It's a small, small world

Today, there is a financial crisis in the world which is particularly affecting the western nations and Japan – the first world. The recession is forcing nations like the USA to think about protectionist measures to save domestic jobs. If you read newspapers like The New York Times, you will notice that readers from across the nation have questioned the efficacy of sending manufacturing jobs to China and service and knowledge jobs to India.
Why did these American jobs go to India and China? It actually started with Japan, followed by South Korea, Singapore and Taiwan which absorbed many well paid jobs from USA and Europe as these countries developed. That was followed by another group of nations such as Malaysia, Indonesia, Mexico, Thailand and Brazil. But the impact was severe when big nations like India and China, which together represent a third of world’s population, started to develop and became competent enough to attract middle class jobs from the USA and Europe.
Now, even the upper middle class of the USA is feeling the pinch as high paying jobs in software development, financial research, technological research and innovation, drug research are going to India and other nations. The discrepancy in salary for the same skill is so noticeable that American corporations have no option other than to ship these jobs to poorer nations in order to remain globally competitive. For example, a Computer Science graduate in the USA starts her first job at about $45000 per year. In contrast, her peer in India with same education and skill starts at $7000 per year if he graduated from a top school and got the job in a top company. Many CS graduates in India, in fact start out at much less than $7000 per year.
In view of such difference, how can an American company create software jobs only in the USA and not in India? The same goes for manufacturing jobs in China. This is globalization, baby.
But wait a minute. Wasn’t globalization a virtuous idea that was to ensure good standard of living for all in the world? Sure. But what happened in the last 50 years is that developing countries did not develop uniformly. A tiny middle class in these countries went against all odds to educate itself so as to get the few white collar jobs in the country. In the process, they became so good that they could work for Multi National Companies (MNC) as well. That started the flow of jobs.
Since the huge majority of nations like India, China, Vietnam remained impoverished and continued with low-productivity jobs, the structure of these economies became such that parity in salary with western nations in any kind of job was impossible. It is because most people are so poor in India that a Computer Science graduate with $7000 annual income can afford to hire domestic helps at home and a full time driver to drive his car. The corporation gets a happy, productive employee at a cost that is less than a sixth of the salary of an American Software Engineer with same skills.
Why did such lopsided development happen where some people in India and China are as productive as their counterparts in the USA and are stealing US jobs while most of the people in these nations have low productivity, education and income? This is because the governments of these nations did not focus on uniform development over the last few decades. They did not attempt to provide high school education to all of their children. They did not open the economy to create jobs. Often, they did not have money to provide decent education, healthcare and housing to all their citizens.
It was precisely in these areas where the USA and Europe could help. Over the last 50 years, the USA and other developed nations could have shown leadership and spent money to improve the lots of the people in India, China, Africa and Latin America. They did not. The Americans love to imagine that the USA is the leader of the free world. But did the USA sacrifice its well being like great leaders of the world such as Gandhi, Martin Luther King and Nelson Mandela? Instead it behaved like a selfish, first boy in the class. The average annual US aid to all developing nations was a meager 0.17% of its GDP. The Americans saw the pictures of impoverished, hungry children in Africa, Asia and Latin America but did not do much more than paying lip service. If in the 1950’s, 60’s and 70’s, the USA had led the developed world and contributed 5% of its GDP annually (that would be $700 Billion in 2008) to improve the lots of developing nations through the UNO, things would have been different today.
I admit that it would not have been easy because many developing nations would consider this an attempt to buy their sovereignty. There were corrupt dictators running many such nations who did not care about national development. But, had it been done through the UNO most nations would have accepted and utilized such aid properly. Even if a fraction of these aids went to help the poor, there would not be millions low-productivity, low-income people in the world today.
Instead, every nation was patriotic and helped only their own nations, ignoring a huge, poor world out there. The USA, the UK, France, Germany, Italy, Japan – none of them truly cared to improve the life of the poor in the developing world. It was not their problem. It was the domestic problem of India, China, Mexico, Bangladesh, Nigeria, Kenya or Uganda.
This form of shallow patriotism has contributed to lopsided development in these nations which is biting the USA and other developed nations today. As you sow, so you reap. The failure of the USA, Europe and Japan to develop and invest in Asia, Africa and Latin America as though it were Chicago, New York, Glasgow, Dresden or Milan was the root cause. They did not realize that it’s a small, small world.