Globalization Discussion at TiEcon 2007

We recently attended TiEcon 2007, held May 18-19, 2007 in Santa Clara, CA. At the pre-conference Charter Members-only event, Dr. Laura Tyson, University of California—Berkeley, talked about globalization of the economy.

Globalization is a great moderator; the GDP per capita is growing globally. There is more equal growth across the world. This also has a great decoupling effect—the United States will not lose its leadership anytime soon, but its influence on the rest of the world will diminish in this century, despite what leaders in Washington believe. Global interdependence is healthy.

Globalization in the 19th and 20th centuries was driven by the railroad, steamship, and underwater cables, which led to massive trade on a global scale. Globalization can be related to creative destruction. Yet, 90% of Americans fear their jobs will be outsourced/offshored and only 30% feel globalization is good, and moves are afoot in Washington to limit imports and impose levies on them—all in the name of keeping jobs in-shore and reducing trade deficits.

Globalization creates losers and winners and there is a role reversal between the developed (G7) countries and emerging economies. Emerging markets comprise 80% of the world’s population, control 40% of the world’s exports, and 96% of all new workforce in 2005-2010 will be created in emerging markets! Threats to globalization are not the economy, but politics.

Footnote: Chindia or Indina

It is noteworthy that in 1800 China and India accounted for almost 40% of the world’s GDP. Today, despite their robust growth and exploding economies, their combined GDP is less than 7% of the global GDP. However, by the year 2050, the leading world economies are expected to be China, the U. S., and India—in that order.

Ellison, The (Ex)Terminator

Oracle's CEO Larry Ellison said a few years ago there are too many software companies, especially, in Silicon Valley and most of them don't deserve to exist, implying they should either go out of business or be acquired. In the past four years, Oracle has spent over $24 billion acquiring companies of the likes of Agile, Hyperion, Peoplesoft, Portal Player, Octet String, Siebel, Stellent, Sunopsis, TimesTen, Thor Technologies, and others.

Oracle's CEO Larry Ellison has been called many names, but we call him a Take-No-Prisoners Winner. Larry fought the U. S. Department of Justice and won.

We are sure the buying binge isn't over yet.

What Shortage?

There are hot debates everywhere about the shortage of engineers in the U. S. and employers are constantly pressuring the US Congress for more H-1 visas. Is there really a shortage?

We believe the answer is an emphatic NO. All one has to do is look around Silicon Valley, for starters. Following the dot-com bust, thousands of engineers were unemployed for long durations. After drawing unemployment benefits for six months, they no longer appear in the unemployed category. Hundreds of engineers changed their careers -- became school teachers, worked in Starbucks, Home Depot, or Macy's, or opened franchises such as UPS or coffee shops. So, while the US Department of Labor reports unemployment rate in the Valley is ~4.3%, it is more like 15% to 20%, if one includes the underemployed.

Is there a shortage of engineers in the US? No, there is a shortage of cheap engineers! That is one of the reasons why:

1. Every major hardware and software company in the Valley has laid off employees and hired in Asia or done intra-company employee transfers on L-1 visas from overseas, paying them far less than what they did the employees they replaced.
   
   
2. IBM, inter alia, is reportedly laying off thousands of its employees in the US and aggressively hiring in India and China; see Robert Cringely's pulpit at:

http://www.pbs.org/cringely/pulpit/2007/pulpit_20070511_002058.html

Dogs, Math, and Science

I recently had lunch with the Marketing Manager for a Silicon Valley two-year community college. We were discussing the quality of education in the Valley and she mentioned over 90% of the students in Science and Math (S&M) in her college are Asian-Americans. Asked why, she said most American kids are raised by their parents with fear of S&M, so they don't love S&M.

This reminds of my childhood in India where most kids are raised with fear of dogs, because so many of them (dogs, not kids!) are stray and carry diseases. I remember walking my (late) Springer Spaniel in my San Jose neighborhood. Whenever I ran into Indo-American kids, they always asked me, "Does she bite?" American kids always asked, "Can I pet her?"

Of course, thing are changing: Many second generation Indo-Americans love and have pets -- cats and dogs.