Thursday, March 30, 2006

An empire looking inward?

While we bask in the almost post-coital glow of Tom Friedman’s ‘The World is Flat’, it might be wise to remember that it is getting increasingly jagged at the edges.

In 1993, Samuel Huffington wrote about “The Clash of Civilizations’ and remarked “…the world is becoming a smaller place. The interactions between peoples of different civilizations are increasing; these increasing interactions intensify civilization consciousness and awareness of differences between civilizations and commonalities within civilizations. North African immigration to France generates hostility among Frenchmen and at the same time increased receptivity to immigration by "good" European Catholic Poles. Americans react far more negatively to Japanese investment than to larger investments from Canada and European countries. The interactions among peoples of different civilizations enhance the civilization-consciousness of people that, in turn, invigorates differences and animosities stretching or thought to stretch back deep into history.”

He went to to state that ‘…the processes of economic modernization and social change throughout the world are separating people from longstanding local identities. They also weaken the nation state as a source of identity. In much of the world religion has moved in to fill this gap, often in the form of movements that are labeled "fundamentalist." Such movements are found in Western Christianity, Judaism, Buddhism and Hinduism, as well as in Islam.’

He further added, ‘The West's "next confrontation," observes M. J. Akbar, an Indian Muslim author, "is definitely going to come from the Muslim world. It is in the sweep of the Islamic nations from the Maghreb to Pakistan that the struggle for a new world order will begin."

The events in the past thirteen years certainly seem to bear out the above conclusions.

In today’s op-ed in the Washington Post, Jim Hoagland puts it this way.

“In radical Islamic propaganda, the United States has graduated from being a mere Great Satan out to undermine Iran's ayatollahs to being depicted as a global monster responsible for virtually every crime and failing since the dawn of modern history. Meet the new Jews: the Americans.”

“The centrality of American power to global change . . . inevitably carries with it a heavy burden abroad of resentment and opposition. In the wake of Sept. 11 and wars in Iraq and Afghanistan, a widespread stereotyping and a visceral hatred that imputes racial characteristics to national policies and actions have also taken hold.”

The response of the Americans has been to withdraw inward. Consider the following:

One of the largest public demonstrations since Martin Luther King was held on Saturday last, when 500,000 illegal aliens marched in LA to protest against potential tough enforcement measures to crack down on illegal immigration such as building a 700 mile border with Mexico.
The elected officials opposed Chinese takeover of Chevron, and approved IBM’s sale of its PC division to Lenovo after intense scrutiny.
The same officials opposed Checkpoint’s (an Israeli security software company) takeover of Sourcefire on grounds of national scrutiny. (The US opposing a business deal of an Israeli company?!!), and also banned the purchase of Lenovo’s computers by the US Navy.
The US legislature also forced Dubai Ports World to exclude US operations from the P&O takeover.

While the short term US economic outlook appears robust, the prospects for 2007 and beyond are a bit mixed due to the Iraq war, budget deficits, rising healthcare costs and unfunded pensions.

The risks of a jingoistic Congress launching a full-fledged trade war with China are not remote either.

This inwardness and rise of xenophobia is not confined to the United States.

France has witnessed riots twice this year already, and there was fierce debate and riots over the cartoons published by a Danish newspaper around the world. The riots by French youth, protesting the proposed reforms to labor law, are as much pro-jobs as they are anti-immigrants.

The WTO negotiations are headed nowhere, and any watered down deal is obviously a mere face-saver.

If the Western world is looking inward, why should our industry get worried?

One, the average Joe does not make subtle distinctions between illegal immigrants and smart IT workers on temporary work permits. Any law on the larger immigration issue will always use the work permits (or H1B visas) as a bargaining point. In countries such of the EU, with enormous business potential, there is a risk that inadequate work permits will prevent us from exploiting that potential.

Two, there is a strong resentment among average Americans towards foreign businesses; more to the Chinese, but increasingly to the Arabs and potentially Indians.

Three, over 80 per cent of Americans feel that their sensitive personal information should not be processed overseas. While we have managed to dodge any significant legislation on this issue, the risks of this emerging as an incipient non-tariff trade barrier are high, and growing by the day.

The history of our industry is a by-product of the history of US business, politics and regulations. We might be tempted to believe that the outsourcing debate is over, and that the world is indeed becoming flat. However, the moment the US economy stops adding 200,000 jobs a month or there is a huge data security breach in India, the challenges to global sourcing will manifest themselves all over again.


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Blogger snigdha said...

hey watch out, you're getting spam on your blog.
on the anti outsourcing debate, what's the update in terms of mobilisation on the ground?

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Blogger snigdha said...

writer's block? april, may and june just went by...

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