Outsourcing and the Global Optimum

The last week has seen the ‘great US ousourcing debate’ hit both new highs, and new lows. On the plus side would be the declarations of the oft maligned Greg Mankiw to the effect that the “outsourcing” of jobs is beneficial to the United States economy (even with the qualification ‘perhaps’ this has merit – since despite the fact that the suggestion may not be as well-founded as Mankiw imagines, it is at least courageous in a situation where the President he is advising doesn’t appear any too clear on the question himself). Among the more evident examples of the low points would be the statement from the Democratic Presidential aspirant John Kerry to the effect that company leaders who promote business process outsourcing are ‘Benedict Arnold CEO’s’.
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Globalise or Die?

I don’t know if he had Europe specifically in mind, but this is the message from Singapore’s finance minister Lee Kuan Yew in this interview in the latest issue of Yale Global Online. As he puts it:”If you’re not driven by profit, and do what the communists used to, which means price equals cost plus, then your economy will collapse.” Is this message being heard here in the EU? If the comments my posts on Indian outsourcing are anything to go by, it isn’t. And if the results of the survey mentioned in my last post are well founded, the consequences of this neglect may not be long in making themselves felt. To give a measure of where we may be on this one, France currently has China at number 16 on its list of trading partners, behind Peru. Turning your back on global supply chains won’t save your job, it will only completely finish it off.
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Anyone Want to Play Ball With Me?

Even though it may appear that this post runs along much the same lines as my last two or three, I should warn you: appearances are sometimes deceptive. The origins of what I want to say here stretch back in time two or three days to some comments I made on an earlier post and a subsequent piece which I have entitled the ‘Pele-Ronaldo’ effect. Surprising as it may seem, the topic here is only tangentially football. The real topic is the so-called brain drain, and how our initial intuitions may mislead us. The aforementioned effect is associated with the apparent detail that all those Brazilians ‘heading the ball’ here in Europe have not notedly had a detrimental effect on the rate at which Brazilian football produces outstanding new stars. In fact quite the contrary.

Now here’s the rub: just think of all those Indian IT ‘stars’ working at NASA, Microsoft and the like, and try to imagine the consequences back home in India. Well then try to imagine the consequences of the secondary effect in India on the employment situation in the US and now increasingly in Europe, and we get to the point of all this. We are experiencing a phenomenon which some are calling ‘hollowing out’. This has been noticed in the first place in the US, but with the EU structural reforms, and the relatively high euro, this tendency is going to make itself felt more and more over here. So this is the purpose of the post. To find out what people think.
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