World Manufacturing: Global Shifts in Competitive Costs

367
DOI: 10.20542/0131-2227-2015-7-5-15

V. Kondrat’ev, Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation (v.b.kondr@imemo.ru)

Abstract. For almost three decades a traditional conception of the world has driven corporate manufacturing investment and sourcing division. Latina America, Eastern Europe and most of Asia have been viewed as low-cost regions. The USA, Western Europe and Japan have been viewed as economies with too high costs. But now such a view appears to become more and more obsolete. Years of steady changes in wages, productivity, energy costs, national currencies’ values and other factors are quietly but dramatically redrawing the map of global manufacturing cost competitiveness. In some cases the shifts in relative costs are startling. Nobody has thought a decade ago that Brazil would now be one of the highest-cost countries for manufacturing  or that Mexico could be cheaper production place than China. While London remains one of the priciest cities in the world to live and visit, the UK has become the lowest-cost manufacturer in Western Europe. Costs in Russia and many of Eastern Europe nations have risen to near parity with the US. The paper considers the ongoing shifts in the relative costs that should drive many companies to rethink decades-old assumption on their sourcing strategies and allocation of new production capacities. To identify and compare the shifts in relative costs the author analyzed statistical data for the period 2004–2014. It is concluded that four factors are responsible for dramatic shifts in manufacturing competitiveness: wages, exchange rates, labor productivity and energy costs. The dramatic shifts in relative costs could drive another large-scale transformation of the global economy as companies are prompted to reassess their manufacturing footprints. These trends also have implications for governments whose leaders increasingly recognize the economic importance of a stable manufacturing base. The author’s findings will, hopefully, encourage policy-makers in Russia to identify growing areas of strength and weakness and to take adequate actions to shore up the nation’s manufacturing competitiveness.

Keywords: manufacturing industry, factor costs, productivity, competitiveness, capacities allocation


Registered in System SCIENCE INDEX

For citation:
Kondratev V. World Manufacturing: Global Shifts in Competitive Costs. World Eonomy and International Relations, 2015, no. 7, pp. 5-15. https://doi.org/10.20542/0131-2227-2015-7-5-15



Comments (0)

No comments

Add comment







Indexed

 

 

 

 

Dear authors! Please note that in the VAK List of peer-reviewed scientific journals, in which the main scientific results of dissertations for the degree of candidate and doctor of sciences should be published for the “MEMO Journal” the following specialties are recorded:
economic sciences:
5.2.5. World Economy.
5.2.1. Economic Theory
5.2.3. Regional and Branch Economics
political sciences:
5.5.4. International Relations
5.5.1. History and Theory of Politics
5.5.2. Political Institutions, Processes, Technologies

 

Current Issue
2024, vol. 68, No. 6
Topical Themes of the Issue:
  • The “Pivot to Asia”: AUKUS in the Perception of American Politicum
  • The Collapse of the European Collective Security System
  • Public Investment and Sustainability of World Economy
  • Sub-Saharan Africa: Trends, Proportions and Factors of Development
Submit an Article
INVITATION FOR PUBLICATION
The Editorial Board invites authors to write analytical articles on the following topics:
  • changes in the processes of globalization in modern conditions
  • formation of the new world order
  • shifts in civilization at the stage of transition to a digital society

The editors are also interested in publishing synthesis articles / scientific reviews revealing the main trends in the development of certain regions of the world - Latin America, Africa, South Asia, etc.