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#21
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On Tue, 4 May 2004 11:47:48 +0100, GSV Three Minds in a Can
wrote: However salaries in India have floated up pretty dramatically these last 10-15 years, and will continue to do so (at least for the educated folks .. and educated Indians are very educated indeed .. which other country teaches '19 times table' in schools? Heck, which other country does most of its teaching in what is, to 99% of the pupils, a second language? 8.) This is only a small portion of Indians, and is where they are going to lose against China if they don't get their act together. India overall is not educating the masses, which is what you need for economic dominance like America or Japan has experienced in the past. Literacy rates in India are running around 50% (with more illiterate women than men). China, OTOH, is educating everyone, and is building considerable momentum. They're like a sleepy giant starting on their 2nd cup of coffee. Watch out when they finish the pot! Another difference is that India is building soft industries (software, design, other stuff that can be moved relatively quickly and cheaply), while China is focusing on hard industry - brick and mortar manufacturing that pays back into the community for decades and is not easily transported elsewhere. Manufacturing is the life-blood of a vital national economy. The size of the population will work to the advantage of both, though. Korea was starting to be a threat with low cost manufacturing, but the population is small enough that raising the standard of living a lot (hence the cost of production) didn't take so much. Raising the standard of living of a billion Chinese is a longer-term project... Neil Maxwell - I don't speak for my employer |
#22
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Wolfgang S. Rupprecht wrote:
"Hugo Drax" writes: True but I think eventually all development/design will go overseas. it makes no sense to pay 16 times more for US labor when overseas is 1/16th cheaper and will afford Intel,IBM etc.. a nice margin on end product. Why stop at development/design? What prevents management from being outsourced too? Heck, what prevents the board of directors from outsourcing the CEO position? That may very well be the next avenue of outsourcing. There was a time when they said they'd never outsource their engineering and scientific brains, but that's happening now. In recent years, upper management has been displeasing shareholders (institutional and individual investors alike), with things like Enron, Tyco, etc. The executive suite seems to believe that it's outside the scrutiny of anybody, but it may not be anymore. Let's face it, even the salaries of American executives are way above anything the rest of the world sees. You can justify it by saying that you're not really paying them a hell of a lot, except with stock options, but even that gets old when they get so many stock options, they usually become major shareholders of the companies they run without even buying a single share. Yousuf Khan |
#23
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David Schwartz wrote:
The reduction in salaries will be partially balanced out by the reduction in the cost of goods. If outsourcing reduces the labor costs of goods, it will reduce the cost of those goods. A reduction in the cost of goods is otherwise known as deflation. If there is ever a recipe for a self-destructing economy, it is deflation, more so than inflation. Deflation is like that proverbial airplane that has stalled and is now spiralling down to earth, supremely difficult for a pilot to control. The most staunchly anti-inflation central bankers tend to try to keep at least a moderate amount of inflation going because deflation is worse -- deflation could cause street riots as salaries get chopped, or layoffs mount. I doubt US salaries are ever going to take a tumble just to compete against these other countries. They could. I don't think it's likely, but it's certainly not impossible. More laborers will be competing on an international market rather than a national one. I see salaries remaining stagnant more likely than salaries getting chopped. Salaries getting chopped will bring the US in line with the rest of the world more quickly, but at the risk of social upheaval. Just look at the Soviets. If workers took a pay cut, would manufacturers also automatically lower prices? No, you have the cause and effect backwards. Prices will lower for goods for the same reason they'll lower for wages -- competition in a larger economy. As you know, in the economy, cause and effect play off of each other. There's no telling which is cause and which is effect most of the time. Not right away, but as their sales start tumbling then they would, but in the meantime, a lot heartache where people can't afford things they were able to afford before, and sellers losing sales that they used to make easily before. No, sales won't tumble, they'll grow. Cheaper labor means cheaper goods that poorer people can affort. Globalization means larger markets to sell goods into. Again, depends on which is cause and which is effect. If salaries are cut before prices are cut, sales will decline. I know that there is a lot of grumbling in the US about why they should be losing jobs to overseas. Well, the reason seems to be that the overseas market is the market manufacturers are going for now. So you can't be having a high-priced US worker designing and making these products for sales to people who make a tenth of what they make. You can, so long as the US worker's productivity corresponds to his cost. Productivity is difficult to measure when it comes to those "brainy" jobs. How do you measure productivity in an engineer? Or worse yet, how do you measure the productivity of management, especially executive? It was easy to measure productivity of manufacting jobs for example, just measure the number of items they make. However, despite increasing productivity in manufacturing, their jobs were among the first to go. If you want to sell to China or India, then you better hire Chinese or Indians to design these things for their own people at the costs that their own people can afford. If the products that they design happen to be sold back to the US at cheaper rates, then that's only good for consumers. Good enough to compensate for wage reductions? It's hard to say. There could be a few rocky decades as the economy adjusts. As I said, deflation is a spinning plane out of control. Yousuf Khan |
#24
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"Neil Maxwell" wrote in message
... This is only a small portion of Indians, and is where they are going to lose against China if they don't get their act together. You gotta take it one small step at a time. China's been uplifting itself for the past twenty-five years. Whereas India is only within its first decade of uplift. India overall is not educating the masses, which is what you need for economic dominance like America or Japan has experienced in the past. Literacy rates in India are running around 50% (with more illiterate women than men). China, OTOH, is educating everyone, and is building considerable momentum. They're like a sleepy giant starting on their 2nd cup of coffee. Watch out when they finish the pot! Yet there are countries with highly educated workforces, who have never been economic superpowers (eg. Canada). So I would have to say, being highly educated is nice, but not critical. More important is the size of the population of the country. In fact, you can't even say that the United States is a highly educated country. High education goes to a very elite group of people in the US, and their status means their children also get the same education. Concentrating the education within a group of elites serves the country's aspirations just as well a universal education system. In fact, I'd say concentrating the education within the elites does a better job. Not everybody is cut out to be highly educated -- as the saying goes, and this is true for many people, all the education I needed, I got in kindergarten. :-) Another difference is that India is building soft industries (software, design, other stuff that can be moved relatively quickly and cheaply), while China is focusing on hard industry - brick and mortar manufacturing that pays back into the community for decades and is not easily transported elsewhere. Manufacturing is the life-blood of a vital national economy. Could be, but a lot of silicon valley's biggest companies were started by Indian-educated persons (eg. Sun Microsystems). The reason India is getting its recognition now is because a lot of these Indian transplants are now helping to uplift their own country, after having made their fortune in America. They are not choosing India just because it seemed like a nice place to set up shop, they are going there because they know the education levels over there personally. The size of the population will work to the advantage of both, though. Korea was starting to be a threat with low cost manufacturing, but the population is small enough that raising the standard of living a lot (hence the cost of production) didn't take so much. Raising the standard of living of a billion Chinese is a longer-term project... The size of the population of both of these countries means companies will be salivating at selling products into their markets. Ever notice when China first started getting noticed (over twenty years ago) that companies were tripping over each other to try to setup a shop there? Never mind that there was no way that they were going to make money for years to come, they just wanted to be in a country with a billion people. I think India's entry into the billion club started a similar ball rolling over there. Yousuf Khan |
#25
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On Tue, 04 May 2004 15:01:11 -0700, Neil Maxwell
wrote: On Tue, 4 May 2004 11:47:48 +0100, GSV Three Minds in a Can wrote: However salaries in India have floated up pretty dramatically these last 10-15 years, and will continue to do so (at least for the educated folks .. and educated Indians are very educated indeed .. which other country teaches '19 times table' in schools? Heck, which other country does most of its teaching in what is, to 99% of the pupils, a second language? 8.) This is only a small portion of Indians, and is where they are going to lose against China if they don't get their act together. India overall is not educating the masses, which is what you need for economic dominance like America or Japan has experienced in the past. Literacy rates in India are running around 50% (with more illiterate women than men). China, OTOH, is educating everyone, and is building considerable momentum. They're like a sleepy giant starting on their 2nd cup of coffee. Watch out when they finish the pot! Producing "intellect" is one thing - motivating it and capitalizing on it is something else. The political/economic systems of either of the above, especially China, has not so far proven itself adept at that. There's also the question of massive, apparently uncontrollable, IP theft in China... which is going to be released to the world in the next few months. Lawyers are licking their chops. Another difference is that India is building soft industries (software, design, other stuff that can be moved relatively quickly and cheaply), while China is focusing on hard industry - brick and mortar manufacturing that pays back into the community for decades and is not easily transported elsewhere. Manufacturing is the life-blood of a vital national economy. And yet without marketing and sales know-how, all the brick and mortar can be just a wasted resource. In the end, in a working politico-social system, who gets paid more - the guy who innovates or the guy who sells his gadget? The size of the population will work to the advantage of both, though. Korea was starting to be a threat with low cost manufacturing, but the population is small enough that raising the standard of living a lot (hence the cost of production) didn't take so much. Raising the standard of living of a billion Chinese is a longer-term project... For various reasons, endogenous and exogenous, Korea has not been able to capitalize on its manufacturing advantage as well as it might have. IMO it's just as likely that China will desend into a morass of social upheaval, inept management, both corporate & govt,. and incompetent marketing. Nothing is given and you need a working/workable socio-economic system to thrive. Rgds, George Macdonald "Just because they're paranoid doesn't mean you're not psychotic" - Who, me?? |
#26
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In article ,
. wsrcc.com says... "Hugo Drax" writes: True but I think eventually all development/design will go overseas. it makes no sense to pay 16 times more for US labor when overseas is 1/16th cheaper and will afford Intel,IBM etc.. a nice margin on end product. Why stop at development/design? What prevents management from being outsourced too? Heck, what prevents the board of directors from outsourcing the CEO position? The illiterati here will say the "golden-rule". Personally I think it's a non-issue, or perhaps even a racist one. -- Keith |
#27
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Mike Smith wrote:
Hugo Drax wrote: I would say 40-50 years from now all farming,manufacturing,development and buisness processing (Accounting etc...) will be sent overseas, since its cheaper and provides the companies much higher margins on the end product. I would say 40-50 years from now, salaries in India/China/Russia etc. will be a lot closer to those of the rest of the world, thus obviating much of the economic advantage in outsourcing. Bold prediction, there, Mike. 8) The question, from a US perspective, is can we maintain our standard of living, while the massive outflow of dollars raises the wealth of the rest of the world. |
#28
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"David Schwartz" wrote:
No, you have the cause and effect backwards. Prices will lower for goods for the same reason they'll lower for wages -- competition in a larger economy. What's weird is that you'll be able to buy a microwave oven for $24, but it will always cost you $100+ to get a stupid union plumber over and wrench on a pipe for you. And scumbag realtors will still want 7% of your $400k house, for a few hours of work selling it... And then there's medical costs... What will force the adjustment in those "can't outsource it" industries? |
#29
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GSV Three Minds in a Can wrote:
Bitstring , from the wonderful person chrisv said "Hugo Drax" wrote: I would say 40-50 years from now all farming,manufacturing,development and buisness processing (Accounting etc...) will be sent overseas, since its cheaper and provides the companies much higher margins on the end product. You'd think that the evil businessman would figure-out that the market for his products will dry up, if people aren't making a decent wage (in the future US). Hmm, defining 'decent' as 50x the global average, I assume? Touché, but you have to admit it's hard to go backwards, and it looks almost inevitable that we will be pulled backwards. Of course, the wealthy elite will get their's, no matter what - in fact, since they pull the strings, they -increase- their compensation, even though the average worker is losing-out. And assuming that the only market which counts is the US market? Well, the developed world is, for a lot of industries. (ISTR there are more $ millionaires in Asia than in the USA) Irrelevant. It's the over-all market that's important, unless you're selling gold toilets or Rolls-Royces. Yeah well, Usenet =is= kind of parochial that way.. Hint: the universe doesn't own =anyone= a living (although people born on top of a pool of oil, or a pile of diamond bearing ore, may have some reason for short term optimism). I can accept that. What I can't accept so easily is the evil businessman getting richer while everyone else gets poorer. For example - what's a big reason why it's expensive to employ American workers? Health insurance costs, to the tune of $500+ per month per employee, right? A recent news story revealed that one of the larger Health Maintenance Organizations (HMO), compensated it's CEO to the tune of $90 MILLION dollars last year. And for what? For over-seeing a bureaucracy that itself sucks-up about 40% of our health-care dollars? Is this right? |
#30
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"David Schwartz" writes:
The reduction in salaries will be partially balanced out by the reduction in the cost of goods. If outsourcing reduces the labor costs of goods, it will reduce the cost of those goods. You are assuming that the reductions of the cost in the producing of goods will be transferred to the buyers of the goods, and not kept by the company as profits. No, you have the cause and effect backwards. Prices will lower for goods for the same reason they'll lower for wages -- competition in a larger economy. I've always wondered about this. Prices are said to drop with competition. But in many "sectors in the economy" (love that phrase) we see "consolidation" and mergers because by having everything under one roof the overhead can be reduced and things be made more efficient, hence giving the ability to lower prices. But with more mergers, it means less companies competing against one another (read: less competition). Is it me, or does the logic seem strange? No, sales won't tumble, they'll grow. Cheaper labor means cheaper goods that poorer people can affort. Globalization means larger markets to sell goods into. Of course, if you lose your job to globalization, how do you get a paycheque to buy these cheaper goods? -- David Magda dmagda at ee.ryerson.ca, http://www.magda.ca/ Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. -- Niccolo Machiavelli, _The Prince_, Chapter VI |
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