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Old 07-23-2005, 09:43 PM   #1
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The End of American Economic Dominance?

http://www.fortune.com/fortune/artic...0.html?cnn=yes

Quote:
The result is that many Americans who thought outsourcing only threatened factory workers and call-center operators are about to learn otherwise. That is a giant development, because information-based services are the heart of the U.S. economy. With 76% of its jobs in services, America’s economy is the most service-intensive of any major country’s. Of course many of those jobs can’t be shipped abroad: Chefs, barbers, utility and NFL linemen, and many others know they can’t be replaced by even the smartest person in Bangalore.

But growing numbers of other service jobs are not safe. Everyone has heard about the insurance-claims processors, accountants, and medical transcriptionists in India and elsewhere who’ve taken away U.S. jobs by doing the same work for much less money. More alarming is that the value of outsourced jobs is steadily rising. Morgan Stanley is hiring Indian bond analysts, fearsome quants who can make or cost a company millions. Texas Instruments is conducting critical parts of its next-generation chip development—extraordinarily complex work on which the company is betting its future—in India. American computer programmers who made $100,000 a year or more are getting fired because Indians and Chinese do the same work for one-fifth the cost or less.

The big question is how far all this will go. A massive new study from the McKinsey Global Institute predicts that some industries could be changed beyond recognition. In packaged software worldwide, 49% of jobs could in theory be outsourced to low-wage countries; in infotech services, 44%. In other industries the potential job shifts are smaller but still so large they’d create major dislocations: Some 25% of worldwide banking jobs could be sent offshore, 19% of insurance jobs, 13% of pharmaceutical jobs.

Looking at occupations rather than industries, some fields will never be the same. McKinsey figures that 52% of engineering jobs are amenable to offshoring, as are 31% of accounting jobs.

....

The downward pressure on U.S. wages could be more immediate and severe than you might imagine. It is tempting to suppose that the giant U.S. economy couldn’t have felt much strain yet; the total number of offshored white-collar jobs is probably fewer than a million so far. But it doesn’t take the shifting of many jobs to produce ripple effects through the whole economy.

Why? Most U.S. workers whose jobs are sent overseas will try to find new ones, perhaps in other industries or occupations. So the offshoring of any jobs will produce job seekers who will tend to push wages down even in industries in which outsourcing isn’t happening. Far more significantly, the mere threat of moving jobs offshore is enough to hold wages down—those growing armies of skilled workers around the world are increasing the labor supply in many occupations, and the immutable law of markets is that when supply goes up, prices come down. It has happened in all kinds of other markets—food, clothing, microchips, appliances. Why not in labor?

Some economists believe they see it happening already. They note that something extremely odd occurred in the U.S. economy last year: Average compensation, including pay and benefits, fell. That is a rare event; the last time it happened was 14 years ago. More important, it usually happens in or around recessions or when productivity is going nowhere. But last year wasn’t like that. Productivity rose. The economy grew. The unemployment rate was low and falling. Every indicator pointed to strong wage increases, but just the opposite happened. Now some of the nation’s most eminent economists, including professor Richard B. Freeman of Harvard and Stephen Roach of Morgan Stanley, believe the supply of overseas workers in newly globalizing labor markets is holding U.S. pay down and will do so for years.
It's a large article, but I encourage you to read it all and comment accordingly.

I remember that when I went to college, I studied media, because I purposely picked an industry that could not be outsourced. All the Indians or Chinese in the world don't work in local media. If anything, they'll work and create their own back in their home countries.

Anyway, globalization is here to stay probably, and while it will prop up the economies of third-world nations, it will be at the expense of our own. I hope we're going to be prepared for rampant underemployment and deflation. After all, for those who went to college and studied a soon-to-be-worthless profession, you can't just tell them to "go back to school" and ignore their $50,000 in existing student loans.

Melon
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Old 07-24-2005, 01:00 AM   #2
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It's all a bloody worthless joke, really. Our so-called 'society' only functions if people have money to buy stuff. Simple as that. That is the way of life we are apparently fighting to defend. It's not a bad way of life, as far as they go - but it only works when ordinary people have money to buy stuff. Ie. a job and a stable livelihood. Go figure.
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Old 07-24-2005, 04:30 AM   #3
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Capitalism is a system that works when all parties benefit. This current situation is short-sighted. When the worker is no longer benefiting--when there is no correlation between productivity or inventiveness and income, the system falls apart.

Buy American--bullshit! Buy when you can from whoever employs American workers at a fair wage regardless of who owns the company.

And American workers need to maintain the skill levels and productivity so they are worthy of earning the higher wages.

Right now, business is in danger on several fronts.

1. It is relying on a system of "let's do what worked before"
instead of what will work in the future. They are becoming
lazy about inventiveness and are just rehashing. (See
Hollywood)
2. Too much reliance on quick profits. Quality diminishes.
3. Too much middle management, too many layers.
4. Minimal production accountability. There are really a lot
of people being paid at relatively high wages who add nothing
to the company. They are paid to hold meetings and look busy
and come up with strategies that the actual workers know
are inefficient. Too much business-speak, not enough
production. Too many highly paid CEO's who know they
are going to be richly rewarded no matter how well or how
poorly they do. How many companies do you know where the
best workers are not the best paid?
5. Employers often won't pay their workers, but will hire a
high-priced consulting firm, which often results in actually
nothing changing or just change for the sake of change no
matter what havoc it wreaks. Sometimes it wasn't broke.
6. PS to employers, an MBA doesn't necessarily mean you
understand how business works. Too much reliance on degree
instead of competence. (There are many competent MBA's
out there. But they were competent people anyway).
7. Growing disconnect between management and labor.
8. Americans are used to spending. Business is relying on that.
But Americans are going into ever increasing debt to buy.
That bubble is going to burst. No money, no customers.
9. No customer loyalty. No employee loyalty. No company
loyalty to either customer or employee.
10. Too many choices--but they are all the same thing.
11. Insufficient education and skills in the upcoming crop of
workers.

Etc. Etc. We're in trouble.
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Old 07-24-2005, 08:20 AM   #4
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I think the biggest problem is that we measure "economic health" on "corporate health." Everyone who works for the corporation, on the other hand, is replaceable and expendable.

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Old 07-24-2005, 08:30 AM   #5
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nothing lasts forever.

but it's too bad that not many are willing to look toward what may come after.
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Old 07-24-2005, 09:05 AM   #6
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Quote:
Originally posted by Se7en
nothing lasts forever.

but it's too bad that not many are willing to look toward what may come after.
Underemployment and deflation?

Future generations will be able to adjust, but what about the existing ones? Do we just write off the current population as a "loss"?

I'm sure that's what our "pro-life"/"save the fetus and fuck the living" GOP would say. As long as the CEOs get a multi-million dollar "departure" bonus, what do they care what happens to their companies?

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Old 07-24-2005, 10:06 AM   #7
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Quote:
Originally posted by melon


Underemployment and deflation?
no. american economic dominance.

i think you took my post the wrong way.
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Old 07-24-2005, 02:23 PM   #8
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People were saying similar things in the early 90's....America seems to go periodic episodes of self-doubt but always bounces back....to those who slag capitalism, what workable alternatives do they suggest?
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Old 07-24-2005, 11:29 PM   #9
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No offence to Financeguy but people have every right to slag capitalism, it's their lives at stake after all... though I'd add the caveat that I at least am not slagging it per se. If it self-destructs, it self destructs. Most (all?) corporations depend on people being able to afford to buy stuff, for their continued existence. In the long run we're all dead. Including the corporations.
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Old 07-24-2005, 11:54 PM   #10
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Quote:
They note that something extremely odd occurred in the U.S. economy last year: Average compensation, including pay and benefits, fell.
this is true


i see evidence of shrinking life-styles for many everyday.
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Old 07-25-2005, 01:31 AM   #11
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ah come on people you have to be dynamic, isnt that what the marketing courses tell us? where are your innovative ideas? we want enthusiastic workers!

its just globalisation. in the end, the free circulation of work, products, money, will serve US ALL (in the LONG RUN EVERYONE will benefit). or do you see any alternative to globalized capital?

if politicians are too lax in reducing social standards and cutting corporate taxes to a minimum, that´s what happens!

be a little flexible. think globally, act locally
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Old 07-25-2005, 10:24 AM   #12
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Quote:
Originally posted by deep
i see evidence of shrinking life-styles for many everyday.
or growing use of credit?

without consistent and healthy levels of national saving, any economy will eventually encounter problems.
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Old 07-25-2005, 10:42 AM   #13
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Work will always find its way to the cheapest provider.
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Old 07-25-2005, 11:21 AM   #14
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Quote:
Originally posted by Kieran McConville
No offence to Financeguy but people have every right to slag capitalism, it's their lives at stake after all...
And that's the thing. Supply-side capitalism is completely aethical and amoral to the point that people are as "important" and disposable as computers. Since business only cares about itself, it is more than willing to let everyone in America be underemployed or unemployed in its quest for infinite profits.

To be frank, I don't give a rat's ass about corporate profits if that means that the workers suffer, as a result.

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Old 07-25-2005, 12:04 PM   #15
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Contrary to the surface impression, business must care about the "quality of life" issues for an employee in order to maximize the productivity of an employee.

India is slowing doing a better job of marketing the biggest resource - raw manpower.

I found it interesting that in order to expidite his research, author C.A. Tripp had President Lincoln's documents digitized in India so research could be done electronically.

It is no longer just call centers.
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