Asia is frequently lambasted as a source of low cost 'slave' labor by skeptics. The standard notion is that armies of Chinese communist automatons are building faulty plastic toys and copy-cat products, undercutting far more skilled, educated, and innovative Western workers.

While this belief may have had some basis over the last few decades, it's hard time for a reality check.

Emerging Asia, which doesn't include Japan, now has more skilled researchers than any other economic unit in the world, as shown in the chart below from Citi based on UNESCO data.

As you can see, Asia made great strides in increasing its share of skilled researchers from 2002 - 2007. They will make even larger ones going forward since education levels are rapidly improving.

Thus, we can easily imagine that Emerging Asia will be immensely competitive very soon -- it will have lower cost labor (since many Asians are still moving up the wealth chain), but at the same time it will have tons of highly skilled, educated (and yes wealthy) people at the same time. Asian industries are likely to be competitive both at the low- and high-end in the not too distant future. Ouch.

P.S. And by the way, hiding from the global economy won't be a successful long-term solution here. It would just mean that 10 - 20 years forward Emerging Asian competitiveness would be even stronger while American and European competitiveness would have gone nowhere. Double Ouch.

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