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Written by Dr Eamonn Butler
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Friday, 28 September 2007 |
US prof Laura Tyson is adviser to one of the Democratic presidential
candidates and a bit of a lefty, but I retained an open mind and turned
up to her Audit Commission lecture last week, on globalization and its
effects.
Her battery of statistics on this was impressive, and all
designed to show that the world economy is globalizing – and changing –
fast. The world used to be dependent on US spending, for example, but
no more. China's economy is just a quarter of the size of the US's, but
its growth is four times – making it just as important on world
markets.
With digitization and other technologies, the range of potentially
tradable goods is expanding. It's taking less time for developing
economies to get up to speed, because they can use and leap-frog
existing technologies. (At current rates, China's prosperity will rise
a hundred-fold in a single lifetime.) The developing world's population
is rising faster too. All of which means that, by 2020, the consumer
goods demand from developing countries will be as big as the West's.
Prof Tyson reckoned that this process would be a huge pressure on
Western jobs, lowering wages in those jobs that can be done somewhere
else – non-specialized, non-face-to-face jobs being most at risk. And,
as you would expect, she used that to justify all kinds of
labour-market interventions – government programmes to make labour more
flexible, for example.
Well, maybe. But the fact that 75% of our income is from services does
not mean that all those jobs can be shipped off to Bangalore. (Indeed,
some financial institutions have shipped them back in the face of
customers' complaints that they cannot understand overseas call-centre
operators.) A huge volume of those jobs are actually face to face. You
can't have your hair cut, your garden tended, your children minded,
your car serviced, your trains staffed, your sink unblocked, your bus
driven, your roads mended, your pint pulled, your fields harvested, or
your brain operated on by someone 10,000 miles away. (Though I have to
admit that with technology, these things may some day be both
economically and practically possible.) Inmigration of hairdressers,
gardeners, child-minders and the rest might well push down wages, but
(for good or ill), immigration can be controlled.
I agree that flexibility is vital, and education/training the key.
Nobel economist Gary Becker says that 75% of our wealth is not land,
buildings, equipment and the rest but the 'human capital' skills,
health, and experience of our people. The best way to improve all that,
though, is to get government out of the picture.
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