Andy Grove, of Intel fame, “spoke out”:http://www.forbes.com/2003/10/10/1010grovepinnacor.html at a recent technology summit in Washington about the current trend towards offshore outsourcing and how it’s causing the US to *slowly but surely lose its edge* in the tech sector. A particularly insightful comment on the “slashdot discussion”:http://slashdot.org/article.pl?sid=03/10/10/2310248&mode=thread&tid=103&tid=98&tid=99 about global standards of living:
bq.. You are spot on regarding standard of living. This is something people must understand. We in the “Western” world are in for a rough ride. We have prospered greatly for many years, and we have built a social structure on that prosperity. We have a very high standard of living. Our educational systems and transparent economies have fostered our wealth. However, other nations are learning, are becoming just as well educated, are reforming their legal and economic systems, and they will be far better positioned to compete with us on an equal footing in the skills department. With falling costs of transport, and dramatically falling costs of communication, as we all know it doesn’t matter where you are for many jobs.
The thing is, we have this huge built-in cost that we, as individuals, cannot overcome. We have far higher real-estate costs, fixed living expenses. We have high taxation, government entitlements, economic and environmental regulations, health care for our aging (and soon to be non-tax-paying) populations, and so on. These are expenses that most developing nations do not have. Workers in western society can only compete to a point on price, before the wealth we have stored in fixed assets (homes, real estate, investments, so on) have to take a hit.
The problem will get only worse… many have a belief that a new, unforeseen industry will pop up to employ not only those who are displaced by foreign competition in “old” industries, but also all the new workers entering the economy each and every month. Yet, with the advances in foreign skills, communication and transportation continuing, there is no reason that the incubation period of a new industry will be long enough to create many long-term jobs in the United States, other than in service sectors.
The solution will be, as you said, a re-balancing. The standard of living, expressed in real money, must fall in the western nations. The EU attempts to fight this through the UN and treaties on global environmental/labor/human rights standards and so on, which we in the US ironically often fight on principle. In reality, we cannot compel the developing world to voluntarily raise the costs of their labor and products; they do, and will, resist. The solution will be painful for us, as we have nowhere to go but down. The rest of the world has nowhere to go but up. We will have to get used to no longer being the dominant wealthy societies, better educated, better able to demand high wages and high social/governmental benefits. Developing nations will become more expensive as their populations demand more of the “benefits” we have, yet they will be starting with, essentially, blank slates, while we have decades, even centuries, of built-up high costs and expectations to overcome. Hopefully rising costs overseas will be expressed in “Internet time.” We will all see.
>> “Slashdot”:http://slashdot.org/comments.pl?sid=81900&cid=7188486
Read moreOffshore Outsourcing and Global Living Standards