< link rel="DCTERMS.isreplacedby" href="krusekronicle.typepad.com" > Kruse Kronicle: Globalization and the US Homefront

Wednesday, July 20, 2005

Globalization and the US Homefront

Globalization isn’t just about events in far away places. The following is story from Thomas Friedman’s “The World is Flat”:

“Consider this multiple identity disorder. In 2003, the state of Indiana put out to bid a contract to upgrade the state’s computer systems that process unemployment claims. Guess who one? Tata American International, which is the U.S.-based subsidiary of India’s Tata Consultancy Services Ltd. Tata’s bid of $15.2 million came in $8.1 million lower than that of its closest rivals, the New York-based companies Deloitte Consulting and Accenture Ltd. No Indiana firms bin on the contract, because it was too big for them to handle.” pp. 205-206

Mind you, this project was about unemployment claims! The Democrat (usually protectionist) governor chose the Tata and the Republicans (usually free trade) raised a stink about the outsourcing of jobs. The governor reneged on the contract shortly after it was under way and gave it to an American firm at about 50% more cost.

So…. who is the victim in this story? With the governor’s first choice, American firms lost more than $20 million in business. Tata and their employees, as well as Indiana taxpayers benefited. But politically, the governor lost. So he reversed himself. This meant that he minimized his political damage and an American firm got $20 million in business. However, Tata competed on a legitimate basis but was denied $15 million in business it should rightfully have had. Indiana taxpayers had to fork out 50% more.

Stories like these are mushrooming throughout the country. Entire industries are being shuffled around as businesses slice and dice pieces of their operations and move them to locations around the world. Foreign competitors are entering US markets. This creates lower cost goods but removes jobs from Americans. On the other hand, the rising living standards of people around the world is creating a greater demand for goods and service that Americans provide, thus increasing the demand for a variety of jobs.

What is the appropriate response to these dynamics? What does it mean to be a Christian in this environment?


At July 22, 2005 9:49 AM, Anonymous Anonymous said...

Outsourcing is less a problem than it looks like. After all, in the U.S. we currently have close to full employment. We hardly ever hear about insourcing, but that happens as well.
Thanks to outsourcing we pay less for many products, which means that the standard of living goes up. Apart from that, outsourcing helps the economies to which we outsource.
Much protest against outsourcing makes one think back to the good old days of the gas street light lighters who all lost their jobs when the electric light bulbs meant them unnecessary. Shall we have a moment of silence mourning for those jobs lost? Do we want to go back to the standard of living of before electricity? Do we want to travel by horse and buggy?
In this global economy we have to be at the cutting edge if we want to be the leader. Cutting edge in production efficiency and products. That requires an educated workforce with an excellent work ethic. Let's do it!

At July 22, 2005 12:33 PM, Anonymous will spotts said...

I kind of agree with anonymous on this. I'm not sure we can preserve particular jobs by keeping the conditions that once made them necessary. As long as people have opportunities, I don't see a major problem.

However, it does strike me as negative that we become more and more dependent on others -- particularly on cheap and sometimes slave labor (China, for instance). Also our oil dependence, and our increasing reliance on imported foods are worrisome. This may have certain benefits, but it is also not necessarily wise.

At July 22, 2005 2:37 PM, Blogger Michael W. Kruse said...

I think it is true that outsourcing is beneficial for the nations involved. I agree that having a 5-6% unemployment rate is great. However, if it is your job that goes away, the unemployment rate is 100%. This is happening to millions of workers. Add their spouses, children, and communities, and it is clear that many millions are affected. This is not a case against outsourcing but I don't want to minimize the trauma. I think the need for an educated workforce is right on. This whole phenomenon had the potential for altering how we view work and our place in the world.

Will raised the issue of dependence. China modestly revalued their currency today making American goods more competitive and investment in American by Chinese more attractive. Suppose further revaluations make the purchase of American corporations attractive to Chinese but then Chinese hardliners reign China back from free markets?

Of course, my concern here is to reflect on what it means to be a Christian in this context?

At July 22, 2005 3:55 PM, Anonymous will spotts said...

You're quite right -- losing a job is a very personally difficult thing, and I don't want to minimize that. Its just that as things change, some negative changes will happen whether we want them or not.

Your question is intriguing. I'm not sure I have a specifically Christian response. As things become farther distant, they tend to be increasingly complex.


Post a Comment

<< Home