Within the last few years, people throughout the world's most advanced economies have become acutely worried about the economic prowess of China, India, and other emerging countries with large low-wage populations. They fear for their own jobs and for their children's future in a world where they must compete alongside the world's poorest. Those fears are testing political leaders in the world's richest countries.
Newspaper stories are an indicator of this rising concern. I searched the Lexis-Nexis database of English-language newspaper stories around the world that contained all three of the words "outsourcing," "jobs," and "India." In 1999, Lexis-Nexis produced only 39 stories; by 2003, there were 749 stories. In the first six months of 2004, there were already 1208 stories. The results were much the same when I searched "outsourcing," "jobs", and "China."
I found similar growth in the use of these three terms together when I searched in French, German, Italian, and Spanish: 90% of the stories were in 2003 and 2004.
Why this explosion of concern? After all, advanced countries have been losing manufacturing jobs to less developed countries for more than fifty years.
One reason is that the expanding development and use of new information technology, notably cell phones and the Internet, shrinks the world and makes competition from abroad more plausible. In fact, new technologies are probably the most important reason why globalization is advancing at a rapid pace. Cell phones and the Internet link the minds of many people in different countries effortlessly and efficiently, encouraging trade in intellectual creations.
At the same time, the new information technology makes us more aware that the kinds of jobs that are migrating to India and China are high-quality jobs, the jobs for educated and skilled people. Over the last fifty years, people in advanced countries have increasingly sought university education and specialized training to protect them from an unforgiving labor market. Now First-Worlders are uncertain whether even this will protect their economic status.
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Increased fear of competition from emerging countries is also a natural consequence of the collapse of the speculative bubble in equities in 2000; stock markets in some countries fell to less than half their peak value. Once we saw our exaggerated hopes for our investments failing, we began to consider our other sources of income and wealth, only to confront the worldwide economic slowdown that began in 2001. Increased economic anxiety has, unsurprisingly, fueled increasing unease about foreign competition.
Earlier this year, I surveyed people who recently bought homes in four American cities. My questionnaire asked: "Do you worry that your (or your household's) ability to earn as much income in future years as you expect might be in danger because of changes in the economy (someone in China competing for your job, a computer replacing your job, etc.)?" Of 442 respondents, 11% answered, "Yes, I worry a lot," 36% replied, "Yes, I worry a little," and 52% said, "No, I don't worry at all." Thus, while most respondents said they were not worried, nearly half expressed some worry.
I asked this question of recent homebuyers on the theory that fear of job loss might help explain the remarkable boom in home prices in the US (as well as many other advanced countries). After all, people who fear losing their jobs may seek greater economic security by investing in real property in their own wealthy country, bidding up prices in the process.
My survey's results lend some support to this theory. Although 81% of the respondents said fear of job loss had no effect on their decision to buy a house, of those who said it did, the number who said it encouraged home purchase outnumbered those who said it discouraged home purchase by a margin of two to one.
Growing fear of foreign competition ought to explain a lot of things in the future. People used to feel insulated from economic problems that occurred beyond their country's borders. No more. Fear of competition from abroad is now fundamental, and will change the political process in advanced and relatively advanced emerging countries throughout the world. It helps explain the rise of protectionism, and the failure of the WTO trade talks in Cancun last September to improve emerging countries' access to advanced-country markets.
As a professor, I find that my students often ask me for career advice with a different tone than in the past. What I hear is a fundamental lack of confidence that they will do well in any chosen career. They want to figure out how they can compete with Chinese or Indian workers who have the same, or better, education. Despite bravado about American superiority, the students themselves do not seem to feel superior, and wonder if they will be living emerging-country lives of their own in coming years.
This sudden fear of emerging countries presents a major dilemma. The fear is real and visceral, and politicians ignore it at their peril. Its further increase could lead to counterproductive protectionist measures. We must not let this happen. The emerging countries are doing nothing more blameworthy than working towards their place as equals alongside advanced countries. It is morally and practically vital that they succeed.
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The escalating war in the Middle East must be understood in a broader context. The fact that the Iranian regime felt emboldened to risk a direct strike on Israel attests to a changing world order in which Western power is increasingly open to challenge.
considers the implications of Iran’s unprecedented decision to launch a direct strike on Israeli territory.
Within the last few years, people throughout the world's most advanced economies have become acutely worried about the economic prowess of China, India, and other emerging countries with large low-wage populations. They fear for their own jobs and for their children's future in a world where they must compete alongside the world's poorest. Those fears are testing political leaders in the world's richest countries.
Newspaper stories are an indicator of this rising concern. I searched the Lexis-Nexis database of English-language newspaper stories around the world that contained all three of the words "outsourcing," "jobs," and "India." In 1999, Lexis-Nexis produced only 39 stories; by 2003, there were 749 stories. In the first six months of 2004, there were already 1208 stories. The results were much the same when I searched "outsourcing," "jobs", and "China."
I found similar growth in the use of these three terms together when I searched in French, German, Italian, and Spanish: 90% of the stories were in 2003 and 2004.
Why this explosion of concern? After all, advanced countries have been losing manufacturing jobs to less developed countries for more than fifty years.
One reason is that the expanding development and use of new information technology, notably cell phones and the Internet, shrinks the world and makes competition from abroad more plausible. In fact, new technologies are probably the most important reason why globalization is advancing at a rapid pace. Cell phones and the Internet link the minds of many people in different countries effortlessly and efficiently, encouraging trade in intellectual creations.
At the same time, the new information technology makes us more aware that the kinds of jobs that are migrating to India and China are high-quality jobs, the jobs for educated and skilled people. Over the last fifty years, people in advanced countries have increasingly sought university education and specialized training to protect them from an unforgiving labor market. Now First-Worlders are uncertain whether even this will protect their economic status.
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Increased fear of competition from emerging countries is also a natural consequence of the collapse of the speculative bubble in equities in 2000; stock markets in some countries fell to less than half their peak value. Once we saw our exaggerated hopes for our investments failing, we began to consider our other sources of income and wealth, only to confront the worldwide economic slowdown that began in 2001. Increased economic anxiety has, unsurprisingly, fueled increasing unease about foreign competition.
Earlier this year, I surveyed people who recently bought homes in four American cities. My questionnaire asked: "Do you worry that your (or your household's) ability to earn as much income in future years as you expect might be in danger because of changes in the economy (someone in China competing for your job, a computer replacing your job, etc.)?" Of 442 respondents, 11% answered, "Yes, I worry a lot," 36% replied, "Yes, I worry a little," and 52% said, "No, I don't worry at all." Thus, while most respondents said they were not worried, nearly half expressed some worry.
I asked this question of recent homebuyers on the theory that fear of job loss might help explain the remarkable boom in home prices in the US (as well as many other advanced countries). After all, people who fear losing their jobs may seek greater economic security by investing in real property in their own wealthy country, bidding up prices in the process.
My survey's results lend some support to this theory. Although 81% of the respondents said fear of job loss had no effect on their decision to buy a house, of those who said it did, the number who said it encouraged home purchase outnumbered those who said it discouraged home purchase by a margin of two to one.
Growing fear of foreign competition ought to explain a lot of things in the future. People used to feel insulated from economic problems that occurred beyond their country's borders. No more. Fear of competition from abroad is now fundamental, and will change the political process in advanced and relatively advanced emerging countries throughout the world. It helps explain the rise of protectionism, and the failure of the WTO trade talks in Cancun last September to improve emerging countries' access to advanced-country markets.
As a professor, I find that my students often ask me for career advice with a different tone than in the past. What I hear is a fundamental lack of confidence that they will do well in any chosen career. They want to figure out how they can compete with Chinese or Indian workers who have the same, or better, education. Despite bravado about American superiority, the students themselves do not seem to feel superior, and wonder if they will be living emerging-country lives of their own in coming years.
This sudden fear of emerging countries presents a major dilemma. The fear is real and visceral, and politicians ignore it at their peril. Its further increase could lead to counterproductive protectionist measures. We must not let this happen. The emerging countries are doing nothing more blameworthy than working towards their place as equals alongside advanced countries. It is morally and practically vital that they succeed.