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Wednesday, July 27, 2005

Global Tech Driven Competition – US Unready

In my recent SQ flight trip read this article in fortune where Geoffrey Colvin writes,It’s a crisis of confidence unlike anything America has felt in a generation. "Can America compete?" is the nation’s new No. 1 anxiety. The question is almost right, but not quite. The real question is, "Can Americans compete?" The U.S. standard of living, after decades of steady ascent, could stall or even begin to decline. More worrisome is the chance that the US finds itself getting poorer rather than richer, some kind of domestic or even global political crisis could follow. The key issues at the core:
- The US is not building human capital the way it used to.
- The US preparedness today for the emerging global economy
, shows that the the US is not ready to compete with emerging giants.
For American workers, globalization is a radically dicier proposition - far more so than most of them realize. The fast-changing economy is exposing vast numbers of them to global labor competition, and it’s a contest millions of them can’t win right now.
Three main factors are changing the game:
- First, the world economy is based increasingly on information, bits and bytes that have to be analyzed, processed, and moved around. Examples: software, financial services, media.
- Second, the cost of handling those bits and bytes - that is, of computing and telecommunications—is in free fall. Wide swaths of economic activity can be performed almost anywhere, at least in theory.
- Turning theory into reality is the third factor: Low-cost countries - not just China and India but also Mexico, Malaysia, Brazil, and others - are turning out large numbers of well-educated young people fully qualified to work in an information-based economy. China will produce about 3.3 million college graduates this year, India 3.1 million (all of them English-speaking), the U.S. just 1.3 million. In engineering, China’s graduates will number over 600,000, India’s 350,000, America’s only about 70,000.
McKinsey figures that about 4.1 million service jobs will actually get offshored from high-wage countries to low-wage countries by 2008. It doesn’t make a forecast for U.S. jobs, but others have done so. Forrester Research puts the number at 3.4 million white-collar jobs by 2015.
In a world economy that threatens to pull down American wages, the key to fighting back is maintaining technological superiority - continually creating high-value new jobs that workers in the rest of the world can’t do yet. Without that advantage, there would be little to prevent living standards in the world’s interconnected economies from equilibrating. Combine all those trends and the picture isn’t encouraging for America. Immigration, education , technology & research investments may be the key for future competitiveness.
My Take: This will become a routine challenge for all nations in the globalised era. In future some asian nations/corporations may also face similar set of issues. Asian competition is a little overhyphed(to the extent of drowning US edge) as I see it - there are several asian big corporations that are struggling now for not being able to reignite themselves or move at the same speed that they used to in the past.Look at the fortune 500 list - exclude oil & Japanese firms - the list of asian corporations listed in there are still small. Even today Asia does not contribute more than 20 % for most of the mature global majors( non oil corproations) The decision making speed, propensity to take risks, the cultural shifts for very diverse nationalities - these are not things on which Asian corporations have found good answers to so far.In general,speed and direction would matter a lot more in fostering competitiveness. But to be fair -Labour arbitrage is not the reason for asian enterprise success – process, quality edge – good management strength and a globalised mindset along with cheap labour have brought success to the asian headquartered enterprises.The US large corporations may have the best solution and answers amongst host of other factors that may influence the US competitiveness. I do not think that the US could be so easily overrun in the emerging world - given the reselience that the US has shown in the past and the depth of talent and corporate strength that the US possess -clearly tough times ahead -but we may see a lot more bounce from the US.

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