Offshoring and Lowered Expectations

Computerworld ^ | March 8, 2004 | Dan Gillmor

[Mini-14]

MARCH 08, 2004 - One of the best things about living and working in Silicon Valley is the quality of the people. I'm frequently the least-knowledgeable person in the

room, and probably the stupidest. I get to learn from the ultrasmart and creative folks I meet.

So why do I have an uneasy feeling these days about the place, even as an economic recovery for the technology industry starts to gather steam?

One factor abounds with irony. A few years ago, I wondered if the Valley was sowing the seeds of its demise by creating the communications and collaboration tools that would make it much less necessary to be there in a physical sense. The near-unanimous consensus at the time among the top people in the field was that the Valley had nothing to worry about.

I never entirely bought their faith, though the Valley has repeatedly shown an ability to rebound to new heights after deep economic downturns. The recent evidence, notably the surge of offshoring, makes me ask again -- about the Valley and the entire nation.

And I wonder if something is genuinely different now.

Intel CEO Craig Barrett put his finger on it a few weeks ago when he stopped by my newspaper for a long chat with some reporters and editors. What's new this time, he told us in a persuasive way, is the nature of the global workforce.

For the first time in human history, Barrett said, a truly gigantic pool of well-educated, technically adept and eager-to-please labor is being created. This pool of talent, which will include hundreds of millions of people in China and India (many of whom speak English fluently), has another characteristic: a willingness to work for a fraction of what Americans expect.

This is not because they like living poorly. It's because local conditions and currency exchange rates make what would seem like a pauper's salary here a highly attractive one there.

The U.S. largely came to grips with a similar crisis in low-end manufacturing. We moved up the value chain as a society, painful as this was for the less-educated, hardworking people who lost middle-class jobs and had to settle for lower-paid service employment.

How high can we move on the value chain now?

I travel widely. One thing I know for sure is that Silicon Valley and the U.S. have no monopoly on brains or energy. We do have an advantage in promoting a culture of risk, of entrepreneurialism. But other places are beginning to adopt even that value, too.

The spectacle of politicians promoting trade wars in the name of stemming job losses is disturbing, if understandable. I wish they'd devote that energy to telling the harder truth: that the U.S. will need to buckle down in unprecedented ways, with vast new investments in education and infrastructure, plus a new commitment to the best aspects of entrepreneurialism.

We may be facing big trouble in the near term, no matter what we do. That's the kind of news few politicians dare deliver.

Barrett, running for no office, offered a hard truth. As he gave his litany of why conditions truly are different this time, we asked if this suggested a generation of lowered expectations in the U.S. "It's tough to come to another conclusion than that," he replied.

[CasearianDaoist]

The American people will not work for third world wages. It will either be protectionism or extreme socialism before that happens. Our corporate chieftains have really over estimated themselves here and have moved to quickly. It is easy emough to stop it. Outsourcing can be stopped with a pen stroke.

Move farther up the value chain? they are kidding themselves. Where would that be? CEO of Intel? The rationalization of labor across the world means the end of western civilization.

And we did not "recover" from the loss of manufacturing. That is one of the reasons we are so in debt. Wealth creation lies in manufacturing and engineering. If we do not lead here we are doomed to follow.

This business of finding a new "restructuring" is a bunk. We did not move our factories oversea and then hunt around for a replacement called the "high tech " to replace it. High tech took decades to come into fruition.

I think they underestimate Americans or they have moved too fast. We will not settle for third world status and we are not about to go bavk to the middle ages.

[RussianConservative]

As he gave his litany of why conditions truly are different this time, we asked if this suggested a generation of lowered expectations in the U.S. "It's tough to come to another conclusion than that," he replied.

But I will contemplate issues on Reviera in my yacht while little peoples suffer....er adjust.

[CasearianDaoist]

Barrett, running for no office, offered a hard truth. As he gave his litany of why conditions truly are different this time, we asked if this suggested a generation of lowered expectations in the U.S. "It's tough to come to another conclusion than that," he replied. Well r. barret might be in for some other conclusions, such as: a 95 % income tax on his @ss, or outsourcing tech jobs being made an act of treason, or the Senate going after intel. All of which will happen if the Rats take back the government, which they will if this is not address by the GOP.

And why will more education solve the problem?

[CasearianDaoist]

They will be shot on the street first. The arrogance of these people, they think that they are above the nation state. They in fact have not thought it through. If they will haul Bill Gates in front of congress over a browser or take apart something like AT&T can you imagine what they will do to these people. It will make the new deal look like a temporary measure.

To sit there and tell the American people that they must compete with a billion Chinese in their own country. What unbelievable arrogance

[sarcasm]

we asked if this suggested a generation of lowered expectations in the U.S. "It's tough to come to another conclusion than that," he replied.

[international american]

The writing is on the wall. I travel all over Asia. The average income in Malaysia for a middle management executive is 1200 USD a month. The stock market recovery, is an illusion. If you have a ton of equity in your home, buy a fast food franchise.

[pabianice]

I know it sucks, but there is both precedent for and no escape from what is happening. Since the development of sedentary agriculture to now, every so many centuries, there is a quantum shift in how the world works. Sedentary agriculture, Roman legions, the serf system, the Renaissance, the Industrial Revolution, mass production, steam power, electric power, nuclear power, computers, the internet, a 24 hour international market. At each turn, millions scrambled to survive or die as the very fabric of society was pulled out from under them.

Today the IT revolution has ended forever every and all knowledge-based job located in a city near you. Highly qualified radiologists in India are performing diagnosis for US hospitals online for $ 25/hour -- 5% of what their US doctor counterparts are getting. You call AMEX and are connected to an Indian in Bangalore who speaks with an unintelligable accent, driving you into a rage and losing you as an AMEX customer (ok; all outsourcing dorsn't work, but for $ 7/hour it's gonna take a lot of pissed-off Americans to replace this Indian with an American for $ 35/hr, including benefits.

You can't turn back time. The Dems demand that we do so. Let them explain how.

[international american]

"we asked if this suggested a generation of lowered expectations in the U.S. "It's tough to come to another conclusion than that," he replied."

But he has already made his money:)

[dfwgator]

All along this has been my fear. The ride is over. After WW II we were the only industrialized country with our infrastructure more or less intact. Then during the Cold War most of the world was trying that failed experiment called "socialism" and we ate them for lunch. The US relative to rest of the world had a tremendous advantage precisely because of our economic freedom. Well, now the rest of the world is slowly starting to "get it." Combined with our dumbed-down education system, the rest of the world, especially Asia, is quickly catching up.

[international american]

Correct!!

[CasearianDaoist]

As I said, stopping it just takes a penstroke. The voter will make it illegal, and pop a hefty tariff on your Malaysian buddies, and if that does not work than sooner or later they will demand a bomb be dropped on them. It amazes me that people think that the American people will allow this. We will go right back to the 1930s with the Dems in charge. It is madness to think that the American Voter will allow this. The globalist elites are in for some surprises. They in act may get wiped from the stage.

Globalism leads to war or totalitarinaism, or both. They have moved too quickly.

[sarcasm]

rank	name	company	total comp ($thou)	5 yr comp ($thou)	mkt value - shares owned ($mil)	age	efficiency grade
25	Craig R Barrett	Intel	19,386	190,222	55.4	63	--

[oust the louse]

"If you have a ton of equity in your home, buy a fast food franchise."

LOL,funny but true....debt up to our asses(not me,but many others I know)...not a good thing.

[international american]

My Malaysian buddies actually are helping to create jobs in America. I bring business franchises to America, and in a very small way, am bringing dollars back to America. No big deal, really, but every little bit helps.

[vikingchick]

For the first time in human history, Barrett said, a truly gigantic pool of well-educated, technically adept and eager-to-please labor is being created.

Is he implying that American workers have an attitude problem? lol

[eno_]

The spectacle of politicians promoting trade wars in the name of stemming job losses is disturbing, if understandable. I wish they'd devote that energy to telling the harder truth: that the U.S. will need to buckle down in unprecedented ways, with vast new investments in education and infrastructure, plus a new commitment to the best aspects of entrepreneurialism.

Unless we cut taxes, we will lose.

Unless we cut the cost of regulations, we will lose.

Unless we fire corrupt sandbagging public sector employees we will lose.

We have a lot of advantages over China and India. If we cut down our disadvanatges, our advantages will keep us ahead.

More "investment" in government programs is exactly the wrong thing.

[international american]

No, he is saying that they will work for 1/6 of our salaries. This is a profound problem!!

[dennisw]

Another good post that lays it all out. We can't stop this lousy globalization but it's revolting how we've rushed into accelerate the trend for the last 20 years. And yes, blue collars were the first to be shit on via outsourcing. No one cared about them and those exported jobs lead to the humongous trade deficits of today.

But who cares because DEFICITS DON'T MATTER!!! (/sarc)

[dfwgator]

I wonder what would happen if all the foreign-owned firms doing business in the US, suddenly did the same thing that the protectionists want our government to do? I guarantee it wouldn't be pretty.