Re: Why back-shoring wont cut it
- From: "Kamal R. Prasad" <kamalp@xxxxxxx>
- Date: 27 Jun 2006 06:50:12 -0700
Straydog wrote:
I am going to demure on this just a little.
On Mon, 26 Jun 2006, Phil Scott wrote:
.
the net cost of doing business in the US is driven almost
exclusively by confiscatory direct and hidden taxes, used to
fund an 80% bloated, largely bogus and self serving
government...retiring its own at 10 to 15 times what the
working tax payers retire at...and 15 years earlier.
CEOs are getting richer as every decade passes and this is also a
serious problem.
Every ameeican should aim to become a CEO/mktg guy -and pass on the
actual work to lowly 3rd world workers. Last I checked -even mktg types
get hefty pay. The team in India slogs it out and a blonde makes a ton
of money by giving a nice ppt presentation.
thats just not viable/
accordingly we are not competitive in world markets... those
with lower costs are eating our lunch... in the past Indian
engieers were lousy to say the least...today only some are
lousy, many are certifiably world class...
Its all in the exchange rates, you need to think about this.
The exchange rates, way back, were based on _material_ & _products_ and
not labor. Now, the work can be moved much more cheaply than materials and
so the exchange rates favor moving work. But, the system messes up the
exchange rates in such a way that nobody wants to readjust them.
No -the exchange rate is skewed to ensure that materials and products
cost differently as well in different countries. Housing for one costs
more in the US than in India/China. Another would be medical treatment
& prescription drugs and also education. If it costs 5x to rent a 1
bedroom apt in the US -then the worker located in the US will likely
find it impossible to match expectations with Indian/Chinese wages and
services will end up costing more as a result.
Further, it isn't a case of setting up exchange rates "back then".
In the 1970s, 1 USD = 8 Rupees with v little volatality and that looks
reasonable even today. Over time, the US govt (most likely under
Richard Nixon) decoupled the USD from the gold std and the cronies in
the US govt manipulated exchange rates ti the extent possible with the
help of currency traders. It kept increasing till about 2002 end and
then hit a downward trend from 49 Rs/$ to the current 44 Rs/$. At the
same time that the USD was gathering strength -productivity and
prosperity in India was also gathering strength creating an even
greater skew between real purchasing power and the exchange rate. The
chinese did not have a peg on the Yuan "back then", but after the asian
currency crisis -they adopted a defensive position wrt currency market.
Fixing currency exchange rates is one part of the solution. The other
would be for americans to adjust their std of living so that if someone
is as productive as a person in the 3rd world -he lives a lifestyle
similar to that of the guy in the 3rd world. If you insist on a higher
std of living, you need the govt or some natural resources based
royalty to provide for that extra std of living. Read this :-
http://money.cnn.com/2006/06/27/news/international/bank_china_dollar.reut/index.htm
Your chest-thumping of "the world loves our currency" is a momentary
illusion which will come to an end as and when central bankers divest
themselves of your funny money. To enjoy a better std of living than
people elsewhere, you do need to work for it and show greater
productivity. There are no shortcuts for this and insider-trading
doesn't last forever.
[snip]
Phil, the problem is in the exchange rates. They have been set up decades
ago and are obsolete when you consider material/products compared to
services before the internet vs. after the internet.
The internet hasn't been all that pivotal to globalization.
Globalization is more to do with the free flow of capital and less to
do with the free flow of TCP data. If you can arrest the flow of
working capital to the location with the cheapest goods/services -you
will be able to put an end to globalization without cutting the under
sea cables.
regards
-kamal
Phil Scott
.
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