Global synergy
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radically different cultures, trade deals, and much more. Why should rich countries, who already have it pretty good, go through the agony? And isn’t it unfair on poor countries to expect them to do the work we in the west consider to be beneath us? In other words, should we view importing workers and exporting jobs with equal suspicion? The simplest answer is that these processes are happening anyway. Like a surfer on a breaking wave, societies face a choice between finding a dynamic balance and getting dumped. But in fact, all countries stand to gain from engagement with the global economy. Even outcast nations such as Libya and Iran are showing signs of rejoining the world, as a change from threatening or excoriating it. The world’s wealthy countries need to embrace less wealthy nations, whenever possible without setting conditions. In particular, they should welcome their up-and-coming neighbours’ cheap expertise and generous pools of untapped talent. To the sea, to the sea | |||||||||||||||||||||||||
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To take an obvious example, compare the U.S. and India. Product 1 might be clothing, which American consumers buy without a blink at the “Made in India” tag. Right now, the likely product 2 would be IT services such as call centres. That these white-collar jobs are moving to India in droves has taken Americans by surprise – hence the current fuss. But the U.S. will still be a world leader in innovative high-tech research and development – product 3 – for years to come. In an election year [2004] when both presidential candidates promise to “stop the bleeding” of service jobs to |
1a) The cost of opportunity
* minimised opportunity cost |
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* minimised opportunity cost |
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countries that can provide them more cheaply, offshoring is undoubtedly unpopular with the world’s largest market. Why is it happening, and does it threaten U.S. jobs? To answer the second question: yes, in the short term. But elementary macroeconomics suggests that, in a labour market as flexible as the U.S.’s, not just more but better jobs will come along to replace them. Consider the law of comparative advantage. Trading partners A and B offer products 1 and 2. Which country should sell which product, and why? It turns out (see Diagram 1a) that country B should concentrate on the product that it creates with lowest opportunity cost, even if it can make the other product more cheaply than country A. In fact, the real challenge for country B is to find products that minimise opportunity cost, products that it can specialise in to its comparative advantage. Over time, if country A’s companies wish to grow, they should identify a product 3 which is beyond country B’s current capacity, and start offshoring product 2. Diagram 1b shows how this is good news for both countries. | |||||||||||||||||||||||||
Career specialist William Bridges argues in his book Jobshift that conventional jobs are being shed from advanced economies. This “dejobbing” process means that workers are being forced to play to their strengths, to become more valuable to their employers, to be in effect their own microcompanies; merely clinging to a job no longer offers adequate security. No wonder voters are scared. The challenge for advanced economies over the next few decades will be to find more creative ways to work. Increasingly they will also be more open to offshore firms who offer a fresh approach to work.
As rich countries trade up jobs, then, the major challenge should not be how to resist the cycle of job creation and destruction, but rather how to educate and prepare the workforce for those newer, better jobs. Can we envisage a time when as many workers as today know how to use a computer will know how to program one? This is as hard to imagine, but perhaps also as inevitable, as the idea of writing as a core skill for almost all jobs would have seemed to ancient Egyptians, amongst whom writing was such a rare skill that scribes were the top professionals. Of course, the advent of printing helped a lot to create a literate workforce. But one can easily imagine a similar “access” breakthrough in software engineering. The flipside of offshoring is, or ought to be, quantum leaps in skill growth, stimulated by the jobs that demand it.
Another way to look at offshoring is as a more cost-effective form of immigration: the new workers stay at home and do the job even more cheaply. But immigration offers benefits to rich and poor countries alike that go beyond immediate economics.
Visiting Toronto, step into a subway car. Look at the faces of your fellow passengers. You may be surprised to see more non-white faces than white. Toronto’s population is now less than 50% white European, and 44% of its inhabitants were born outside Canada, facts that have increased its appeal to young professionals, so that in many ways the city’s social and economic fabric can be regarded as a testbed for successful migration. Certainly, the economies of Ontario and Canada have benefitted significantly.
Canada shares with its massive neighbour to the south a long history of diverse immigration. Both countries are almost entirely built on a contagious desire to leave
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Europe, or beyond, and find a new life in the world’s west. But there are differences in attitude. For immigrants to the U.S., the first encounter is with the suspicious, arbitrary, and unforgiving INS (Immigration and Naturalization Service). Canada does a little better with its official welcome (although not much, particularly since 2002 when a toughened set of qualifying rules made it harder for everyone – not just the young Arab men everyone is suddenly worried about – to get in). Once settled in their country of choice, new Americans and Canadians are offered different deals. the U.S. expects her immigrants to be American first, playing down their cultural heritage and giving up their old citizenships if they wish to become full American citizens. Canada, by contrast, sees diversity as innately superior to homogeneity, so the bustling |
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crowds along Toronto’s Spadina Avenue can feel comfortable about being Chinese first. Both approaches are, in their way, fair deals; as more countries in other parts of the world begin to be attractive destinations for economic migrants, one of the key patterns of the next century will be the social attitudes of the world’s immigration destinations. | |
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What about the menial workers?One thing affluent white citizens will have to decide is whether they would rather be served their latte by someone with patchy command of their native language, or do the serving themselves. Does immigration necessarily imply social stratification, with all its attendant dangers and resentments? What happens when you let the market operate? Many immigrants run family businesses which offset meagre profits and long hours with the |
benefits of personal ownership. If English is a problem, get your teenage children involved. Diversity is by its nature adaptive, creating societies in which the stress of change is outweighed by its dynamic benefits. Not the least of these benefits is demographic.
Whichever western destination migrants head towards, they will be doing their new country a favour. Demographics are increasingly stressed in the USA, Canada, the EU, Australia, New Zealand and particularly Japan. To maintain a productive ratio of workforce to dependents, these countries need young, energetic migrants to choose them, as modelled in Diagram 2 [next page]. Indeed, a country with birthrates significantly lower than replacement must look to increasing immigration year on year. Yet migrants often benefit their home country by seeking out higher pay abroad, much of which eventually finds its way back home. China’s economy is currently growing at 8% per year thanks in large part to its openness to western investment. In return, the west has gained many talented, industrious workers – which China can spare by the millions.
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2) Taking the strain
* = workforce/dependents
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a) no immigration
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b) constant immigration
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c) increasing immigration**
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The strange case of JapanIt is often said that if you want to know where the rest of the developed world will be in 20 years time, look at Japan. If you want to look at Japan in 20 years’ time, walk into a Kyoto high school classroom, where a single student sits at a single desk. He or she may have to support anywhere up to five other people on entering the workforce. Classrooms like this are still very much the exception in Japan, but the trend is alarming. |
Demography in Japan currently stands on its head: people below 20 are becoming dangerously scarce, while the elderly are often still fit and healthy at 80. Japan’s dilemma is that to compensate for this effect, she needs to learn to welcome the very immigrants who have historically been viewed with suspicion. Otherwise, the possibility exists that the cost of the elderly will become too great to support, popular Japanese life-savings plans will go bankrupt, and the economy will plunge ever further into unmanageable debt. Europe should take careful note.
Japan has a small but clear window to avoid her demographic fate. She stands at a crossroads to which all developed countries will soon come: choosing open markets for jobs, services and migrants, or choosing the less risky but more certainly downward path of economic insularity. There will be constant challenges, as societies all over the world remake themselves from decade to decade, but there is already plenty of evidence that the West’s unease about some of its new citizens is misplaced. The 9/11 bombers appeared to be model Arab-Americans. But they were first trained and indoc-
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trinated in the mountains of Afghanistan. In almost all cases, Arabs who embrace Western life are part of the solution, not the problem. In the future that is already arriving, it seems clear that freer international markets for goods, services and workers hold the promise, not just of global growth, but of extending the benefits to more nations than ever before. Rich countries will retain their vitality through immigration, and should hone their high-tech edge through offshoring. Less fortunate nations will follow them up the Jacob’s ladder of comparative advantage. The world needs cross-border movement of both jobs and workers. What are we waiting for? |
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