Street vendors in Calcutta are among the 300 million Indians who aren't cashing in on the prosperity generated by the growing Indian economy. Photo: FriskoDude (Flickr)

Imagine the entire population of the United States — just over 300 million people — living in ramshackle homes, struggling to feed and clothe their families. That's about how many Indians are impoverished. According to a recent report by NPR, although India’s economy is growing at around 8 percent a year, about a quarter of the population is missing out on the benefits of robust economic growth.

Many of the jobs being added to the Indian economy aren’t accessible to everyone, says NPR. For example, rural villagers and poor city dwellers lack the skills to fill jobs in India’s expanding service sector, meaning you can't work in a call center if you can’t speak English or have never used a computer. Partha Sen, director of the Delhi School of Economics, suggests that manufacturing jobs would help create income for impoverished Indians. He says, "so far as I know the only way out of poverty for [a] hugely overpopulated economy is through manufacturing."

NPR reports that unless a country discovers oil, manufacturing is a necessary step between poverty and prosperity. Nations that are prosperous now, like the U.S., the UK and China, went through an era of manufacturing that allowed the lower classes to pull themselves out of poverty over a few generations. But in India, certain laws discourage corporations from setting up shop. As a result, many of India’s poor can’t find work.

To make matters worse, because many impoverished Indians don’t technically qualify as “poor” under government standards, they are ineligible for subsidized food and other services, reports The Wall Street Journal. For 25 kilograms of rice and 10 kilograms of wheat, a family with a rare, government-issued ration card pays $4 per month, about half of what others pay.

The Wall Street Journal says that the government plans to adjust their criteria so that an estimated 100 million more Indians will become “poor,” even though this figure may still underestimate the number of people in need. If job creation continues to be limited to the service sector, India's poor could be left behind as the economy booms without them.

A worker makes a lens for a digital camera in a Chinese factory. Rising wages could contribute to the growth of sophisticated manufacturing jobs in China. Photo: Robert S. Donovan (Flickr)

In China, wages are rising and the cost of labor is increasing. The consequences of this trend are affecting different economic groups in ways that spell significant changes for China’s economy.

The rising wages are forcing some companies to relocate to Vietnam or India, according to a recent article in BusinessWeek. In fact, labor only accounted for about 2 percent of a company’s total costs in 2000. Today, that figure is closer to 12 percent. Profit margins have fallen from 15 percent to 8 percent over the same time period, and to compensate, companies are moving production.

Over the past two years, millions of jobs have moved to China's interior or elsewhere in Asia as factory owners try to cut costs. In Guangdong, the mainland's top exporting province, wages have almost doubled in the past three years, and more than half the factories can't find enough workers. The number of migrants who traveled to coastal provinces for work fell by 9 percent last year, to 91 million.

By contrast, a recent article in The Wall Street Journal suggests that rising wages will help China’s economy by increasing the standard of living and the purchasing power of the working class.

Many economists see the upward pressure on wages as a good thing. Higher incomes for households could help their consumption take a greater share of the economy, reducing the need to rely on investment and net exports. If companies respond by moving their manufacturing bases inland — as they have already started to do — this could help reduce regional disparities in economic development.

So why are wages rising? According to BusinessWeek, government tax breaks and subsidies have encouraged farming and industry in China’s interior, causing people who would normally fill jobs in coastal factories to stay in their home provinces. And Chinese youth are seeking jobs in the service sector, not in manufacturing.

The Christian Science Monitor reports that the government "is keen on moving up the value chain" — meaning that rising wages will shift the focus of China's economy toward more skilled manufacturing as unskilled positions move abroad.

The pool of factory workers is already 22 percent smaller than it was ten years ago, according to figures by Merrill Lynch. And the labor shortage will likely continue as the population ages and wages continue to rise. China's days of being the go-to place for cheap labor may soon be numbered.

Workers at a footwear factory in Dongguan, China. Photo: clayirving (flickr)

Made in China.

It's a label you might associate with cheap labor and mass production — but a recent study featured in BusinessWeek says that China's products may no longer be the best bargain for U.S. companies.

Outsourcing to mainland China has several "hidden costs" related to rising labor and currency rates, the report reveals. In the last three years, the yuan has gained ground on the weakened U.S. dollar and factory workers wages are going up. This translates to a drop in the average price gap between China and U.S.-manufactured products — from 22 percent to 5.5 percent.

And when you add in the costs that come with producing goods halfway around the world — storage fees, shipping delays and the price to repair or replace high-tech product parts — the ultimate savings are minimal. "A couple of years ago, outsourcing to China was a no-brainer," says Stephen T. Maurer, director of AlixPartners, the firm that led the study. Now, he tells BusinessWeek, manufacturers are thinking twice about where to send their business.

Some U.S. companies are turning to Mexico, where manufacturing rates are cheaper than China's and suppliers across the border are more accessible.

That doesn't necessarily mean that the label "Made in Mexico" will replace "Made in China." Low wages for factory workers still make China a top competitor when it comes to labor-intensive products like toys and clothes.

Assembly line in a California auto-manufacturing plant. Photo: Gregory Melle (flickr)

Just how deeply is the recession carving its way through the U.S. — and who's getting hit the hardest?

A New York Times interactive map measures December 2008 unemployment rates across the U.S., layering in the impact of the housing boom and the loss of manufacturing jobs. Dark patches of color, indicating higher unemployment rates, are especially noticeable along the West Coast, as well as in Michigan and in parts of the Deep South.

The national unemployment average reached 7.1 percent last December. Current figures put the jobless rate at 8.1 percent — the highest since 1983. Unemployment has crept as high as 22 percent in places like El Centro, California, an area weakened by dried-up crops and withered spending as fewer Mexicans cross the border to shop there.

This recession bears a different face than previous economic lapses, writes The New York Times’ David Leonhardt. He says the current downturn is hurting blue-collar workers more than college graduates, affecting men more than women and stinging homeowners more than renters. He adds that Latinos have become the ethnic group most vulnerable to job losses.

"The main reason that recessions tend to increase inequality is that lower-income workers are concentrated in boom-and-bust industries," Leonhardt writes, citing recent job landslides in the agriculture and construction sectors.

Leonhardt suggests that stocks, government policy and education are the three tools most crucial to lifting the U.S. from the economic depths the country hasn't seen since the Great Depression.

Globalization may be giving way to local production due to shipping costs. Photo: Think Panama

Americans can forget about avocado salads in January. The price of oil isn’t just hurting consumers at the pump — record oil prices are changing the way globalization works.

In the past three decades, the world economy has become so integrated that most products travel the world before coming home from the store. Illogical supply chains have emerged — and fossil fuels are wasted — because of price-driven production. From cars to processed foods, raw materials and labor from different countries, even different continents, are part of the production process of much of what we buy.

But cheap oil is now a thing of the past, and the cost of oil changes everything.

Higher prices are upsetting the global supply chains that until now considered cheap labor and raw materials more important than geography. Decades ago, Wal-Mart set the industry standard with this global supply chain model, but now industries that have made their fortunes through outsourcing are in trouble. Shipping a 40-foot container from Shanghai to the U.S. costs $8,000 now, compared to $3,000 earlier this decade. This increased shipping cost is the equivalent of a 9 percent tariff on all global trade, according to a recent report by Canadian investment bank, CIBC World Markets. The report states, “The cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today” and “has effectively offset all the trade liberalization efforts of the last three decades.”

Globalization, economists are now saying, is changing rapidly. The “neighborhood effect,” or putting factories and suppliers as close as possible to the consumer, is the newest trend. People are now becoming increasingly interested in trying to grow, produce and shop as locally as possible, particularly food and goods which take little time to make or package or are heavy and expensive to transport. Electronics companies lured to Asia by lower wages and lax environmental standards are returning to Mexico, and furniture, footwear and toy industries are returning to the United States.

A shift to local growing will cause a change in what food is available and affordable. Consumers will now be economically encouraged to eat with the seasons, given the prohibitively high costs of exotic items, like avocado or peaches during the winter.

Perhaps most significantly, American steel production is rising after decades of decline, while China’s steel exports have fallen more than 20 percent this year. Motors, machinery, car parts and appliance industries will all be affected. As Chinese factory orders plunge and its export growth slows, the Chinese economy is already slowing. Economists expect growth to slip from double digits to 9 percent this year alone.

Globalization isn't dying — just changing. Products that are light and inexpensive to transport, products that are labor-intensive and products that don't require transportation, like telecommunication and Internet-based industries, will continue to be outsourced. But the change in global trade is shifting who profits and on what. These changes will impact both labor markets and trade balance, lessening the US trade deficit with China.

In an ironic demonstration of the power of globalization, China’s troubles will be felt worldwide. Their dampened economy is one reason gas prices have recently fallen in the United States.

With this change, though, environmental economists have something to celebrate. After all, with the U.S. Energy Independence Act of 2007 setting measly policy goals — reducing U.S. emissions by just 4 percent by 2020 (compared to the EU’s goal of 20 percent) — and the lack of any international climate treaty, the imperative move to green living will have to be driven by the consumer.

Regardless of your opinion of globalization, growing, shipping and shopping local is now the option that is most affordable - and sustainable- and option.