are we really ready for world trade?

[rogerj]

The Flight to India By George Monbiot

If you live in a rich nation in the English-speaking world, and most of your work involves a computer or a telephone, don't expect to have a job in five years' time. Almost every large company which relies upon remote transactions is starting to dump its workers and hire a cheaper labor force overseas. All those concerned about economic justice and the distribution of wealth at home should despair. All those concerned about global justice and the distribution of wealth around the world should rejoice. As we are, by and large, the same people, we have a problem.
Britain's industrialisation was secured by destroying the manufacturing capacity of India. In 1699, the British government banned the import of woollen cloth from Ireland, and in 1700 the import of cotton cloth (or calico) from India.
So an historical restitution appears to be taking place, as hundreds of thousands of jobs, many of them good ones, flee to the economy we ruined. Low as the wages for these positions are by comparison to our own, they are generally much higher than those offered by domestic employers. A new middle class is developing in cities previously dominated by caste. Its spending will stimulate the economy, which in turn may lead to higher wages and improved conditions of employment. The corporations, of course, will then flee to a cheaper country, but not before they have left some of their money behind. According to the consultants Nasscom and McKinsey, India -- which is always short of foreign exchange -- will be earning some $17 billion a year from outsourced jobs by 2008.


George Monbiot

rogerj (http://)

[Platypus]

This is an issue that has been very much on my mind. I'm a software engineer, and I can see very clearly that the outflow of jobs is no longer limited to the low-paying low-status low-requirements sorts of jobs that we all think about when the issue comes up. It's not just manufacturing, or service. Even within my own field, it's not just the junior engineers who are being forced to compete with cheaper talent elsewhere. It's even the mid-level folks, and it won't be long before it's even the senior staff. That means people like me. I believe I can compete with anyone in the world, I have a track record to back that up, but I wouldn't have that track record if I were such a fool that I couldn't see what's going on and feel some concern about the implications.

I'd have to say no, we are not ready for global competition. We've become too used to having the largest markets, and the largest capital markets. Come to America, start a company, if you have a good idea you'll find plenty of backers and plenty of customers. Now the rest of the world is catching up. Other countries have robust venture-funding communities now. They have huge and growing consumer markets, which have only begun to be tapped while ours reaches saturation. Our own companies are beginning to hire, sell, and invest elsewhere. Meanwhile, our most important natural resource - our people - has not been maintained. Blame the people who seem unwilling to fund public education if you want, or blame the people who seem unwilling to accept market-based alternatives. Either way, our educational system is failing. We should be able to give young Americans entering the workforce a compelling skills advantage over competitors abroad, and we don't. Knowledge is power. Our competitors all speak our language and understand our culture, which gives them access to our markets that we lack in theirs because we almost deliberately avoid such knowledge. Add to that our high labor cost, which gets built into every US-built product, and you have a real problem. It's not the unions' fault, either; the most overpaid people - some would say I'm one of them, and I know some of my coworkers are :lol: - are non-union.

I hear a lot of talk in discussion forums about free-market capitalism. Supply and demand. Prices increase with demand, and decrease with supply. Well, guess what? There's a global supply of labor, not just manual labor but intellectual labor as well, and we're overcharging for the labor we supply. Any economist can tell you that such a situation cannot persist. If we want to thrive in a global economy - and we're the ones pushing for it, quite often - we need to identify the areas in which we expect to retain a competitive advantage, and actively work on transitioning people into those areas. That might mean helping them acquire different skills. We'll probably also have to accept that our current material standard of living is unsustainable, technological advances and everything else notwithstanding. Unless and until we do those things, we'll have no hope of doing anything but suffer in a global economy.

P.S. This month's Atlantic magazine has an article comparing our current trade situation to the dot-com bubble, but you'll have to wait until next month to find it online. It's a different take on a similar theme to what I've written above, but of course it's much better written.