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Giant Sucking Noise
bsharma writes "The next round of globalization is sending upscale jobs offshore. They include basic research, chip design, engineering--even financial analysis. Can America lose these jobs and still prosper? Who wins? Who loses?" News.com has a related story about outsourcing.
The article is pretty much spot on. By decree of some department head somehwere, 1/3 of the people in each gruop have to be GDC employees (GDC is the termed used for the 2 companies we outsource work to - InfoSys and Tata) - which means if you have 30 people in your group, 10 must be contractors, and 2/3 of those must be off shore.
What's really depressing is that these changes aren't being done to get BofA back in the black or because it's going down the drain. It's so that they can show 7% (or 4% or something, I can't remember) more profit than they did last year.
This is absolutely *killing* morale. People worry about jobs. A lot. Our group has actually lucked out a bit - due to the closing of remote offices and a couple people leaving for their own reasons, we've been spared - Our manager is fantastic, he's doing everything possible to keep from laying any of us off. But other groups aren't so lucky. Quite a few people were laid off today, so the rumor mill says.
It's tough. It's one thing to be laid off for poor performance - it's a whole other ballpark when you're simply getting replaced with somebody a little cheaper.
Any empire in history has subjugated the poor of other nations in order to sustain it's own wealth. The US is acting similar in this regard. Unfortunately for you and I, we do not get to reap the benefits alongside the corporations, we are merely discarded in the process. The term globalization does not mean that we will all live easier and everyone will have a job, it means that the empire will no longer have a home base, just as corporations have become a faceless entity to complain about, they are becoming a stateless entity that is no longer subject to the free market rules. These new global corporations may cut a large swath of productivity, but they move from third world country to third world country leaving devastation and ruin in their wake.
Today the beneficial country may be India and Singapore, but as wages there begin to climb, those same companies will pack up and move elsewhere to start the whole process anew. There is no ethics in that, and there is no sense of responsibility in global corporations who continue in such endeavors.
Hammer of Truth
Any organization looking at relocating somewhere west, feel free to contact me at the email above. I am more than happy to contribute to the giant sucking sound coming out of Seattle... that is, until the officials pull their heads out of their asses as the parent post alluded to.
Money and power are finite resources.
That obviously isn't true. If it was true, we'd ALL be living in prehistory still, trying to eek out a meager existence in small hunter-gatherer bands, living to the ripe old age of 25-30, if we were lucky.
No, economies produce wealth (through the combination of base resources, capital, labor, increased productivity, etc. etc. etc.). Economies CAN and generally ARE win/win for this very reason. Economies at local, regional, national, and international scales grow far more and far more consistently than they shrink ... the very definition of the creation of wealth.
Outsourcing is a technique used to cut costs and maximize profit, not lower prices. Competition is what lowers prices.
an organized boycott against those companies should be implemented
Your economics is oversimplified.
Let's say Microsoft is required to hire only Americans. Because of their increased labor costs, their OS becomes more expensive. Now, an Indian software company finally perfects that Windows clone, and sells it for cheaper because their programmers cost less.
It is now your (patriotic, whatever) duty to buy Microsoft, even though it's more expensive. Are you now happier? I doubt it. If Microsoft then lobbies to ban the importation of the Indian Windows, you'll probably be even less happy.
However, if Microsoft is free to outsource, then you the consumer is certainly free to buy the cheaper clone, and actually save money. (Of course, you'll have a harder time finding a job, because you're competing with the whole world. I'm not saying it's easy.)
The trouble with your logic is that it can be applied at any level to limit competition. You could certainly say that Microsoft is hurting California companies, because it's cheaper to live in Redmond than in San Jose and so they manage to get cheaper programmers.
Self serving baloney pumped out by the steel companies. If that fable was true the European steel industry would have gone as well.
Asian steel producers costs are considerably greater than the 87 cents you quote. It costs them considerably more to ship their finished product than it costs the Us producers. They also have much longer lead times because of the transport time and so they are unable to address markets where quick turnarround is important.
If you read 'the Innovator's dilema' you will find the real reason for the decline of the US integrated steel mills, they were made obsolete by the cheaper to build mini-mills. There are still successful and profitable steel producers in the US, they are the ones the use mini-mill.
The integrated refiners have two major problems, the first is that they massively underfunded their pension plans for the past 20 odd years so they could claim to be profitable when in reality they were not. This allowed them to delay restructuring for 20 years past the time when the EU producers restructured.
The second big problem is that the integrated steel plants are not earning their cost of capital. This is the same in every country regardless of labor costs. 30 years ago when mini-mill technology first appeared the product was only fit for the least demanding uses. Over time the mini-mills have gradually more efficient and produced higher quality output so that today they provduce steel for car body panels which is pretty much the most demanding mass application. About the only market that is not well served by mini-mill today is steel for hand-fashioning by blacksmiths.
Of course the nationalist fable is a much easier sell, even though the message it sends is ultimately defeatist.
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Here are the top domestic manufacturing categories from 1999:
2001 Statistical Abstract of the United States
Table 974. Manufactures-Summary by Selected Industry: 1999
Value of shipments (mil. dol.)
675,122 Transportation Equipment
458,485 Computer and electronic products
The first two combined exceed the $883 billion in manufactured goods imported from all countries.
429,053 (manufactured) Food products
419,674 Chemical products
(including, e.g., $108 billion pharmaceuticals/medicines)
277,117 Machinery
256,899 Fabricated metal products
(architectural metals, screws, nuts, bolts, etc.)
172,397 Plastics and rubber products
168,096 Petroleum and coal products
158,102 Primary metal
157,491 Paper products
119,792 Electrical equipment, appliance, and component
108,238 Miscellaneous
107,437 Beverage and tobacco products
102,404 Printing
According to the latest trade statistics
(http://www.wto.org/english/res_e/statis_e/its200
the United States is the largest exporter of merchandise, with $731 billion in
exports; Germany is second with $571 billion. China comes in sixth with $266
billion.
I live in Derry in Northern Ireland. This is a part of the world which was a bit like India for a good few years. What I mean by that is a lot of American companies set up operations here as it was cheaper. Near me we have Prumerica (Prudential) and Northbrook (Allstate) doing software and up the street we have a massive DuPont plant. There is also a load of call centres, MSN used to have support for its American operation based here. These are fairly safe purely on the grounds of the geographical location which is good for Europe and America.
Another sector that was established here was clothing and textiles. In the early 90's Fruit of the Loom set up several factories here, at considerable cost albeit offset by some government grants. So did Lee Aparell and a few other big names. Fruit of the Loom opened two plants near me and 3 over the Irish border a few miles away in Buncrana, Donegal. This was in the early 90s, only one plant is left and that is at risk of closing. Most of the plants that closed didn't last 5 years. The reason? management got uppity at staff joining unions and wanting better conditions and they were afraid of the upcomming minimum wage. So they shipped all the work off to Morocco, where the costs were 25% of the costs here. Even taking in to account the costs incurred building new factories here only a few years earlier it was still cheaper to move to Morocco.
This is where the weird logic kicks in, what happens when the Morrocan workers decide they want better pay, which will inevitably happen? Pretty much the same thing which happened here, management will not like the unions causing trouble and they will move somewhere else.
When will big business learn wages are not the only thing to think about when trying to make more money. A happy workforce with job security is a productive workforce, a productive workforce cuts manufacturing costs, lower manufacturing costs means more profits. Well at least I think thats how it works.
The book How Americans Can Buy American by Roger Simmermaker explains this from a consumer/taxpayer perspective. The book's main idea is that manufacturing companies, regardless of where they manufacture, pay most of their taxes in their country of headquarter , so consumers should buy from companies owned domestically. Then it lists several thousand brands and corporations and their country of headquarter. It's a neat book to bring to the store, but it's also scary to see that companies like Universal Pictures, Stanley Tools and Chrysler are foreign owned. I suppose in the book's next edition we'll see more Indian brands in the IT section.
This is good for your town, and the rest of us because phone services, steel and concrete are now that much cheaper.
I understand that the pace of the change from usefull to not usefull disturbs you, but there is no long term way to keep both the companies and the customers in this country when other places can do the same job for better / cheaper.
The solution is for the US to do what we are good at. Innovate. At least it is more dignified than sitting around whining.
It's not the size of your .sig that matters, it's how you use it.
Um, you do know that that the U.S. has very low tax rates compared to other industrialized nations, right?
Taxes probably have less to do with that than a inflated real-estate market. So the exodus is good - there will be fewer people and less demand for real estate, and the cost of living will fall. Supply and demand. The free market at work.
The "flat tax" as a means of simplifing tax law is a red herring at best and outright bullshit at worst. The complexity is not figuring out how much tax to pay on x dollars of taxable income (I just look it up in the darn table in the back of my 1040); it's all the income deductions and tax credits. You're probably right about a lot of that being "favors" for "contributors", but I doubt we'll ever see it change much.
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You cannot wash away blood with blood
The truth is we import 68% more from Canada than from Mexico. What a spectacular failure for your theory.
Hint: read in an economics textbook about wages and productivity. The reason wages are so high in the United States and that we can afford the niceties of pollution and safety regulations is that we are so much more productive. As productivity grows in other countries, their wages rise, too. Forty years ago Japan was a country with wages lower than China has now. But by 1990 wages there were on a par with the U.S. The same thing is happening in Korea, Taiwan, Singapore, Mexico, Malaysia, and so on.
Wealth begets wealth.
Yes, there's quite the imbalance between my salary and a Fortune 500 CEO's, and that's not changing much. What is changing is that people in other countries are ending up with more money to spend individually, and end up with their marketplace infrastructures being upgraded. India has Internet connections. FedEx delivers in India. The same countries getting the jobs are also becoming consumers and export markets. There is temporary pain like this for us, but there will eventually be ROI. It just sucks when you're the individual out of a job.
And what happens to us Americans if and when the US faces disaster? I'm not loyal to the US so much as I am loyal to a country that provides:
If the US crumbles in this endeavor (which I doubt), it will do so while a few other countries outdo the US in the areas listed... some would argue that there are other countries that already far exceed it in the areas that matter to them.
You too can play the globalism game.
After WWII US dollar became the only currency left standing -- every other country that had an economy good enough to support international trade in its own currency was devastated, US remained ok (because it was separated from a war by the oceans, and please shut up about what others "owe" to the worst military among allies in WWII).
What followed was a horrible abuse of this "de-facto international currency" status, the (number of dollars abroad)/(amount of products traded abroad for dollars) was significantly lower than the (number of dollars in US)/(amount of products traded in US). In other words, everything was cheaper abroad and expensive in US, so US simply printed dollars (or, to be more precise, created them as Federal Reserve loans) and injected them in this system. The system worked through osmosis, it became easier to buy products abroad, sell them in US, pocket the profit and call yourself a rich company while producing nothing, and merely exploiting the slowness of trickling of dollars abroad by making it a bit faster.
Of course, due to this difference in prices, and efficiency of non-export parts of foreign countries' economies, US citizens could hear blood-curdling stories about low salaries abroad, when they were counted against US dollars, however it was nothing but a propaganda trick -- the prices difference was not taken into account, and the lack of reliable currency conversion rates for countries and products not involved in trade with US allowed for absolutely ridiculous numbers. Just look at GNP figures and think, how is it possible to have such a disparity, yet people don't starve everywhere abroad. So for US citizen there was no visible difference between indeed starving people in Cambodia and rather prosperous people of India.
However everything comes to an end. "Osmosis economy" can't run forever, and just buying stuff while racking up trade deficit becomes more dangerous, and other currencies (mostly Euro) issued beyond the US control are becoming used in international trade. However US companies can't expand the production within the country -- educational system and media prepared only consumers for them, there aren't enough people that can and are willing to produce something, they would rather accept sliding quality of life for themselves. So US proclaims itself to have "service economy" (aka doing each other's laundry) and "high technology" (aka having a lot of engineers). The problem is, "service economy" is big fat zero unless it supports production of something, and engineers in US meet just as much competition from foreign engineers as US workers did before, therefore all the outsourcing you can see.
So US as a whole became an arrogant, unskilled and incapable of supporting itself nation by abusing currency machinations -- something that often happened to individuals and now happened to the country as a whole. And here is the sucky part -- crook that lost his money does not harm millions of people that ARE capable of productive work yet happened to live in a country where the macroeconomic processes deny them this work.
If US wants to restore its currency system to something usable, sooner or later it must significantly devalue dollar, and possibly tie it to valuable commodities (say, gold) and stop the "osmosis" forever. If US wants to restore its production capability it must rebuild its educational system. And if US wants to get people capable of doing productive work now and not in 20 years, it must reduce barriers to immigration. All of those measures will without any doubt decrease "quality of life" -- at leasr temporarily, and at least for some parts of the population. However the only alternative to them is accelerating slide into poverty, and turning the country's economy into an equivalent of giant failed dotcom, like flooz.com x 1e6.
Contrary to the popular belief, there indeed is no God.
In it one of the themes is American impoverishment due to the collapse of the info economy. Intellectual property is easily be copied therefore worthless to its makers, many white collar jobs can/will be eventually automated/moved offshore.
All this forces will leave America with no competitive edge.
So your ideology is that any time someone is willing to work for less, the job should go to that person.
I got news for you - we're in a world with HUNDREDS OF MILLIONS OF UNEMPLOYED PEOPLE. So what you are advocating won't work. It will lead to everyone in the world with a job getting just enough to eat, and the rest starving.
It is a "spiral to the bottom." Mexico is losing jobs to Cambodia, and Cambodia is losing jobs to China.
How To Keep Your Job
Good heavens Miss Sakamoto - you're beautiful!