Comprehensive reply to Hetrons Globalization Question

[lehighguy]

A Passage From India

By SUKETU MEHTA
Published: July 12, 2005

ACCORDING to a confidential memorandum, I.B.M. is cutting 13,000 jobs in the United States and in Europe and creating 14,000 jobs in India. From 2000 to 2015, an estimated three million American jobs will have been outsourced; one in 10 technology jobs will leave these shores by the end of this year. Stories like these have aroused a primal fear in the Western public: that they might soon need to line up outside the Indian Embassy for work visas and their children will have to learn Hindi, just as my parents had to line up outside the American consulate in Bombay, and my sisters and I had to learn English. My father came to America in 1977 not for its political freedoms or its way of life, but for the hope of a better economic future for his children. My grandfathers on both sides left rural Gujarat in northwestern India to find work: one to Calcutta, which was even more remote in those days than New York is from Bombay now; and the other to Nairobi. Mobility, we have always known, is survival. Now I face the possibility that my children, when they grow up, will find their jobs outsourced to the very country their grandfather left to pursue economic opportunity.

The outsourcing debate seems to have mutated into a contest between the country of my birth and the country of my nationality. Of course I feel a loyalty to America: it gave my parents a new life and my sons were born here. I have a vested interest in seeing America prosper. But I am here because the country of my ancestors didn't understand the changing world; it couldn't change its technology and its philosophy and its notions of social mobility fast enough to fight off the European colonists, who won not so much with the might of advanced weaponry as with the clear logical philosophy of the Enlightenment. Their systems of thinking conquered our own. So, since independence, Indians have had to learn; we have had to slog for long hours in the classroom while the children of other countries went out to play.

When I moved to Queens, in New York City, at the age of 14, I found myself, for the first time in my life, considered good at math. In Bombay, math was my worst subject, and I regularly found my place near the bottom of the class rankings in that rigorous subject. But in my American school, so low were their standards that I was - to my parents' disbelief - near the top of the class. It was the same in English and, unexpectedly, in American history, for my school in Bombay included a detailed study of the American Revolution. My American school curriculum had, of course, almost nothing on the subcontinent's freedom struggle. I was mercilessly bullied during the 1979-80 hostage crisis, because my classmates couldn't tell the difference between Iran and India. If I were now to move with my family to India, my children - who go to one of the best private schools in New York - would have to take remedial math and science courses to get into a good school in Bombay.

Of course, India's no wonderland. It might soon have the world's biggest middle class, but it also has the world's largest underclass. A quarter of its one billion people live below the poverty line, 40 percent are illiterate, and the child malnutrition rate exceeds that of sub-Saharan Africa. There's a huge difference between the backwater state of Bihar and the boomtown of Bangalore. Those Indians who went to the United States, though, have done remarkably well: Indians make up one of the richest ethnic groups in this country. During the technology boom of the late 1990's, Indians were responsible for 10 percent of all the start-ups in Silicon Valley. And in this year's national spelling bee, the top four contestants were of South Asian origin.

There is a perverse hypocrisy about the whole jobs debate, especially in Europe. The colonial powers invaded countries like India and China, pillaged them of their treasures and commodities and made sure their industries weren't allowed to develop, so they would stay impoverished and unable to compete. Then the imperialists complained when the destitute people of the former colonies came to their shores to clean their toilets and dig their sewers; they complained when later generations came to earn high wages as doctors and engineers; and now they're complaining when their jobs are being lost to children of the empire who are working harder than they are. My grandfather was once confronted by an elderly Englishman in a London park who asked, "Why are you here?" My grandfather responded, "We are the creditors." We are here because you were there.

The rich countries can't have it both ways. They can't provide huge subsidies for their agricultural conglomerates and complain when Indians who can't make a living on their farms then go to the cities and study computers and take away their jobs. Why are Indians willing to write code for a tenth of what Americans make for the same work? It's not by choice; it's because they're still struggling to stand on their feet after 200 years of colonial rule. The day will soon come when Indian companies will find that it's cheaper to hire computer programmers in Sri Lanka, and then it's there that the Indian jobs will go.

Of course, it's heart-wrenching to see American programmers - many of whom are of Indian origin - lose their jobs and have to worry about how they'll pay the mortgage. But they are ill served by politicians who promise to bring their jobs back by the facile tactic of banning them from leaving. This strategy will ensure only that our schools stay terrible; it'll be an entire country run like the dairy industry, feasible only because of price controls and subsidies.

But we have a resource of incalculable worth right here to help us compete: the immigrants who've been given a new life in America. There are many more Indians in the United States than there are Americans in India. Indian-Americans will help America understand India, trade with it to our mutual benefit. Just as Arab-Americans can help us fight Al Qaeda, Indian-Americans can help us deal with the emerging economic superpower that is India. This is the return of the gift of citizenship.

And just in case, I'm making sure my children learn Hindi.

[lehighguy]

I thought I might get something here.

[sam h]

[ QUOTE ]
The rich countries can't have it both ways. They can't provide huge subsidies for their agricultural conglomerates and complain when Indians who can't make a living on their farms then go to the cities and study computers and take away their jobs.

[/ QUOTE ]

We shouldn't be able to have it both ways. But we do, and I don't see that changing any time soon.

[hetron]

This post doesn't really say anything new. All it says that globalization is a leveling of the playing field, so to speak. But the thing is, how does this in anyway benefit americans as a whole? Are most americans entrepaneurs/stock holders/ advanced degree holders? I agree, there might be americans who are benefitting from globalization...but the question is, are MOST of us benefitting? If so, why have middle and lower class incomes become so stagnant over the last 20 years?

[ACPlayer]

Trickle down economics. Is that the same as voodoo economics?

The initial beneficiaries of outsourcing have been corporations, their executives, entrepreneurs in foreign lands, and workers in foreign lands.

It is modestly silly to say that savings from outsourcing will be passed on to consumers in the short term. The price of items are set by supply and demand first. Costs determine profitability, costs determine the ability to be and stay profitable and in business.

What is true is that lower costs will a) reduce the rate of growth of prices of certain commodities and b) will allow some businesses to stay in business which would otherwise be non-competitive specially against foreign competition and c) will allow businesses to invest in innovation that will lead to more and interesting products over time.

However, the days of corporate investment resulting in American jobs is over. Corporate investment will result in jobs and the competitors for those jobs will be Americans spending $1000 per month for housing and Indians spending $100 for housing.

I suggest that there are very, very few on this forums, who's job (assuming they are not in biz for themselves) is not a candidate for outsourcing at some point.

[bobman0330]

ACPlayer:

Cost is the most important determinant of supply, and therefore an extremely critical influence on short-term prices.

[ACPlayer]

I dont agree.

If Dell Computer outsources its call center to India the cost savings are unlikely to flow immediately to the supply of dell products or to the price of dell products.

It does set the stage for dell to be more competitive and may influence price down stream.

Cost is usually a influences competititve and influences pricing if the high cost causes suppliers to go out of biz.

I am certain of one thing, when the managers make the decision to cut costs they consider ROI, competitiveness, bottom line, and only rarely (if at all) would be they consider cost cutting moves in order to drive the price of their products down (they may be responding to other forces driving the price down). That is simply not likely to be a primary consideration in making the decision to implement a cost saving outsourcing deal.

[lehighguy]

Perhaps your missing the point. It's comming. It doesn't matter what you do. No amount of trade barriers is going to keep it out.

There is a fundamental imbalance in the world. The west has all of the wealth. Remember colonialism, we created this imbalance. Like all imbalances, it can't continue indefinately. If you think it can, your a fool.

The only way to deal with globalization is to remain competitive. Protecting dying manufacturing industries isn't going to do this. Sending people back to school will.

Can Americans compete, sure. I just got done playing a little World of Warcraft. Warcraft is produced in California by Blizzard Entertainment. Blizzard is a market leader whos games are always blockbusters. Thier games are always blockbusters because they make the BEST games. They are innovators and creaters. Warcraft has 3.5 million users (a majority are outside the US) because its the best game of its type on the market. The programmers, designers, game managers, marketers, developers, and all the other people involved in the process owe thier wealth and success to globalization and thier own hard efforts.

Even traditional American industries can be competitive. Take steel. In my college town Bethlehem steel went bankrupt because it took your we don't need to worry about the international market approach. When the government gave them protections it only made things worse because they didn't feel the need to change. However, there are new kinds of steel companies these days that are so competitive they can export American steel. They are called mini mills and they incorporate new technology and methods to stay ahead.

There is one thing I'm sure of. American companies and American workers are too lazy to change until they get a kick in the ass. And the attitude that we can stop globalization that you keep feeding them is only going to make things worse. Americans need to be told up front that they are lazy, stupid, and people in the rest of the world are better then them and deserve what they have more. If they want to keep thier standard of living, they have to make it so companies don't want to move oversees because Americans are so damn competitive.

As I've stated many times, we could do nothing. We could decide not to change, to protect our manufacturing industries, and hunker down while the world passes us by. Then one day foriegners will complain about how thier manufacturing jobs are going to America because of the cheap labor while they all sit in offices designing, managing, and creating at a much higher standard of living then us and our cheap labor.

[laserboy]

For the most part, I agree with you, though I think you are sugar coating things a bit. Let's face it... those jobs that are leaving the US are not coming back anytime soon.

Look at Toyota's effort at bringing manufacturing jobs back to the US... They were so appalled by the lack of education of the Americans that they have decided to locate their next NA manufacturing plant in Canada instead.

TOYOTA: AMERICAN WORKERS TOO STUPID TO BUILD CARS

[ QUOTE ]

the educational level in the Southern United States was so low that trainers for Japanese plants in Alabama had to use "pictorials" to teach some illiterate workers how to use high-tech equipment


[/ QUOTE ]

Innovation does not take place in a vacuum. It requires an educated and experienced workforce. I have mentioned this to you before, but China and India are pumping out hundreds of thousands of scientists a year while we are pumping out hundreds of thousands of real estate agent and lawyer parasites. Go to any graduate level science program in America, they will all be Chinese or Indian. They are not only cheaper than us, they are smarter.

You should check out Three Billion New Capitalists by Clyde Prestowitz, I think you would enjoy it.

Side note... Have you seen these guys?

IGE

I hear they hire Chinese people to farm WoW items for sale on the internet. Once upon a time in college I EBAY'ed my EQ character for $3K, so I guess it could definitely be more lucrative than manufacturing trinkets for Walmart. [img]/images/graemlins/grin.gif[/img]

[lehighguy]

Krugman's piece, which I already read the other day, only reinforces my view. American workers, protected by too long by geography and political instability abroad, have become so lazy and stupid that there is no hope for them.

The anti-globalization crowd doesn't want to fix this problem. Rather they want to create an enviorment where change in impossible. They want to continue to protect Americans from having to go back to school, from having to work harder, from having to compete. They want to imbue in American's the idea that they deserve something simply by virtue of being American. This is a rediculous idea. If our government enacted a law saying only people in New Jersey could manufacture textiles and none of the other states could that would sound rediculous. However, that is what they want us to do on a national scale.

American's have become complacent and stupid. Or perhaps they always were. As Sklansky mentioned in another post not related to this topic only the top 5% of American scientists, engineers, and business leaders have made this country great. The rest of the population are just leeches. In a country where getting ahead is so damn easy people have no one to blame but themselves.

We can face this in one of two ways. We can try to adapt, work harder, and go back to school. Or we can futily try to stop it much like France or Germany. But thier economies don't work so well, so let's save ourselves the trouble now that they've proven its a failure.

As for warcraft:
http://www.1up.com/do/feature?cId=3141815

The American and Chinese guy that got rich of this understand what's going on. They are going to be the big winners.