Will Out-sourcing End Up Biting American Ceos And Shareholders In The Butt?
Posted by China Sourcing CommentatorOct 30
As American companies outsource more and more, won’t other countries eventually learn all the processes and steps and just start there own firms to compete against American companies? HAHAHA….The competitive edge will be then be that the foreign company won’t have to pay some fat American CEO a couple million a year.
Do I sound bitter…yes, I’m a recent victim of out-sourcing. I’m actually a little torn about the global economy. On one hand I think it is good that the standard of living is going up, and that there is oppurtunity for collarboration across the information superhighway. But on the other hand, I think the US is giving away it technological advantage.
What does the future look like for the US in the global economy?
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Not an easy answer for this. On one hand there are many benefits to society as a whole with globalization… i.e. everything in Walmart would cost about 20% more if we didn’t have China to rely on, and if that was the case a lot of working poor in America would be worse off. But on an individual level it is tough, even if for society as a whole its ‘good’ – for each person’s job who is outsourced it is hard to say them it is a good thing.
For the world as a whole it begins to even the playing field to some degree… i.e. the very poor countries can become at least ’2nd world’ and some ’2nd world’ countries can enter ’1st world’ status. China and India are obvious examples but already in India they are seeing large wage increases in certain industries (i.e. 20% in 1 year) since the availability of talent is sometimes limited, so supply and demand economics works even there. Even in China with its limitless human capital, there is already talk of outsourcing to places like Vietnam where the labor is even cheaper. It is quite amazing. Remember when all the US companies were outsourcing their manufacturing to Mexico in the early 90s? That seems like eons ago…now Mexico is seen as way too expensive as they pay their people $2/hour instead of $0.75/hour like they do in China.
As for technological advantage, in many industries if someone wants in they can take a product, dissect it and over the long run learn how it works… but yes we are speeding up the process more. But it is inevitable.
I think the US will be a strong power for a long time but won’t be the only superpower like it is now. Just on pure size alone China will be there and India is likely too in 20-30 years. I mean how are we ever going to fight an army which has 1.3 billion people backing it?
Anyhow a lot of the issues there and it could be a 10 hour discussion… what if CEO’s were not paid at the level they are here? How many jobs would that save. In Western Europe, UK/Ireland where great companies are located and innovation is also found, the average manager makes 7x the average worker. Here in the US it used to be about 20x … in the 70s… now its like 240x. The excuse is they are so rare and so important and so incredible. But seriously – why are the top honchos in foreign companies only worth 7-10x as much as the average employee? Are they dumber over there or less important. So think of all the jobs that could be ‘saved’ here if upper management made a nice, healthy but reasonable wage. Could at least save some jobs for the peons of America (I use the word peon lovingly because that is how ‘management’ views them)
My main worry is countries like China and India churn out more engineers/technical degrees/PHds in 2 months than the US does in a year… just can’t fight the demographics. Eventually it will catch up to us.
Other countries such as Philippines and India where a lot of outsourcing is going will never be able to compete with the US.
Why? Simple – they don’t have the capital that US and US companies have. All they have is an abundance of labor/manpower that they are putting to good use by getting all the outsourcing jobs possible. They will not push out American companies in terms of R&D and product development — which requires tremendous capital — but they will be there to provide the services needed such as customer service or technical support.
Americans can’t seem to handle that the world is global these days. The manufacturing is done in the cheap far eastern countries, whereas the marketing, r+d and patents and branding are carried out in the western world.
The UK learned this decades ago with the decline of shipbuilding and coal mining, you’ve got to get with the times otherwise the western countries will find themselves running fat, under achieving businesses.