Musing of a Global Citizen

In the globalist web site, a few days ago there was a very interesting article.

http://www.theglobalist.com/storyid.aspx?StoryId=4965

The author is an Indian with an interesting background working in “an Indian software company specializing in outsourcing.” The article is very interesting and I wish you read it first. He has opened a Pandora’s Box of questions. Many are out of the scope of this blog as each needs a detailed discussion. However, I shall mention them as I go.

I do not agree with some of his (somewhat outdated) views of Economics. As a scientist, I look down upon Economics as an unfortunate subject – something that must be run as a science but being run as a religion – yet running everyone’s lives. Mentioned! Shall discuss later.

Now let’s go through the article from top to bottom.

He did question whether globalization means “anything significant” to the Indian poor – maybe apart from the plethora of TV channels in all the fourteen Indian languages - some uplinked from Singapore & Dubai!! A Very Good question!! It needs a separate thread of discussion.

However, at one point he says (looking at the masses on Calcutta's streets) …

And yet, I can bet 100 to one that their lives will differ in no significant way from their fathers' or grandfathers' before them. The only consolation I can offer myself is that my job makes me the avantgarde of a movement which may — over the course of this century — improve their great-grandchildren’s lives.

This somewhat ticked me off. In the last one hundred and fifty years the changes India has gone through is more that what it went through the (Indian) “dark ages” for about 1000 years before that. Furthermore, the changes since Independence, however below expectations it may be, did bring about a social revolution and a partial economic one. The families that he pitied could well have been escapees from the caste and social bondage in their villages and are now enjoying the freedom of urban anonymity the metropolis provides. And they are working hard to get their children into IITs or Calcutta Medical or Presidency College (take your pick). Next generation they would be dating your daughter!

I was also a bit put off by the hubris. At first, let’s get this straight, I too am (and so the Indian readers) a part of “Macaulay's Children”. But we cannot, by just being a member of an avant-grade movement, pull up the rest of the population. The rest of the population too must get on the globalization train. The problem is that they need a step-stool and we are not providing them with that. So please don’t give me that crap about our “avant-grade movement” – please.

So as it stands we have built a new two-tiered caste-system – we, the Macaulay’s children, who are best equipped in the world to take the first class compartments of the globalization train and the rest of the country standing on the platform while the train is pulling away. How do we get them on the train in this generation? How to build the step-stool? There are waves of people at the different strata waiting to buy the tickets for a ray of the Sun.

Now let us come back to the battle between “import of jobs” vs “export of labor”

Sitting in a Third World country, the proposition could equally be phrased as: "Export workers — or import jobs?" Actually, whichever way you state it, the economist’s answer is the same and is very simple: It does not matter.

No – they are different! When you import jobs (or even the workers to do it), you create a whole bunch of downstream employment. With one new job and a worker coming in (from wherever it may be), we have restaurants, laundry, real-estate and grocery business supported by that job.

Look at US or to be precise, California. Yes, outsourcing may be a big political question but US imports workers of all strata – not just the white collared ones. Some come in with green cards and some just walk in across the border. The underlying flexible and mobile labor markets and even more liberal capital markets form the ideal substrate for their growth.

This is one very very important thing for India (or other country) to learn from the US. Under globalization the country is one giant “Inc”. And the most successful “Inc”s are those who attract and retain talent. The US gets the best (or rather the most enterprising) from all walks of economic strata. The rest is on “autopilot”.

As a graduate student of economics, I have imbibed the theorems of microeconomics almost with my mother’s milk. If we view the right to work and citizenship as a bundle of legal rights, then their free exchange will move resources to their highest valued use, thereby maximizing global output.

This is the central thesis of the article that I totally agree with and this topic deserves special mention. Not many in today’s world would accept it easily.

But then there is a contradiction in terms, on one side the “‘Inc’ nature” of today’s nation-states would want to attract the best talent whereas the protectionist nature of the nation-states would lead to a barrier. Internal politics of the United States is a good example. Here there is a political party called “Republicans” which is a strange admixture of free-market liberals and social & nation-state conservatives – a nice cocktail of Whig & Tory (unlike other countries "republicans" here are not a left wing party)!! And we see the internal debates on Latino Immigration – while illegals are welcomed in open arms by business owners who mostly vote Republican. Sacre blue!!

The author then raises the very fundamental question of human nature – I don’t want to change and don’t take my cheese. But he puts a very important question…

The economic entrepreneur is expected to follow the demands and needs of the consumer slavishly, but if the political entrepreneur — that is, the politician — were to follow this advice, a protectionist regime could easily emerge. After all, demand for protection is a natural reaction to declining or stagnant income levels.

But do not forget the forces of history that none can escape. Protectionism is a failure due to the pressure of the consumer. India’s “Burma Bazaars” succeeded as it gave us cheap though unsupported foreign goods and the government opened up import so as to help the consumer have access to supported foreign goods. Look at the labor trade - it is somewhat like a “Burma Bazaar” – there is a demand for enterprising labor. Sometime soon, the governments would be forced to “legitimize” this “labor Burma Bazaar” for similar reasons.

None of these are the real fears of globalization. The real fear I have (and I mentioned last) is 1914. Before the fateful day, the world was getting economically united and politically more separate. The rest is history.

Isn’t that the same case today?

Readers: Please comment on my review of the article and the viewpoints that are raised. Please discuss here.