Globalisation – what happens next and what will it mean?

I’ve been doing some (fairly idle) thinking but not much reading about globalisation and the extent to which large amounts of ‘offshoring’ of labour will be good and who it will be good for. I can’t say I’ve got far but was interested to read this post which was pointed to by the indefatigable uber-blogger Brad DeLong.

Here’s an edited extract of some central points.

Due to radical reductions in international communication and coordination costs, EU firms can offshore many tasks that were previously considered non-traded.

This means that international competition — which used to be primarily between firms and sectors in different nations — now occurs between individual workers performing similar tasks in different nations. The really new feature is that deeper new-paradigm globalisation will seem quite unpredictable from the perspective of firms and sectors. Since individual tasks can be offshored, globalisation may help some workers in a given firm while harming others.

Moreover, old-globalisation’s correlation between skill groups and winners and losers breaks down. Certain highly skilled tasks may turn out to be offshore-able, while other highly skilled tasks are not. Increased offshoring will therefore not systematically help or hurt skilled workers in the EU. In particular, many “Information Society” jobs are prone to offshoring so EU policies aimed at moving workers into Information Society jobs may be wasted since those jobs are only “good jobs” because they do not yet face direct international competition.

The paper1 . . . underlying theme is that the increased unpredictability should make EU leaders more cautious about moving workers or skills in a particular direction. Flexibility is, as always, the key to allowing Europe to seize the opportunities of globalisation while minimizing the adjustment costs.

So what skills will go offshore? My guess is that one way the pie will be cut will be that those skills will be disproportionately technical. Engineering, software development and maintenance, drafting, medical diagnostics – eg reading x-rays and fancier scans. Legal drafting perhaps, accounting, actuarial work.

There’s a whole bunch of highly paid jobs that require low levels of technical skills, but are highly rewarded. The skills these people have are organisational and ‘people skills’. We’ve all experienecd some managers who add negative value – but whose skills, one might call them ‘political skills’ see them thrive and prosper. According to this nascent theory of mine (though I expect others have ventured the same speculation) most managers’ jobs won’t be outsourced. Nor will public relations people.

Now there’s been a fair bit of debate recently in the States about whether the huge rises in income to the very top of the income scale are rewards to skill as we would understand that term (ie generally technical skill). In fact in the States, the rewards have been quite slight for highly technically skilled people. It’s only at the very very top – a smaller band than the top one percent that returns are really smoking. And what characterises such people. Well some of them will be entrepreneurs who will usually be capturing a chunk of the social value they’re generating.

Some will be dead lucky. And a lot of the others I’m guessing will be managers whose ‘people skills’ (which also include skills of political manipulation) enable them to manipulate existing structures – boards for instance – to advantage themselves on a scale that we have not yet seen.

Just a thought.

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17 years ago

Nicholas, so Shakespeare was right 400 years ago – fox like cunning will get you everwhere?

I just saw the play Julius Ceasar – in which “honest” lamb like Brutus is slain Cassius turns “good” at the end and dies and the ruthless charismatic political machine man Marc Antony triumphs. Sounds like what you are describing??

Just a bit of whimsy from me – just trying something new.

17 years ago

The skills that will go offshore will be the skills that do not need to be attached to a specific locality. Health services, non-tertiary teaching, local bureacracy won’t be outsourced. However while costs of communication may be going down, the issue of energy, particularly in regards to costs for transport will be a long-term issue. Any moves to non-carbon fuels could be expensive and could encourage more localism in the short-term.

I agree with the view that alot of technical skills will be outsourced, particularly as China and India are putting alot of investment into local education. As their population becomes more skilled with more resources at their disposal as we fund education and resource less it really is no surprise.
Managers and public relations jobs might not necessarily be outsourced but they might move overseas. Though these professionals have the opportunity and the mobility to follow the job overseas.

It raises an entirely new issue about the mobility of labour. Capital once was geographically tied but no longer is. Land isn’t as big a factor as it once was either. Labour has restrictions on its mobility, both imposed by government and is at the whims because of these spatial factors. It’s a buyers market for labour.

What really is necessary is for greater co-operation between different countries and communities. As capital has gone global, any regulation of it has to go global in the creation of a floor and some controls. Though I wonder if that’s really that possible in the forseeable future.

17 years ago

IMO any business model that is static will contain processes and employment that can be done anywhere with the technology allowing that company to compete in the local market.

Static business models seem to be commoditised industries that compete on margin.