This blog has been long in the writing. Life’s actually getting very busy and challenging for me, in the serene city of Columbus, OH. The story starts though in a far more tropical and bustling metropolis of Bangalore, India. It was summer and keeping with Indian summers I was perspiring like crazy as I walked around with Nandan Nilekani, co-founder of Infosys in their Bangalore corporate campus. To the uninformed, Infosys along with corporations like TCS and Wipro accept 3.32 million jobs(1) outsourced and off-shored from the United States alone. Mr. Nilekani described Infosys as a catalyst of efficiency streamlining business processes and generating huge profits for American businesses and shareholders. He also said, given the relative lower labor costs and high technical proficiency in India and some other places, outsourcing is here to stay. I’ll take his word on that. For one thing, outsourcing strengthens globalization and enhances equitable distribution of wealth. Both of these are progressive traits that have only got stronger over vast swathes of commercial history. To counter these forces would be regressive and defeatist considering a comprehensive global economy is fast becoming a reality and maybe even a necessity. Now why are most countries benefiting while a few losing out a lot? Why do the streets of Greece resemble a third world nation while the world’s only superpower talks about default? (If you already know a lot about the recent depression just skip to the fourth paragraph)
Post World War 2, America experienced an economic boom fueled by demand, industrial growth and innovation. A lot of these were a fall out of post war reconstruction and emergence of new markets in former colonies. Despite intermittent recessions, American economy flourished and innovators across fields created new products and services; IT was one of them. Outsourcing and off shoring became business practices and American corporations found a new competitive edge and profit generator: low cost! As both India and America enjoyed the mutual benefits of the IT miracle people were missing the obvious. It’s a simple question that comes from an equally simple observation. India and America are so differently placed economically. Americans enjoy a far higher standard of life than what most Indians could hope for. Why?
Maybe it’s the fact that America is rich in oil, gold and all those precious stuff under the ground. Think again; the last time mining was economically significant well.. was a long time ago. Manufacturing has remained stable value wise but jobs just haven’t grown a lot (I’ll blame China and better productivity technology for that). So maybe Americans were going to college studying hard and coming out with specialized technical degrees? And if that were not true then America really has no reason to remain where it is and will lose wealth to others. It’s as simple as that: you have money as long as you have something I want to buy. Now say if you really don’t have the cash but still want to live the American dream of a nice house and car and stuff. Well if you’re the only one that’s cool with the USA. But say there are millions like you and people who’ll bend the rules to get you what you want but can’t afford. The rest is the story of the 2008 Economic Depression. The scary part of this depression was that it redefined outsourcing and off-shoring. As companies started losing money they cut back on jobs like they always do. They also moved jobs to cheaper places. Companies actually used their own offices and employees in India and Philippines to do the same stuff well educated Americans would do but for more than triple the cost.
A college degree was no longer a safeguard against outsourcing. To illustrate, imagine someone had upped the ante on what constituted ‘outsourcable’. The result is a pool of qualified young people as well as non-collegiate workforce without jobs in the time of a recession. While the American economy will be able to accommodate many of the qualified ones the problem is far deeper. In the next five years, if more people go to college and get technical degrees and outsourcing continues (which it will) then the existing industries would still be unable to hire a large number of these people. The reason comes back to my argument (para 3). If America does not do things differently from the rest of the world it will continue to lose wealth. Guess how many Indians, Asians, Latin Americans, East Europeans and Africans are going to college to get the technical degrees you’re trying to get? True a lot of their colleges aren’t nearly as good as yours but as the average job description of specialists goes for now: their colleges are good enough. So unless you are something different (smart researcher or inventor often called niche employee) you’re in for a race just like the kids in Asia. If you don’t care and look forward to the social security check you’re fine as long as you’re the only one with that brainwave. But you won’t be.
All’s lost? Well not really because economics has a nice law that comes as an analogue to Murphy’s Law. It goes like this: If you really work hard for something opportunity will present itself. Essentially as a corollary to my argument if Americans do something differently that can make a difference. So say a new industry is created in the United States much like IT and computers were, it will need human resource. This is the question that is of so much focus in certain circles of this country. Will there be a new Bill Gates or Steve Jobs who can create a new industry. More importantly will it happen in America because even as I type I know of at least five other countries in a race technologically to research and create those industries? The winner gets the patents and the chance to build the industry with their own people tandem to American economic interests.
Fortunately America remains the largest spender on research for now. If biomedical is to be the next thing then the National Institute of Health (NIH), the NSF and other agencies are doing their bit. American universities still manage to attract bright brains and sometimes keep them. The strategy must be to keep as much of this human talent and increase public and even private spending in these research which can stimulate new industry. Investment banks which have now slowly returned to profit must take startups seriously. Till (If) these solutions make a concrete impact on the economic scene this country needs to do as much as retooling of its people as possible. National debt needs to be addressed and social programs adjusted. Taxes as well must be put under the scanner as there is no one right way to address the deficit. In this mixed approach there will be bruised parties but that can be easily addressed with strong leadership. So strong leadership then.
Note: Statistics is limited however most sources are from the Federal Labor and Statistics bureau
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