The point made above that, despite these alleged advantages of developing countries, profit-maximizing firms from advanced countries invest largely in each other's economies is relevant here. The main reason for this is not far to seek. Although wages in developing countries are low, these countries do not have the social and physical infrastructure and other advantages which developed countries enjoy. As a consequence, productivity in developing countries is generally low. One could argue that the immensely superior social infrastructure and other advantages, such as easy access to capital and low interest rates, enjoyed by the advanced countries tilts the playing field grossly in their favour.
Lower wages paid by firms in the South only slightly redress the balance.
Summing up In conclusion, the widely expressed fear of workers in advanced countries that their countries will become increasingly uncompetitive, as nations like China and India increase their productivity and manufacturing export capacity while their wages remain extremely low, is unfounded. The experience of the successful Asian NICs referred to above suggests that as productivity rises with development so do real wages. This is not specific to Asian countries but is a more general phenomenon. Japan climbed the productivity ladder over the past thirty years, its wages also rose from 10 per cent to 110 per cent of the US level. South Korea's wages have also risen dramatically over time.