The 'Exporting Jobs' Scam by Harry Browne

The burning issue of the day is the "exporting of jobs" to foreign countries by corporations.

As the prevailing wisdom would have it, greedy corporations are taking advantage of lower wages in foreign countries — taking jobs away from Americans and giving those jobs to foreigners who will work for much less money.

In other words, American companies make their products overseas and then bring them to America to sell to Americans who were denied jobs producing those wares.

The politicians who are upset about this practice rarely suggest any specific solution; they just promise to put a stop to it. The TV commentators who are exercised about it also are short on solutions; they just seem to enjoy viewing with alarm.

The only concrete solution that's been offered (that I've come across) is the introduction of state laws to require any companies doing business with the state government to produce their products within the U.S.

Politicians are notoriously economically illiterate. And even when they know what would be the right thing, we don't really expect them to do it.

But we do expect financial and economic reporters and "experts" who appear on television to have some grasp of whatever they're discussing. Thus, when these "experts" join in the chorus of outrage over greedy corporations exporting jobs, it's easy to believe there must be something to the complaint.

But just once I would like to see someone on television ask one of these politicians, reporters, or "experts" the following question:

Since American wages have always been much higher than wages in Thailand, India, Indonesia, and other Asian countries, why weren't American companies exporting jobs to those countries 30 or 40 years ago?

Since wages in African countries are even lower than those in Asian countries, why aren't American companies exporting jobs to Africa?

Since wages in America are lower than those in Japan, why don't Japanese companies export jobs to America? Yes, they have factories here that employ Americans, but those plants make products that are sold here. They don't ship the products to Japan to be sold. American companies build factories in foreign countries but don't sell the products there; they bring the products here for sale.

If you think about these questions, you can't help coming to the conclusion that jobs aren't being "exported" because of wage differentials, but rather for some other reason.

Most likely, companies are heading overseas because U.S. regulators just won't quit heaping more and more demands on American corporations. . . .

• About the only sure way a company can avoid discrimination suits by government regulators or individuals is to hire by quotas, which certainly isn't the most efficient way to build a workforce.

• EPA officials can make a company's life miserable by demanding changes in the way a product is produced — changes that conform to government rules but don't make the environment any safer.

• At any time a company might have to make major changes in its facilities to accommodate new rules for dealing with disabled employees or customers.

• In addition to the wages paid to employees, companies must collect and contribute to payroll taxes that grow bigger and bigger over the years.

These are just a few examples of the many regulatory problems companies face. Every little regulation, every demand, every new policy imposed by the government costs money. And at some point, it simply becomes too expensive to continue operating within the United States.

It's interesting that some of the politicians and reformers who have demanded the above impositions on business are the same folks who are condemning the companies that move some of their production facilities offshore.

And what solution do they propose to stop the "exporting of jobs"? More government, of course — which will chase more companies overseas.

If they really want to bring those jobs back, there's a simple way to do it: repeal all the regulatory legislation that's driven companies to export the jobs.

If your answer is "never," you're probably right. So the "exporting jobs" problem will be with us for a long time.

Also see: "Seeing through Economic Fallacies: Is America in Trouble for Lack of Manufacturing?"

Oct 26 2000

It's quality that has done the trick
by Pankaj Jalote

DEVELOPING nations in Asia and Latin America want to replicate India's story.

Indian software exports, as is well known, have grown from less than $100 million before 1990 to over $5 billion in 2000.

What is not well known is that revenue per person per year has grown from less than $20,000 to over $50,000 in most large companies in the last five years. This is not simply due to inflation.

Though the industry is still focussed on tapping the huge software services market, most of the big players have moved from lower value services to higher value services.

The story of the Indian software industry has spread far and wide.

From the presentations that representatives of various Asian and Latin American countries made at a recent workshop in China on IT industry in developing countries, it is clear that many developing countries want to emulate the Indian story.

Within India, however, many continue to view the industry's success with a mixture of admiration and scepticism. There is a lingering doubt about whether the industry is inherently strong or it is just tapping a window of opportunity which will soon be tapped by other Asian countries with large population and better infrastructure.

Strengths
India has moved rapidly on the quality front. Indian software organisations adopted the ISO model soon after it came and then when the Capability Maturity Model (CMM) started becoming more important, rapidly transitioned to the CMM.

This has given the Indian companies solid project and process management strength these models are supposed to bring.

This is a tremendous strength that is not easy to emulate. For example, China, despite the fact that it has about a 1000 software companies in Beijing area alone, has probably none at level 4 or 5 and is now actively looking at CMM as part of the country-level strategy to tap the global market.

The situation in the rest of Asia (not counting the developed countries) is similar. The situation in Latin America is no different. In fact, outside the developed countries, it is only India that has companies that have been able to successfully implement these global quality models.

The second strength is the business expertise that now exists in the industry. With time and experience, managers who deal in projects with clients across the world, have developed good understanding of business practices in other countries and have acquired domain knowledge and an understanding of the cultural context of the customer.

These are the factors that are essential for moving from low level technical services to higher level services, i.e. for going up the value chain. They are also essential for customer satisfaction, which, in turn, is essential for business. Many Indian software companies boast of repeat business of over 70 per cent - a huge asset when trying to grow at a rapid pace.

At the same time, the senior management seem to have transformed from thinking like a India-based supplier to being a global player. This has brought in organisation management and business practices that are in line with the developed world.

Finally, Indian software companies have developed the ability to change rapidly with technology. This has been amply demonstrated by the quick movement to Java and e-commerce related technologies.

These three solid strengths - processes, business skills, and reprogammability are not easy to acquire. Perhaps the biggest factor has been the export orientation of the industry. This has helped the industry in being receptive to technology, and has brought quality consciousness.

The second reason is that the software industry grew without government help. Perhaps the only thing that the government did was to get out of the way by liberalising imports and exports in the early 90s.

Contrast this with the situation in other developing countries - almost all countries in Asia and Latin America are looking for government funding and help for developing the IT industry.

Business leaders have played a key role. After the standards set by TCS, Infosys, Wipro, HCL, etc., no company today aspires to be just a few-crore company.

All this does not mean that the industry or the country can rest on its laurels. The lead will remain for a few years at best. There are many areas where the limits are reaching, particularly on the trained manpower front, and the use of IT with the country itself.

The author is a professor of Computer Science and Engineering at IIT, Kanpur. His email id : Jalote@iitk.ac.in

http://www.economictimes.com/today/26netw06.htm

The column made some good points, but...asked 3 questions and didn't answer them directly. Direct answers will indicate the questions are actually non sequiturs.

Well, it could be because 30 to 40 years ago there was still war in Vietnam, Cambodia, etc. And where there wasn't war, there was rampant corruption, kidnapping, bribery, and confiscation of property of external investors in Asian countries. Not to mention that China was hard core communist at the time. Oh, yeah. Let's not forget the "killing fields".

Since wages in African countries are even lower than those in Asian countries, why aren't American companies exporting jobs to Africa?

Because much of Africa today is like Southeast Asia was 30 to 40 years ago - terrorists, tribalists, murder, mayhem, looting and confiscation of property. Not a good place to "invest", much less risk your personal butt running a factory.

Because Japan will protect jobs above everything else. Heck, the answer to this question is DIRECTLY opposite what the columnist is trying to steer you to. Japan has been jobs protectionist for a long time. Companies there spent the last decade having people doing all kinds of useless makework rather than lay off anyone.

So...none of the questions lead to the answer the columnist wanted you to believe IS the answer.

"The problem with the immigration issue is the influx of people from Mexico seeking a handout."

this is 1) a lie 2) stupid 3)a statement that flies in the face of all the evidence out there. None of the people I know from Mexico want to be on the dole. I walked away from my dad's general contracting business years ago because I was so sick of being unable to find enough sober non dopers to put together a work crew that would finish a job. The mexicans have changed the entire construction industry, and for the better.

back on topic, though, i do agree with the idea that for a citizen to be fully "vested" with citizenship privileges, they should be property owners.

fully on topic, I have never read anything by Browne that I did NOT agree with. Even when I don't WANT to agree with him, I wind up scratching my head a bit. I wish the Republicans had more of his thinking and less "compassionate conservatism." (translated "we believe in government when OUR guys are puking out the money")

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