Offshoring -- where it stops, nobody knows

Production moving overseas, good jobs disappearing, national angst upwelling... South Korea sings the grownup globalization blues

Published May 16, 2007 3:26PM (EDT)

Once upon a time, we measured whether a country was "developed" or not by such measures as per capita GDP. Today, the real proof that one has joined the rich kid's club is whether or not a country is worrying about its manufacturing base becoming "hollowed out" by offshoring.

Case in point: An article in South Korea's Chosun Ilbo, "Samsung to Move Flagship Phone Production Base Abroad," includes passages that sound strangely familiar.

Samsung Electronics is poised to move its main mobile phone production base to Vietnam.... The decision deals a decisive blow to the dwindling domestic manufacturing industry.

...A mobile phone industry insider said Samsung has decided that its domestic plant is unattractive as a production base because labor costs are over 10 times higher than in Southeast Asia.

...The decision reveals how dire leading companies feel the situation in Korea is. If they move their massive plants abroad, the hollowing of the domestic industry will gain pace -- a development that will drastically worsen already high youth unemployment here.

This is not the first time Samsung Electronics has moved production overseas. But the nature of plant transfers has changed. Around 2000, when the exodus started, plants that moved overseas were simple assembly lines for electrical home appliances. Despite the high wages, cutting-edge industries such as cell phones, LCDs and semiconductors, remained in Korea due to their high profitability and fears of a technology drain. Samsung's latest decision opens up a vista where any production can move abroad.

I am tempted here to paraphrase the sage words of TNT's NBA analyst Charles Barkley, who skewered the Golden State Warriors' disappointing second round playoff loss to the Utah Jazz this week by observing "Live by the three, die by the three."

Live by becoming a base for the offshored industrial production of more advanced nations, die by offshoring your own industrial production to less advanced nations.

Except, South Korea is a lot better off than the Warriors. It is the tenth largest economy in the world. Per capita GDP in 1963, $100. In 2007, over $25,000.

Offshoring -- the price a nation pays for making it to the top.

(On a related note, Mark Thoma's "You Economists Don't Get It, Do You?" offers an amusing and cogent take on how economists and the general public perceive the challenge of globalization.)

By Salon Staff

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