14 October 2006

Globalization, Economics and Education

outsourcing -- the buying of parts of a product to be assembled elsewhere, as in purchasing cheap foreign parts rather than manufacturing them at home.

offshoring -- the practice of moving business processes or services to another country, esp. overseas, to reduce costs.

The hysteria raised by US and British groups over the migration of skilled "white collar" jobs to places such as India and Thailand is nothing new. It is in the best interest of companies (and ultimately everyone) to find the most efficient and low-cost methods of conducting business. On the surface, it seems that outsourcing and offshoring jobs will lead to increased unemployment in the countries from which those jobs migrated, however reality and history paint a different picture.

Industries such as IT and even financial journalism have established a thriving presence in cities such as Bangalore and Bangkok. While true, Western workers once performed many of these job functions, the offshoring process will ultimately benefit those economies from which those jobs came.

Throughout the history of Industrialism, modernization and outsourcing have altered job functions. When Henry Ford developed the assembly line for automobiles, scores of blacksmiths decried the development as a threat to their horseshoe business. In fact, workers that would have entered the economy as blacksmiths now had new industries to pursue such as tire production, oil exploration/ refinining, steel manufacturing and road construction. There was a net increase of jobs and economic strenghth from the mass production of autos. The blacksmiths were correct: horses would be replaced and their specific job function would become obsolete, however they were incorrect in suggesting that the auto would cause increased unemployement.
The fundamental rule of economics is to look at a policy effect on the whole rather than on a constituent parts. The blacksmiths were (rightly so) looking after their own self-interest; they can't be faulted for trying to preserve their industry. However, the critical element is that the government did not attempt to prevent the auto industry from expanding.

As former House Speaker Tip O'Neil once said, "All politics is local." As a result, politicians will attempt to fashion policies tailored toward their constiuencies. The result is that the rest of the economic picture falls victim to special interest dynamics. The US people as a whole benefited far more than the losses suffered by blacksmiths. As a result, the standard of living and employment increased overall. The auto industry also expanded the economy by creating new business where none existed before.

With outsourcing and offshoring, some jobs are leaving the US. However, there is a net gain of jobs and economic strenghth because of several reasons. First, businesses are becoming more efficient which leads to either lower costs or increased value to shareholders. This lower cost will allow more people to afford products they might not have afforded before. Even higher corporate profits benefit the economy and the individual. If shareholders are making more money, they will invest more capital in creating new business and thus new jobs. The Internet is a great example of this phenomenon. The web-development and e-commerce industry did not exist a generation ago. Yet, the expansion of the web (by mostly commercial interests) has led to jobs that did not even exist in concept years ago. So while Michael Moore loves to harp upon the decline of the auto industry in Michigan in the 1980s, the reality is that the closing of plants led to increased profits which allowed shareholder/ investors to create new companies in other industries, such as IT. The unemployeed auto-workers initially suffered from the transition, but a new category of employee emerged from the ashes of the plant shutdowns. The average American benefited from auto industry realignment, in the form of higher quality products at a lower cost and increased capital available to finance entirely new industries.

The hysteria of outsourcing and offshoring is unfounded. With increased globalization comes increased opportunity for everyone. With the migration of tech jobs to India, comes an increase of Indian purchasing power which will lead to an increase in overall product and service demand. China is another example. Workers are often paid extremely low wages in developing countries, however this low wage is more than they were receiving prior to increased globalization. This is now allowing the average Chinese to purchase goods that they could not purchase (or didn't exist) before. The number of cell phones in China now versus ten years ago is an example.

For the US and Western Europe to remain competitive, they must extract themselves from the politically expedient attitude of the blacksmiths. They must invest more capital in research, development and education. If the average US high school student cannot even find Nebraska on a map, how can the US expect to compete within the global economy? Rather than decrying globalization, the US should instead be condemming the educational system that sets up American students to fail on the world stage.

There are a few recommendations that would pay huge dividends for the US economy. First, comprehensive economic education should be integrated into junior and high school curriculums. Adults rarely use high-school chemistry in their life, but economic theory pervades almost every aspect of my life. An understanding of both is important. Topics such as supply and demand, foreign currency and taxes are essential learning for students to ensure that when they reach voting age, they understand the effects of economic policy on their future employment prospects. Traditional classes such as algebra should be redesigned to integrate practical applications such as banking, calculating loan interest and even fuel efficiency of a car. The entire math curriculum needs to become relevant. This will provide two benefits: students will learn the topics more thouroghly and students will be able to use the skill towards furthering their own career, regardless of field.

Secondly, their should be an emphasis placed on foreign cultures in the modern world. While history is essential, Americans are at a critical disadvantage when it comes to understanding cultural differences across the world and how they affect US market access. Cultural understanding is not about "tolerance," but about competitive advantage. Even topics suchs as the American civil rights movement can be integrated into an economic curriculum. There was a profound negative effect of slavery on the economic strenghth of the South, which most would argue led to the defeat of the Confederacy in the Civil War. The economic superiority and victory of the North had much to do with increased labor efficiency and industrial accumen. Robert E. Lee was a better General than Grant, but the South was hampered by inefficiencies caused by an antiquated labor system. Women's rights had a similarly important economic effect. The increase of women's rights led to an enourmous increase of US productivity through the addition of more women to the workplace. In Korea, students study Western culture primarily to increase their effectiveness as multi-national managers and for when they are negotiatiating with Western companies.

Finally, within the cultural education curriculum there should be dramatically increased foreign language education, especially in languages such as Korean, Russian, Thai and Chinese. Spanish and French are tired and dead for the most part on the global stage and serve very little in advancing the US economic health. The school systems should revamp their goals towards successful navigation of a world economy, not simply survival in a US-centric environment.

There is no excuse for failure, except perhaps apathy. Apathy is a far greater threat to American success than outsourcing or offshoring.

For futher reading:
Economics in One Lesson by Henry Hazlitt.
The Lexus and the Olive Tree by Thomas Friedman


Walrus said...

Ah, but all politics are local, and educational concerns often are too.

I'm not sure that I'm quite as sanguine as you about globalization, or at least about specific aspects of it. It is the power of multi-nationals that concerns me, not out-sourcing to foreign countries. They are too powerful, with too few checks on their power. Accountability to shareholders just isn't enough. But this is quite a different issue than what you are raising.

Anonymous said...


The grip of the Majlis-e-ittehadul Muslimeen on the community remains strong, With a Member representing Hyderabad in the Lok Sabha, five members in the Andhra Pradesh Assembly, 40 corporators in Hyderabad and 95-plus members elected to various municipal bodies in Andhra Pradesh, the All-India Majlis-e-Ittehadul Muslimeen is one of the foremost representatives of the city’s Muslims and the most powerful Muslim party in India and one can see the partys strenghth if it goes to Hyderabad old city and Parts of Muslim Dominated Villages of Andhra Pradesh everywhere u look u can see MIM written on walls ,lightpoles and buildings leaving aside green flags and posters of its Leadership and there small Offices . The Majlis has brought lot of development to the Old part of the city even after it is said it hasnt done anything by its opponents who are mostly Ex Majlis workers.The Majlis was formed in 1927 “for educational and social uplift of Muslims”. But it articulated the position that “the ruler and throne (Nizam) are symbols of the political and cultural rights of the Muslim community… (and) this status must continue forever”.The Majlis pitted itself against the Andhra Mahasabha and the communists who questioned the feudal order that sustained the Nizam’s rule. It also bitterly opposed the Arya Samaj, which gave social and cultural expression to the aspirations of the urban Hindu population in the Hyderabad State of those days.By the mid-1940s, the Majlis had come to represent a remarkably aggressive and violent face of Muslim communal politics as it organised the razakars (volunteers) to defend the “independence” of this “Muslim” State from merger with the Indian Union.According to historians, over 1,50,000 such `volunteers’ were organised by the Majlis for the Nizam State’s defence but they are remembered for unleashing unparalleled violence against Communal Hindus and the communists and all those who opposed the Nizam’s “go it alone” policy. It is estimated that during the height of the razakar `agitation’, over 30,000 people had taken shelter in the Secunderabad cantonment alone to protect themselves from these `volunteers’.But the razakars could do little against the Indian Army and even put up a fight. Kasim Rizvi, the Majlis leader, was imprisoned and the organisation banned in 1948. Rizvi was released in 1957 on the undertaking that he would leave for Pakistan in 48 hours. Before he left though, Rizvi met some of the erstwhile activists of the Majlis and passed on the presidentship to Abdul Wahed Owaisi, a famous lawyer and an Islamic scholar from jamia nizamia who also was jailed for nearly 10 months after he took over the Majlis leadership as the then govt wanted to abolish the Majlis party but Owaisi refused to do so and was seen as a person who had financially supported the party when it was a bankrupt and weak one after the Police Action in Hyderabad State.Owaisi is credited with having “re-written” the Majlis constitution according to the provisions of the Indian Constitution and “the realities of Muslim minority in independent India”, and fought the legal case for winning back darrusslam mim headquarters for years according to a former journalist, Chander Srivastava. For the first decade-and-a-half after this “reinvention”, the Majlis remained, at best, a marginal player in Hyderabad politics and even though every election saw a rise in its vote share, it could not win more than one Assembly seat.The 1970s saw an upswing in Majlis’ political fortunes. In 1969, it won back its party headquarters, Dar-us-Salaam — a sprawling 4.5-acre compound in the heart of the New City. It also won compensation which was used to set up an ITI on the premises and a women’s degree college in Nizamabad town. In 1976, Salahuddin Owaisi took over the presidentship of the Majlis after his father’s demise who also was also Jailed Various times .This started an important phase in the history of the Majlis as it continued expanding its educational institutions,Hospitals,Banks, including the first Muslim minority Engineering College and Medical College. Courses in MBA, MCA ,Nursing, Pharmacy and other professional degrees followed and now a daily newspaper known as Etemaad Daily. The 1970s were also a watershed in Majlis’ history as after a long period of 31 years, Hyderabad witnessed large-scale communal rioting in 1979. The Majlis came to the forefront in “defending” Muslim life and property Majlis workers could be seen at these moments defending the properties of Muslims in the wake of riots and these workers were very hard even for the police to control them even now it is a known fact that there are nearly about 2500 units of strong members who only act if there is a seirous threat to the Owaisi family and these members are under the direct orders of the Owaisi family which leads the Majlis party leaving aside thousands of workers and informers throughout the State and even outside the country far away till America and the Gulf countries.Salahuddin Owaisi, also known as “Salar-e-Millat” (commander of the community), has repeatedly alleged in his speeches that the Indian state has “abandoned” the Muslims to their fate. Therefore, “Muslims should stand on their own feet, rather than look to the State for help'’, he argues.This policy has been an unambiguous success in leveraging the Majlis today to its position of being practically the “sole spokesman” of the Muslims in Hyderabad and its environs.Voting figures show this clearly. From 58,000 votes in the 1962 Lok Sabha elections for the Hyderabad seat, Majlis votes rose to 1,12,000 in 1980. The clear articulation of this “stand on one’s feet” policy in education and `protection’ during riots doubled its vote-share by 1984. Salahuddin Owaisi won the seat for the first time, polling 2.22 lakh votes. This vote-share doubled in the 1989 Lok Sabha elections to over four lakhs.The Majlis has since continued its hold on the Hyderabad seat winning about five-and-a-half lakh votes each time.Despite remarkable economic prosperity and negligible communal violence in the past decade, the hold of the Majlis on the Muslims of Hyderabad remains, despite minor dents. And despite widespread allegations of Majlis leaders having “made money”, most ordinary Muslims continue to support them because, as one bank executive put it “they represent our issues clearly and unambiguously'’. An old Historian Bakhtiyar khan says the Owaisi family was a rich family even before entering Politics and he says he had seen the late Majlis leader Abdul Wahed Owaisi in an American Buick car at a time when rarely cars were seen on Hyderabad Roads and the family had strong relations with the ersthwhile Nizams of Hyderabad and the Paighs even now the family is considered to be one of the richest familes in Hyderabad.A university teacher says that the Majlis helped Muslims live with dignity and security at a time when they were under attack and even took the fear out of them after the Police action and adds that he has seen Majlis leaders in the front at times confronting with the Police and the Govt. Asaduddin Owaisi, the articulate UK educated barrister from Lincolns Inn College son of Salahuddin Owaisi and Former leader of the Majlis’ Legislature party and now an MP himself who has travelled across the globe meeting world leaders and organizatons and even in war zones compares the Majlis to the Black Power movement of America.The Majlis that emerged after 1957 is a completely different entity from its pre-independence edition, he says adding that comparisons with that bloody past are “misleading and mischievous”. “That Majlis was fighting for state power, while we have no such ambitions or illusions”.He stoutly defends the need for “an independent political voice” for the minorities, which is willing to defend them and project their issues “firmly”.“How can an independent articulation of minority interests and aspirations be termed communal,” he asks and contests any definition of democracy which questions the loyalty of minorities if they assert their independent political identity. “We are a threat not only to the BJP and Hindu communalism, but also to Muslim extremism,” Asaduddin claims. “By providing a legitimate political vent for Muslims to voice their aspirations and fears, we are preventing the rise of political extremism and religious obscurantism when the community is under unprecedented attack from Hindu communalists and the state'’. He can be seen in his speeches speaking against terrorism in the Country and says if the time arises Majlis will stand side by side in defending the Nation and Recently Majlis ittehadul Muslimeen MP Asaduddin Owaisi has Visited Lebanon after the war with israel and met the leaders of the resistance group Hezbollah and he has even visited Bombay and Malegaon Muslims and raised there issues in Parliament and has even represented the police torture victims to the Prime Minister and has given aid From Majlis Ittehadul Muslimeen Party Fund.

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