Globalization: The Good, The Bad and the Ugly
Date: Wednesday , March 05, 2003
I have yet to meet a professional who is happy to lose his/her job. When a leading business daily carries the cover story, "Is your job next?", and has an article describing the pain of Americans losing high-paying jobs to India and other developing countries, globalization looks like a raw deal. If the national economy loses high-paying jobs, who is going to buy all the goods and services produced in the economy and maintain high living standards?
Globalization is the hunt for markets to sell products and services at the highest prices and the hunt for procuring products and services at the lowest prices. The manufacturing industry witnessed the first wave of globalization in which China has emerged the winner in terms of attracting jobs for its citizens and attracting foreign investment: last year, in fact, it became the world's largest net recipient. I am sure for thousands of Americans who lost their jobs in manufacturing fridges, microwaves, and air conditioners, that wave of globalization was not a blessing. But for the overall economy of world, that wave was great. Millions of consumers in other countries are benefiting from the low price of Chinese goods. China used the money earned from manufacturing to buy foreign goods and services, thus creating a giant market for foreign companies to sell their products. Even now, China's trade surplus is only around $30 billion-which is smaller than that of Japan, Germany, or even Russia.
Now, the migration of services jobs to Bangalore, Manila, and Shanghai is following the same trend. For a programmer losing his job in Silicon Valley because the company found it cheaper to hire someone with the same qualifications in Bangalore, this phase of globalization is ugly. But for the company, if it helps it to become more competitive, globalization is a god-send.
Does it mean that in a few years, all the high-paying service jobs will move out of the U.S.? One need only look to the automobile industry. Remember Ross Perot's fears of a "giant sucking sound" as low-cost Mexico snapped up jobs from the U.S. after NAFTA? Now, Nissan is building a new plant in Mississippi, Toyota is considering to open a new truck plant in Texas, Honda and Mercedes are expanding in Alabama, and BMW is expanding in South Carolina. All these are in the good old U.S., not in Mexico. At least the automobile industry has figured out that moving manufacturing to low-cost countries is not a straightforward solution. In the high-tech world of manufacturing, Sony recently decided to move its digital video camera production facility from China to Japan. A global economy affords the business executive the freedom to choose where to manufacture, thus making manufacturing more productive throughout the world.
This new wave of globalization will result in similar productive gains in services. It's a shame that New Jersey legislator, Shirley K. Turner, has introduced a bill that prohibits the outsourcing of state contracts to foreign countries. Connecticut, Maryland, Wisconsin, and Missouri have also begun considering such laws. How are services jobs going abroad any different from manufacturing jobs going abroad? Is it due to the fact that India is an open democratic country, so journalists from mainstream U.S. newspapers and magazines can do stories about how India-based professionals are doing good work for U.S. clients? Surely, a story about professionals losing their jobs in North Carolina and offices humming in the wee hours of the morning in Delhi working for U.S. companies will elicit some resentment. Maybe it's time for the Indian services industry to do some good PR in the U.S. We keep hearing that half of the Fortune 500 firms have outsourced to India. But the total export of software services from India (around 10 billion per year) is still less then 1/3 of what the IBM Global Services group does. Where's the beef?
I never get tired of thinking how much of services work can be done from India. To this day, I have to wait two days to hear back from a software company when I leave a message that I am interested in buying their product, I have to wait a week to talk to a salesperson to open a merchant account with a bank, and I have to wait 15 minutes in order to call for some clarification on my phone bill. All of this delay points to opportunities just waiting to be exploited by entrepreneurs. On a personal note, if we didn't have our Bangalore office to do much of the work involved in the publishing business, we would almost certainly have followed the lead of innumerable magazines and would have been long gone with the wind. That's the good part of globalization. Now tell me what you think about globalization.