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ECT News Community   »   CRM Buyer Talkback   »   Re: Politics of Outsourcing Aren't Dead Yet

Re: Politics of Outsourcing Aren't Dead Yet
Posted by: Andy Mukherjee 2006-08-22 07:38:02
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If anyone is singularly qualified to offer advice to policy makers, business executives and academics on managing the politics of outsourcing, it is Gregory Mankiw. As the chairman of George W. Bush's Council of Economic Advisers during the last U.S. presidential campaign, the Harvard University economist got badgered by Democrats and Republicans alike for suggesting that it was fine for American companies to relocate customer help desks to India.

Re: Politics of Outsourcing Aren't Dead Yet
Posted by: us-consultants 2006-08-22 08:43:58 In reply to: Andy Mukherjee
The only workable solution to the globalization problem is a fundamental system reform in US.
Let not talk about globalization but to make an analogy. Simplify the situation and exaggerate the important traits to highlight the problem and find out the solution. Let not talk about Indians for now but about robots.
Let assume that tomorrow advancements in robotics enable robots to do all the jobs in society for far cheaper than any human. The robots are owned by a few corporations while 99% of the world population is out of work since their workforce is not needed anymore. We are going to witness either:
a) mass extinction due to starvation
either a violent revolution with 2 possible outcomes:
b1) people kill all the business owners in the revolt due to their bigger number
b2) business owners kill all the people due to access to military technology
Well, none of the 3 outcomes seems not to be worth of the XIX century. What is the problem ?
The problem is that the advancements in the technology makes old social systems obsolete. It did happen all the times into human history and only a mentally impaired will believe it won't happen again.
Now let go back to globalization after a look at history. Whenever the rullers asked people to struggle harder in order to live worst than before the human society was at a turning point where the system failed the society and needed reforms.
- Facing numerous slave revolts, Roman Empire was unable to cope anymore with barbarian invaders and the treasury was depleted. They asked their solders to fight/work harder while being rewarded worst than before. The price paid to have slaves was just too high and the empire collapsed taking with it the whole slavery system. The slavery system was replaced by feudalism, where the former slaved got more freedoms in exchange for the peace of mind for the land owners.
- Facing competition from the mechanized steam looms and the beginning of mass productions, land owners had to ask their serfs to accept a lower and lower living level while having to work harder to reduce the decline of their textile revenue. The feudalism become obsolete and was shortly replace by classical capitalism.
- Great Depression was the turning point where the classical capitalism was replaced by free market capitalism. As usual, it was a general system failure that prompted the change. The extensive use of mass production and the advent of automation in the same time with a huge wave of cheaper workforce generated a drop of average wages while the business owners got all the profits and they invested them in more and more facilities in expectation of higher revenue. But this investments did not increased the average wage since the productivity grew and cheaper labor was readily available. Soon, it was realized that despite all the investments the demand for their products declined since people just could not afford to buy what they produced. This prompted a wave of workforce reduction in the hope to make the factories profitable again. It didn’t happen, because of the low wages, workers/consumers just didn’t had any savings. Once fired they just stopped spending entirely. More desperate to bring the profits back the layoff wave intensified and this prompted a more dramatic decrease in the demand. The owners put more pressure on workers to work harder for lower wages, but the expected profits were nowhere to be found. Then the market crashed.
The Great Depression was the end of the classical capitalism and the beginning of today slightly reformed free market capitalism.
- Today globalization again change the things into a new way. Again workers are asked to work harder in order to live worst. The polarization between rich and poor is again increasing following exactly the same pattern as did before Great Depression. It is again the signs of the times. The free market capitalism is failing and more reforms need to be applied. As FDR saved the capitalism from capitalists with the “new deal” allowing it another 70 years of prosperity,
a new set of reforms on the same tone need to be applied to cope with globalization challenges.
Since now se see exactly what the problem is, we can hunt for the solution.
Trade tariffs are not a good idea. First they invite retaliation. In the past US was able to produce technology so advanced that if China and India wanted it, they had to buy them regardless of tariffs. Not anymore. Multinational corporations already moved most of their development and research centers offshore, and starting with the fall of 2005 US import more high tech than it actually export. The advantage US had was already lost.
As of this moment tariffs will just hurt than help US since if China retaliate we still have to buy from them what we don’t produce anymore while they can produce everything they need.
The solution is to emulate the way tariffs works with tactics that nobody can retaliate against. Look at GM and Ford. They were brought down due to huge expenses in retirement and health care. If US apply a sale tax and use that money to finance an universal health care and pension system then GM , Ford and the importers will have to pay the sales tax. But GM and Ford will eliminate a lot of unproductive expenses.
While the importer price increase due to sale tax, the price of domestic products can
stay the same since domestic manufacturers gets a lot of expenses eliminated.
There will be no retaliation possible since most of the countries already have these social services and they already have a sale tax. By not doing so, we are hurting ourselves.
University education and public funded research labs that transfer the technologies to small domestic businesses with a contract that prevent them to offshore also can make a huge difference.
Increasing taxes on dividends and capital gain also can be used to finance public research while reduce the amount of money that will be invested by large corporations offshore to compete against US directly.
This is the plan.
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Which best describes what you think about requiring Covid-19 "vaccine passports?"
It will prompt more people to take the vaccine to help end the virus.
It will lessen restrictions and provide more freedom for individuals.
It is a violation of privacy and civil liberties.
It will lead to stigma and discrimination.
It will encourage counterfeits and other criminal activities.