February 02, 2004

Passage From India

http://www.wired.com/wired/archive/12.02/india.html

A long article, linked with several others, looking at the phenomenon of IT outsourcing to India. In addition to enjoying the competitive advantage of a salary mean about 12% of that prevelant in the USA, India also has the hidden weapon of a large, well-educated, work-oriented middle class which speaks and can work in English.

The bottom line -- get used to it. India and its capabilities are not going away, and efforts at protectionism should prove as counterproductive here as they have in other economic sector. While the USA has moved from the agricultural economy to the industrial economy to the information economy, the hard question is: "what comes after knowledge?".

The answer is creativity, and looked at in this light, besides the rather humble venue of on-site maintenance, it may well be this is the next step the USA must take to make itself competitive. But this will work hardship on a social group which is both used to taking political action and wealthy enough to make its veiws felt, so the transition will not be painless [and, one would argue, probably should not so be].

A shorter article on offshoring generally, presenting the Ricardian argument for competitive advantage is presented here:

http://www.usatoday.com/usatonline/20040204/5895934s.htm

While, as the article notes, the theory has worked well for over 100 years, the question of what comes next could be the disconfirming instance.

Posted by jho at February 2, 2004 12:16 PM
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