Business

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How production went global

Penny Brooks

29th November 2016

This week's Deloitte Monday Briefing looks at the history of globalisation, and why it may be causing a backlash amongst voters in the UK (Brexit) and the US (Presidential election), while it is seen as a force for good in emerging economies including Vietnam, the Philippines and India.

The briefing looks at the history of globalisation, from the birth of specialisation in the 18th century, via Henry Ford and Taylorism in the 20th, to the ability of countries to specialise in outsourced production of components and services which contribute to today's interconnected business world. It mentions the disadvantages for the consumer of low-quality businesses that didn't need to compete with international alternatives for their market share (though you will need to be of a certain age to remember the Austin Allegro car - launched in 1973 with a novel rectangular steering wheel and voted Britain's Worst Car in 2008). Contrast this with the evidence that, in the UK, globalisation has contributed to a more than halving of clothing prices in the last 25 years, and the price of computer equipment has fallen a staggering 98% over this time.

It also challenges the perception that manufacturing jobs in the developed countries have been lost to the cheaper labour markets of the far east, pointing out that successful high tech businesses like Apple might employ staff to assemble their products in China but that this accounts for only 1.6% of the wholesale price. The value-added jobs that are supported as a result of Apple's success are the product design, software and marketing, which takes place in the US.

This is comparable with Dyson in the UK; famous (or infamous) for outsourcing low-paid production to Malaysia in order to cut costs, nevertheless a successful Dyson company supports the employment of over 1,000 engineers at the company's headquarters in Wiltshire, with expansion currently underway of up to a further 3,000. This brings prosperity to the town and its surroundings, new shops, houses, and other business opportunities to provide services for all those highly paid skilled staff. If Dyson could not produce at a low cost, could they provide jobs and training in the UK?

If you like this Deloitte article, their Monday Briefing is always a great read; it examines a particular topic each week and also provides a summary of the week's top news stories, in a manner which is very accessible for A level students - well worth encouraging them to subscribe to.

Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor

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