Why are Western countries so rich when most of the manufacturing and production happens elsewhere?
Elvan Çağlar BODRUMLU
Well, I think Western countries are rich because they have developed economies that rely more on services, technology, and innovation rather than just manufacturing and production. They have a highly educated workforce, advanced technology, and a stable political and economic system that attracts foreign investment. Additionally, many Western countries have a history of colonialism and imperialism, which gave them access to resources and markets in other parts of the world. While manufacturing and production may happen elsewhere, Western countries still dominate in areas like finance, technology, and entertainment, which contributes significantly to their wealth.
Developed Western countries have universal healthcare and education of decent quality with the US as sole exception. They also have social welfare. This is what makes people productive and therefore’ rich’. How does it matter where manufacturing happens? That’s irrelevant.
Most manufacturing happens elsewhere. To rephrase, “Most but not all manufacturing happens elsewhere”
The USA and Europe for example manufacture fighter jets, commercial airlines, semiconductor chip lithography machines, high end alloys, precision instruments, patented pharmaceuticals and precision medicines. Keyword is high end. Wherever it makes sense to manufacture in the West it is done. Wherever it is not feasible due to high cost of labor input vis a vis value addition to end product — the manufacturing is shifted to a low wage country. Finally the west has capital to invest and they ensure high return on capital. Manufacturing is just one piece of puzzle.
It's a common misconception that Western countries are rich primarily because they have outsourced their manufacturing and production to other parts of the world. While it's true that many Western companies have taken advantage of lower labor costs and favorable trade policies in develo countries, there are other factors that contribute to the overall wealth and prosperity of Western societies.
First and foremost, Western countries have a long history of technological innovation and scientific research, which has led to the development of many groundbreaking inventions and discoveries. This has enabled Western companies to create new industries and products that have driven economic growth and increased productivity. Furthermore, Western countries have established robust systems of education and training that have helped to foster a highly skilled and adaptable workforce.
In addition, Western societies have generally embraced free market capitalism and private enterprise, which has created a favorable environment for entrepreneurship and business development. This has allowed companies to compete on a global stage and has attracted investment from around the world.
Another important factor is the political stability and rule of law that exsts in most Western countries. This provides a reliable and predictable environment for businesses to operate in, and it also helps to ensure that property rights and contracts are enforced. This stability and predictability have made Western countries attractive destinations for foreign investment and have encouraged the development of vibrant financial markets.
Finally, Western societies have a high degree of social and cultural capital, which fosters a sense of trust and cooperation among individuals and institutions. This has enabled Western countries to build strong institutions and infrastructure that have contributed to their overall success.
In summary, while outsourcing manufacturing and production may have played a role in the overall wealth of Western countries, it's important to recognize that there are many other factors that have contributed to their success. Western societies have a long history of innovation, a skilled workforce, a favorable business environment, political stability, and social capital, all of which have helped to drive economic growth and prosperity.
Because ‘assembly’ is not a high margin part of the process, it’s a commodity.
Owning the brand, doing the R&D, sales, marketing, distribution … there’s more profit in that.
If I design a widget, I can go to any number of places and have it built. It will be built for cost, plus a tiny margin of profit.
It would cost more to build in the West.
Another way of saying this, is that the develo world sells their labour very cheaply, and they don’t profit it from it that much because unskilled labour essentially a commodity. The ‘buyer’ of the labour gains more advantage than the seller, although they both gain.
I’m glad no one here has touched on this yet but it’s really very simple leading into the 21st century and probably beyond. I’ll make this as timeless a principle as best I can.
The greatest gift humanity can have is having a creative, imaginative and a sound mind. The greater any of these in any level, then the better in producing anything of value, it’s not even about doing anything.
See, we are talking about Maslow’s Hierarchy here. We are all essentially also living on the same planet. So, let’s reshape the questions we have in our minds moving forward as well.
Who can ever predict the future? AI? Spirituality? No, no one or no thing on earth or in the galaxes. Let’s just say, apply wisdom when you watch the trends and industries begin it’s shift. Everything is always cyclical.
This is also neither from a Western nor an Eastern point of view. It’s a global view. We can live and go anywhere as we please to pursue what we want or set out to do.
In conclusion, the right question the original author intended to ask is two-pronged:
Why can’t I get a high paying job or profit where I am living or operating out of?
Why are my competitors in another country (quoted as above ‘western countries’) better off than I am financially?
This is more appropriate as it breaks down the generalization into one specific person, background, intelligence or personality. That will answer the deepest part of the answer anyone seeks.
My answer is ironically a question in response from my personal and professional viewpoint: Who are you and how do you bring value?
Tej Pal Singh Saran
west is rich because of true capitalism which drives them ahead in technology which help them conquer the world , rule it , loot it and invest that money in newer technology and arms race with other european country makes them stronger and stronger but with god grace they fought two destructive war ww1 and ww2 all jews and european money went to america so it replace britain but now after cultural revolution in west there is a downfall in there productivity and quality so USA has a super weapon h1b1 visa and all the gr8 minds from the world come to usa and with money they make new technology but my future hope is china and india both are getting rich and accepted true capitalism and with in 2 to 3 decades chinese with leader in technology . IN SHORT WEST BECOME RICH AND POWERFUL THROUGH TRUE CAPITALISM.
Those rich countries do have a large manufacturing industry for high or extremely high value products. France and the U.S. make space rockets, bullet trains, fighter jets, nuclear reactors etc. Switzerland manfuctures expensive cancer drug. Germany makes high precision optical instruments and lens. One stealth bomber the U.S. makes is worth 1 million TV made in China. By focusing on high tech and high value manufacturing they can stay wealthy.
Luís D Oliveira
To produce something, you need capital (money you invest) and labour. The value added by the productive process is distributed between the provider of capital (the investor, in the form of profit or interest), and the provider of labour (the workers, or, if you don't want to sound as left wingy, the employees, in the form of salary).
In the modern global economy, while most of the labour in the manufacturing industry is provided "elsewhere", the capital is provided from the West, and that's where the profit returns.
The old story: The market price of Iphone 5 16 Gb about $650. The 16GB model carries a bill of materials worth $188. So about $450 receive a well-educated, innovative citizens of Western countries for ideas and engineering. Workers in China receive about $12 for 1 Iphone
Contrary to popular believe the western countries haven't deindustrialized. The percent of manufacturing industry in the GDP has remained the same. What happened was that other sectores grew in share of the GDP. Besides, the service sector is highly productive in the West. That is also why those countries are wealthy.