Emergic: Rajesh Jain's Blog

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Outsourcing Views

March 26th, 2004 · No Comments

Always-On writes:

Beneath the passionate debate over U.S. companies outsourcing jobs to low-wage foreign workers in far-off countries lies a new and worrisome truth: They’re gaining on us.

People in the Third World are rapidly acquiring the skills and knowledge needed to close the gap in the great competitive race against the U.S. It is the race to win — and hold — markets around the world.

Robert Hormats, vice chairman (International) of Goldman, Sachs, sums up the issue: “Historically, developing countries have been competing against us on the basis of cheap wages. Now, increasingly, they are competing against us on the basis of high-quality goods. We don’t have much alternative to raising the quality of our work force. The answer to the challenge of outsourcing is to address the problems of education and training that we have at home.”

In other words, the way to combat outsourcing is not to slap tariffs or import quotas on foreign goods, not to bar U.S. companies from producing their goods and services as efficiently and inexpensively as they can, but to equip American students with the skills and knowledge required to beat the competition in the Darwinian global economy.

We are entering an era when whole countries and individual companies will be valued and rewarded according to the quality and exercise of their brainpower. The most valuable form of capital will be human capital, the intelligence and ideas, the resourcefulness and industriousness of a nation’s people.

Companies and other institutions will climb or fall along with their ability to seize upon new ideas, to carve out and capture new markets, to invest wisely in research, and to turn research into useful, marketable, urgently demanded goods and services and to make steady, incremental, day-to-day improvements in their products and services. Steadily improving education will go far to create all that.

Paul Schumann has an excellent survey of recent commentary, and adds:

In my crystal ball, the next major innovations coming our way will probably be in the convergence of infomatics, genetics and nanotechnology. To participate meaningfully in this revolution is going to require multidisciplinary approaches. People will have to have a high degree of education in more than one of these fields. The problem is that this revolution is still a number of years away. Technology takes a long time to develop. Look at the technologies that have come tougher to create the productivity improvements that have led to our current situation. They’re all 30 to 60 years old!

It will probably be some combination of these factors. And, I wholly support getting our children better educated in the physical sciences so that they can help produce the innovations of the nano-bio-info revolution. But, as you know, growing children into educated adults takes a long time. It seems to me that we cant wait for the nano-bio-info tech revolution. The process of globalization is going on too fast. It seems to me that we need innovations now that increase the productivity on US knowledge workers ten fold so that they can compete globally and still make enough money to buy the products they make. We need innovations in the way we look at corporations, the nature of work and how we organize ourselves. We need innovations in how we fund business and reward workers. And, we need innovations in the way we measure success – corporate and personal.

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