What Alibaba really teaches us about the world


Allister Heath

September 19, 2014

We all need to face up to the fact that there is competition in every kind of industry, even in those where Western professionals used to enjoy some sort of protection

Alibaba is based in Hangzhou, China; its founder, Jack Ma, will make an immense fortune from the online retailer’s float, the world’s largest ever.

He symbolises a monumental change: the days when the West focused on high-value-added services and tech, while the emerging markets concentrated on low-cost manufacturing – the norm since the 1980s – is gone forever. Alibaba is an astonishingly advanced company; its technology is far more advanced than that of most Western firms.

China is beginning to crack consumer tech; there will be much more of this from emerging countries in the years and decades ahead. Of course, this shift has hardly come out of the blue: India, to name just one other country, has spent years building a thriving and ultra-modern tech industry. Just as obviously, the US will retain its astonishingly successful tech industry, for a variety of economic, political and cultural reasons.

What is different post-Alibaba is that the psychology has changed. We now all need to face up to the fact that there is competition in every kind of industry, even in those where Western professionals used to enjoy some sort of protection.

This doesn’t mean that the number of high-value-added jobs will now collapse in the UK, or that the wage slump of the past few years will become permanent. Clever Western companies and entrepreneurs will be able to ride a new wave of prosperity and job creation as a result of Asia’s coming of age. Free trade and the integration of the global economy are not zero sum games: they allow all countries to get wealthier.

There will inevitably be short-term disruptions, however. Western companies and workers will be kept on their toes. It is possible – though one cannot prove this – that the dip in higher than average paying jobs in the UK over the past year was caused by the increasing challenge of globalisation. As it happens, I suspect other factors, led by automation, are more important. But even if the hit were caused by the increased exposure of the services sector to global forces, there is no reason why the impact on jobs cannot be reversed, with a few reforms and a little effort.

What is certain is that there are no longer any easy rents to capture, no low-lying fruit in areas until recently sheltered from emerging markets. Competition will be much more intense. Lawyers, for example, are now facing the full force of globalisation even in the City of London, and are having to tackle bloated cost bases.

Skills will need to be honed and incentives improved. Education, tax and infrastructure will all have to be right. Alibaba’s mega-float ought to serve as a salutary reminder to Western economies: nobody is immune from globalisation and powerful market forces any longer.


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