Theos-Talk Archives (February 2004 Message tt00055)

somethingnew: "Outsourcing is what is saving the American economy. 
Take away that and it is doomed.

That is certainly something new. Outsourcing itself is something 
new, and only started about 1996. So if what you are saying is true, 
one has to wonder why things did not fall apart decades earlier.

somethingnew: "More $20/hr+ jobs are being created everyday because 
of outsourcing.

That is not what is being reported in the media. The new jobs that 
are being created are working at Wal Mart for the minimum wage,

It is also not true that most managers, outside the health care 
industry, work for $20/hour. Multiply that by an integer of your 
choice (at least 3) and you get a more realistic number.

somethingnew: "And for all that, we pay them $2/hr or less and they 
are upper middle class in their respective countries.

People are being exploited but not that badly. An engineer in India 
makes about $7500/year, which is much better than "$2/hr or less," 
and which oddly makes them higher paid than a doctor or a lawyer. It 
is less than they are worth, of course, and they are reportedly 
demanding and getting more equitable compensation. The long term 
problem is that most observers expect the same companies to leave 
India for some lower wage country in the future to avoid paying 
better wages there, so the outlook for everyone everywhere is hard to 
predict at this point. Companies have already left Mexico, which is 
a low wage country, for China, and Honduras, which is a flat on its 
back country, for Bangladesh, etc. Indian corporate leaders are 
already talking about outsourcing work from India to China. Nobody 
in Bangladesh is secure because North Korea has cheaper labor if the 
government there ever opens the place up. The advantage to the 
recipient country is purely temporary as the organizers of all this 
constantly look for cheaper labor elsewhere.

somethingnew: "Which means more money being saved and put into 
research and development jobs, creative jobs, and managment jobs. 
Nope. "Research and development jobs, creative jobs, and managment 
jobs" are precisely what we are ridding ourselves of.

somethingnew: "Actually, don't take my word for it, LOOK AT THE 
ECONOMY AND THE JOB MARKET."

The latest news is, new unemployment claims are at their highest in 
months.

somethingnew: "Do you think Greenspan is lying?

I follow the markets daily. I cannot remember how long it has been 
since Greenspan raised interest rates.

somethingnew: "Obviousley it looks like we are headed for another 
boom and it looks quite big. 

We are headed for something big alright, but it may not be a boom. 
Or if it is, it may signify things are blowing up.

arielaretzie: "Those "numbers" keep shifting everyday. I think your 
Greenspan has just announced more job losses in America.

Millions of them.

arielaretzie: "Living in India, I've noticed how much the Indian 
economy has picked up these last few years.

The challenge to India is going to be to create a domestic demand for 
high level services so they are not totally dependent on 
outsourcing. If India decides to become a long term outsourcing 
dependent economy they are surely headed for a crash. India's 
government minister who is responsible for IT (I forget his name) is 
well aware of this based on interviews he has given and is working to 
prevent it from causung a problem. Whether he will succeed or not 
remains to be seen, but it is encouraging that he is at least clear 
sighted. I don't get the impression US ministers have a clue, or 
else that they are engaging in self serving behaviors and not in 
public service.

arielaretzie: "l know Europe is doing very poorly but 
this seems more a result of making the Union which can be temporary.

Robert Samuelson published an interesting article recently which 
suggests the socialist bubble is finally deflating. Like the dot com 
bubble, this one seemed to do well forever against all logic, and now 
things are adjusting. The admitted unemployment rate in the EU is 
9%, which means the real unemployment rate is probably about 18%.

arielaretzie: "So I would not put all the blame on outsourcing

Actually, what I am doing is trying to figure out where this is all 
going. Blame implies judgement.

Bart Lidofsky: "The principle is more short?term cutting of expenses, 
giving a temporarily higher profit, with major rewards to the CEO. 
The Board of Directors is, of course, made up of a group of connected 
people, all of whom take turns being CEO's of 
other corporations. The cuts in expenses end up severely injuring or 
destroying the company, but by the time this has happened, the CEO 
has bled it dry."

True. The Italians just put a bunch of CFOs in jail for what is 
being charaterized as the largest corporate fraud in history. 
Someone sent me an article recently which suggests CEO jobs are 
starting to be outsourced, meaning companies may get better 
management without being flattened by exhorbitant compensation 
demands.

At a macroeconomic level it appears to me this all translates into 
deflation. Deflation and the inability to manage it successfully 
seems to have been the driving force behind The Great Depression. It 
would be naive to think anyone really enjoyed that eperience. Even 
JP Morgan found it frustrating.