Very Computer

http://www.latimes.com/news/opinion/commentary/la-oe-adhikari6feb06,1...
#    
#    If You Get the Ax, Don't Blame India
#    
#    The threat of 'outsourcing' high-tech jobs is overblown.
#    By Gautam Adhikari
#    
#    Gautam Adhikari, a former executive editor of the Times of India, is a
#    visiting fellow at the American Enterprise Institute.
#    
#    February 6, 2004
#    
#    Relations between the world's largest two democracies, the United
#    States and India, have never been better, but a small cloud has
#    appeared in these otherwise clear skies: outsourcing.
#    
#    Even as President Bush and Prime Minister Atal Behari Vajpayee
#    announced in January increased cooperation in civilian nuclear,
#    space and high-technology areas, the election-year rhetoric in
#    the U.S. was rife with talk of India luring jobs away from the
#    U.S.
#    
#    Is it really so? Are "profits- before-patriotism" American
#    corporations conspiring with India to move jobs abroad, tempted
#    by depressed wages for high-skilled workers? Not quite. (We're
#    not talking here about "offshoring" companies in the Cayman
#    Islands, which is usually a tax dodge, but about outsourcing
#    of skilled jobs.)
#    
#    It is undeniable that job growth in the U.S. has been poor and
#    that jobs have gone abroad. At the same time, India's economic
#    growth estimated to average more than 7% in the current fiscal
#    year is creating millions of jobs there. But such broad
#    comparisons mean little.
#    
#    Most jobs going to India are in the high-technology and
#    professional-services sector. Data released by the U.S. Bureau
#    of Labor Statistics show, however, that U.S. job losses are taking
#    place mainly in manufacturing and retail services.
#    
#    In the professional and business sectors, U.S. employers added
#    workers in the last quarter. Although jobs did shrink for many
#    reasons, including a burst stock market bubble employment in
#    computer and mathematical occupations has grown since June last
#    year by more than 150,000. According to the Information
#    Technologies Assn. of America, only about 2% of 10 million
#    computer-related jobs have gone abroad.
#    
#    In U.S. manufacturing, jobs have been declining, but they have
#    been gradually doing so over two decades. Investments by U.S.
#    companies in India's manufacturing are still quite modest. In
#    India's fast-growing automobile sector, for instance, Japanese
#    and South Korean firms are big players. American auto giants
#    have a comparatively low profile.
#    
#    As for the loss of jobs or lowering of labor standards in retail
#    business here, Wal-Mart might offer more clues to that than India
#    or China.
#    
#    What about wages? Yes, Indian wages are low compared with U.S.
#    wages. This is an important reason, apart from the highly
#    qualified skills pool, why technology and knowledge-based services
#    corporations have moved some of their operations to India.
#    
#    Though it's true that a software engineer's job worth $80,000
#    a year in the U.S. goes for $20,000 in Bangalore, that by no
#    means indicates that India is deliberately depressing wages or
#    that Indian high-tech workers are being forced to toil in
#    Dickensian conditions. On the contrary, such wages are like manna
#    for a tiny section of an Indian labor market long used to low
#    incomes by world standards. Remember, India's per capita income
#    is still $490 annually.
#    
#    If you look at purchasing power, $20,000 in India can buy you
#    goods and services worth three or four times what it can in the
#    U.S. Put differently, a job offering that much in India is like
#    having one worth close to $80,000 here.
#    
#    In a global economy, where communications have made differences
#    between day and night operations almost irrelevant, it is
#    inevitable that corporations around the world will seek the
#    best-quality workers at the lowest price. That is one reason
#    why, for example, BMW set up manufacturing facilities in the
#    United States. Germany's higher labor costs and relatively more
#    rigid labor laws and unions make hiring and firing German workers
#    much more expensive.
#    
#    To seek to regulate this practice is to undermine the principles
#    on which free markets operate, unless you believe that free
#    markets are fine in everything except labor.
#    
#    Although high-tech outsourcing unfortunately causes temporary
#    disruptions in the jobs situation and keeps wages depressed in
#    some skilled occupations, it also helps moderate inflation and
#    thereby keeps prices low for the average American consumer.
#    
#    Threats to the U.S. economy probably lie elsewhere in ballooning
#    and unprecedented budget deficits, in a dollar that is cascading
#    in world markets, in creeping doubts abroad about its long-term
#    financial credibility and not in the shift of a few high-tech
#    jobs abroad.
#    
#    Meanwhile, outsourcing by U.S. companies helps a poor country
#    like India skip a few steps on its way up the development ladder.

http://www.veryComputer.com/
#    
#    Thursday, February 12, 2004
#    
#    Perils of Outsourcing
#    
#    The Chinese "yellow peril" was the late nine*th century menace.
#    And today, horrors, the Chinese and Indians are selling Americans
#    things like computer software at bargain ba*t prices. In
#    fact, when it comes to overall U.S. living standards, there is
#    nothing special about outsourcing software technology.
#    
#    All that matters in this case is whether the Chinese and Indians
#    sell for less than what current American software producers could
#    earn in their next most lucrative employment. If so, outsourcing
#    enhances U.S. living standards.
#    
#    The effect on U.S. living standards is the same as what would
#    happen if a cost-reducing technology in software production
#    occurred. Living standards rise either way. Those who seek to
#    seal Americans off from the Chinese and Indians in this case
#    are analogous to the Luddites in early nine*th century England
#    who smashed cost-reducing textile machinery.
#    
#    What Americans pay the Chinese and Indians for software technology
#    measures what the Chinese and Indians can buy in the United States
#    as a result of the outsourcing. That's the opportunity cost of
#    outsourced software. Does it cost U.S. citizens to produce the
#    software themselves?
#    
#    You bet! U.S. citizens give up what American software producers
#    could produce/earn in their next most lucrative jobs. That's
#    the opportunity cost of domestically produced software. Economists
#    have long noted that there is no such thing as a free lunch.
#    Well software isn't free either, even if Americans produce it
#    for themselves.
#    
#    It follows that if the Chinese and Indians sell software for
#    less than American producers' opportunity costs, Americans give
#    up less of other things to acquire software. This means opting
#    for Chinese and Indian software is a recipe for higher, not lower,
#    living standards. Anyone who has ever bought a computer (or
#    anything else) will tell you that paying less for the computer
#    means they can have more of other things. It is no less true
#    for the citizenry of any nation.
#    
#    To give the latter its own legs, suppose 2,000 Americans in North
#    Carolina's Raleigh-Durham "research triangle" earn $200,000,000
#    per year producing software for the triangle's corporate
#    residents. That's $100,000 per person. While individual earnings
#    would no doubt vary around this $100,000 figure, assume for
#    simplicity that each earns the $100,000 average.
#    
#    Selling software is not the only service these Americans can
#    sell. Indeed, there is a seemingly endless list of other ways
#    they could earn a living. The distinguishing characteristic of
#    these other occupations is that adjusted for nonmonetary work
#    conditions, all pay less than $100,000 per year. Surprise? No!
#    That's why these people produce software.
#    
#    Suppose the Americans' next-best jobs pay $60,000 per year. The
#    Chinese and Indian software producers can displace their American
#    counterparts only if the Chinese and Indians will sell software
#    for less than $60,000 per year.
#    
#    Let's assume 2,000 Chinese and Indians sell "dirt cheap," say
#    for $25,000 per year. Americans have two choices. One, opt for
#    U.S.-produced software, sacrificing $120,000,000 worth of other
#    things (2,000 American workers times their $60,000 per worker
#    opportunity cost).
#    
#    Two, go for the Chinese and Indian software, sacrificing
#    $50,000,000 worth of other things (2,000 workers at $25,000 per
#    worker). Either way, Americans acquire the software. The
#    difference is that by choosing Chinese and Indian producers,
#    Americans end up with $70,000,000 more of other goods and services
#    ($120,000,000 minus $50,000,000). Availing ourselves of lower
#    cost options is the closest we'll ever get to free lunchesstill
#    not free, but bigger helpings.
#    
#    American software producers obviously don't participate in the
#    $70,000,000 increase in overall U.S. living standards. Indeed,
#    they're $80,000,000 worse off after landing in their next-best
#    jobs. The temptation is to conclude that the Chinese and Indians
#    capture what American software producers lose. Tempting or not,
#    such a conclusion is silly. The Chinese and Indians are paid
#    $50,000,000 for their services. End of that story as far as that
#    issue is concerned.
#    
#    Then who gets the $80,000,000 that American software producers
#    lose? Likewise, who gets the $70,000,000 increase in the economic
#    pie? Does each vanish? Not at all, both accrue to "research
#    triangle" purchasers of software. These purchasers initially
#    paid the 2,000 American producers $200,000,000; now they pay
#    the Chinese and Indians $50,000,000.
#    
#    The difference is $150,000,000, which equals the sum of what
#    American software producers lose and the increase in the economic
#    pie. Again, not a penny of what American software producers lose
#    or the increase in the economic pie goes to the Chinese and
#    Indians. It goes to the buyers of software services.
#    
#    Lower software prices also open up new opportunities for Americans
#    to buy software for uses that were uneconomic when software was
#    produced by higher cost Americans. Filling these consumption
#    niches generates additions to the U.S. economic pie over and
#    beyond the $70,000,000 increase noted above.
#    
#    The bottom line is that the Chinese and Indians offer Americans
#    the chance to enlarge the size of their economic pie, while at
#    the same time reslicing the economic pie against those American
#    producers who compete with the Chinese and Indians.
#    
#    American consumers capture both the addition to the pie and the
#    resliced pie. Orphan Annie xenophobes only see those bearing
#    the costs of the resliced pie. They are blind not only to the
#    fact that the pie available to Americans is larger, but also
#    to the fact that Americans other than American software producers
#    capture what the latter lose.

--
http://www.veryComputer.com/~amandic/     [ Anthony Mandic ]
#
#    I was a typical little gay boy.

From The Asian Wall Street Journal
Updated February 13, 2004

Outsourcing Is An Old Story With New Critics
By ILA PATNAIK

The most important fact about the present outsourcing debate is that
it is not new. The world economy has been through the same phenomenon
before, and when U.S. politicians attack White House chief economist
Gregory Mankiw for pointing out the potential economic benefits of
relocating some jobs to lower-wage countries, they betray a lack of
knowledge of American history.

Many decades ago, technological improvements dramatically drove down
the cost of cargo transported by ship and air. Suddenly, the
electronics assembly work that was done in Maryland could be done
cheaper in Malaysia. That led to massive growth in trade in goods.

Production chains broke up, with specialized manufacturing taking
place across the globe, exploiting opportunities for the lowest costs.
Companies that did this benefited -- they were able to cut costs and
reduce prices. Consumers benefited from cheaper goods. The
manufacturing work which went to poor countries helped ignite economic
development, particularly in Mexico, China and the four Asian tiger
economies -- Hong Kong, Singapore, Taiwan and South Korea.

That process was obviously unkind to the blue-collar workers in the
West who lost their jobs. And it is equally unkind to the many
middle-class workers who are now losing their jobs due to outsourcing.
The difference is that these middle-class workers are closer to the
political elites in their country, so they are in a position to make a
louder fuss about it.

But what those who complain forget is that, throughout this earlier
transition, world gross domestic product grew. Output and productivity
-- in both rich and poor countries -- rose. The workers who were
formally in manufacturing got absorbed into other parts of the
economy.

Throughout this episode, populist politicians periodically complained
about job losses, and fitfully tried to do something about it. But the
basic logic was loud and clear. The essence of capitalism is a
ceaseless quest for cost reductions. The companies that manufactured
at the lowest cost venues were the ones that prospered.

This identical story is now being repeated afresh, through a different
technological impetus. The driver here is the incredible progress in
telecom, where high bandwidth is now available virtually across the
globe at extremely low prices. Suddenly, it became possible to think
of "global production chains" for services as well.

Once again, we are seeing production being sliced up into pieces, and
each piece is placed at the best production venue available globally.
And once again populist politicians are exploiting the understandable
concern about job losses in an attempt to score cheap political
points. That has been demonstrated in Washington over the past few
days, as those who should know better rushed to condemn Mr. Mankiw's
observation, at a news conference Monday, that sending U.S. service
jobs abroad "is probably a plus for the economy in the long run."
Prominent among the critics was Democratic presidential front-runner
Sen. John Kerry.

Their short-sighted criticisms ignore the fact that the companies,
such as General Electric, that have taken advantage of the incredible
progress in telecommunications to relocate jobs have benefited by
being able to cut costs and prices. Consumers in Western countries
have benefited too -- from cheaper goods and services, to more
responsive help lines they can call. The services work that goes to
countries like India is helping to ignite economic development. Thanks
to this, World GDP is growing.

The benefits of outsourcing are not limited to companies. Governments
and public-sector entities in the West are also finding that sending
work to India is a way of making ends meet. When health-care work gets
done in India, all consumers in the West benefit from cheaper health
care.

The deepest consequence of this new outsourcing is perhaps found in
research and development. The cost of doing R&D in India is roughly
half that of doing it in the West. Startups in Silicon Valley are now
routinely structured as a marketing operation in the U.S., and the
entire engineering work is done in India. When research is cheaper,
the CEO can place more bets. More avenues are explored, and more risks
are taken. This can lead to an acceleration of technological progress,
which could have a profound impact upon world GDP growth in coming
decades.

What is perhaps different here is that when blue-collar workers were
losing jobs, they were far removed from the political elites of
advanced countries. In contrast, job loss in services strikes closer
to home with respect to middle class, high-skill families. This is a
novel feeling of insecurity for many prosperous people.

It is perhaps unsurprising that populist politicians will try to
harness the insecurity in the minds of many workers. But the basic
logic is clear: Companies that will exploit global production chains
will out-compete companies that don't. Corporations and citizens alike
have a direct interest in blocking the new protectionism. Perhaps Sen.
Kerry should remember that before he abandons his former free-trade
credentials to attack a trend that can only benefit America -- and the
world -- in the long run.

Ms. Patnaik is senior economist at the National Council of Applied
Economic Research in New Delhi.

http://online.wsj.com/

---===============================================================---

Guard us from the she-wolf and the wolf, and guard us from the thief,
oh Night, and so be good for us to pass.
--
 t 20665.42 t Programmers assemble!

http://nytimes.com/aponline/technology/AP-India-Siemens.html
#    
#    February 16, 2004
#    
#    Most Siemens Software Jobs Moving East
#    
#    BANGALORE, India (AP) -- The German firm Siemens will move most
#    of the 15,000 software programming jobs from its offices in the
#    United States and Western Europe to India, China and Eastern
#    Europe, a company official said Monday.
#    
#    ``Siemens has recognized that a huge amount of software
#    development activity needs to be moved from high-cost countries
#    to low-cost countries,'' said Anil R. Laud, managing director
#    of Siemens Information Systems, the group's information technology
#    subsidiary in India.
#    
#    About 3,000 of the 30,000 software programmers that Siemens
#    employs worldwide are already in India.
#    
#    Laud declined to reveal the exact number of jobs to be relocated
#    or how long the process would take.
#    
#    Scores of Western firms have farmed out software development
#    and back-office work to India and other countries, where wages
#    are significantly lower. India is expected to earn $13 billion
#    from such services for the fiscal year ending March 2004.
#    
#    The job shift has led to a backlash from unions and politicians
#    in Western nations.
#    
#    Siemens programmers worldwide might lose their jobs too, once
#    the planned shift is implemented.
#    
#    ``It is a problem. They could lose their jobs,'' said J. Schubert,
#    the spokesman for Siemens in 11 countries, including India. ``The
#    Indian subsidiary will fight hard to get a portion of the pie,''
#    he said.
#    
#    Laud said Siemens Information Systems, which has a development
#    center in Bangalore, India's technology hub, hoped to get software
#    development work for Siemens' customers in telecommunications,
#    health care, transportation and energy industries.
#    
#    He said China might get a chunk of the jobs too.
#    
#    Siemens is a diversified company offering engineering services
#    and products to a variety of industries. It has annual revenues
#    of $95 billion and employs 417,000 people.