That you found what the world is waiting for
I think it's time
To get real."
--Stone Roses, "What the World is Waiting For"
It is quite bizarre to see John Kerry, Pat Buchanan and Ross Perot all on the same side of a political issue.
However, one recent political issue directly threatens the high-technology community.
The start-up world embraces diversity like no other industrial sector.
Here are seven reasons why Silicon Valley should be very alarmed over protectionism:
• Protectionism will hurt the overall economy.
History has confirmed that Adam Smith's theory of comparative advantage was remarkably prophetic. Not only have scores and scores of countries thrived as they initially encountered global trade, but many others have crashed dramatically upon raising barriers to the same.
While there are many examples of such catastrophes, including China at the end of the first millennium, Holland in the 1600s, Great Britain in the 1800s and Japan in the late 1900s, perhaps the most relevant is America's own protectionist movement in the late 1920s, which led to the single worst economic drought in American history.
Ignoring the theory of comparative advantage is the intellectual equivalent of harboring thoughts that gravity might be a myth or suggesting that diet and exercise really aren't that important to one's health. While it may seem trite to mention it, crashing the overall economy will certainly hurt the market for start-ups.
• Start-ups don't collect subsidies.
One typical method for implementing protectionism is to offer subsidies or tariff advantages to local companies such that they have an advantage vis-a-vis foreign competition. The catch: Start-ups have no idea how to file for subsidies. They don't have large lobbying groups in Washington.
They have no idea how to schmooze their member of Congress in order to increase their chances of receiving preferential treatment on some new multibillion-dollar tax credit program. These are the skills of large, bureaucratic companies in staid industries that already have hundreds of employees in the nation's capital.
• Diversity is critical to start-up success.
The start-up world embraces diversity like no other industrial sector. It is not unusual for a company in Silicon Valley to have employees from numerous geographies, representing numerous religions and numerous languages. More importantly, no one seems to notice. Companies succeed because they can recruit the very best from all around the globe.
Multiculturalism is ingrained in the fabric of everyday life. The xenophobic notion that someone deserves a job over someone else simply because of religion, ethnicity or nationality has no place in the 21st century. Protectionism will only serve to bring tension to a community that has none.
• Start-ups are increasingly global at an early age.
Ironically, the protectionists in Washington are beginning to beat their drums just as start-ups have become dramatically more adept at crossing borders. For example, Jamdat Mobile, an emerging player in the mobile game space, is distributing software in 29 countries and transacting business in nine currencies with 60 percent of its employees living outside the United States.
Skype, a company that began just 18 months ago in Europe, already has 40 percent of its users in the Americas and Asia. And Google may have grown internationally faster than any company ever has. It already offers its search service in 97 languages and across 95 international domains. And in its recent quarter, international revenues were already 30 percent of its overall results.
The Internet has reduced friction in communication and distribution and has enhanced the speed at which young companies can serve the entire world. Protectionism will put a quick end to this remarkable development.
• The critical emerging markets are outside the United States.
The leading cellular markets are in Europe. The most innovative broadband carriers are in Korea and Japan. Increasingly, the majority of consumer electronics are being designed and assembled in Taiwan and China.
Perhaps the only saving grace is that the international community may protect Silicon Valley from Washington.
America is interesting, but it's hardly where the action is. Start-ups are increasingly focusing on markets outside the United States--sometimes bypassing the United States and entering the market elsewhere. Protectionism will slam the door on the most critical opportunities for start-ups.
• It is equivalent to taking a step backward.
The U.S. government, as well as leading companies such as Intel, just spent the past year convincing the Chinese government to embrace a single global standard for 802.11 wireless products, bypassing its previous decision to implement a proprietary security standard.
This single feat will have an overwhelmingly positive impact on thousands of small companies that build products based on 802.11 in the United States. All of their products will now work out of the box in the most important emerging market on the planet. It seems laughable that just as we convinced the most historically communist country of the benefits of free trade and comparative advantage, a few of our own leaders seem to have contracted amnesia.
• Protectionism is inconsistent with the entrepreneurial mind-set.
It is hard to imagine a successful entrepreneur arguing that he or she deserves a job over someone else who is equally skilled and willing to work for a lower wage. The entire spirit of entrepreneurialism is based on finding ways to do something better, faster and cheaper. It is the whole nature of the game. If someone can do something better somewhere else, it simply means it's time to innovate again--with intellect and technology, not politics.
Perhaps the only saving grace is that the international community may protect Silicon Valley from Washington. Just as our entrepreneurial founding fathers must have had choice words for a maturing Europe, America is now being criticized by the emerging economies of our time, such as India and China.
The World Trade Organization has taken on a significant role in the global economy, and many of its members are specifically targeting U.S. protectionist polices as their key agendas. Just as many countries criticized what they consider to be unilateral U.S. military behavior, they are equally up in arms with regard to unilateral economic behavior.
What many in America may miss is that the rest of the world will go on without us. Over the past 30 years, the key market for technology products was obviously the United States. Start-ups in Europe, Israel and Asia would develop their products at home but quickly shift the focus to the United States, when the time came for marketing and sales.
This is no longer the case. In many instances, Europe and Asia are quickly becoming the enviable markets. What's more, as recently noted in The New York Times, "Foreign advances in basic science now often rival or even exceed America's, apparently with little public awareness of the trend or its implications for jobs." If America closes its borders, resourceful entrepreneurs in Europe and Asia will cheerfully step in and generate tomorrow's leading break-through companies.
Biography
J. William Gurley is a general partner at Benchmark Capital, a venture capital firm in Menlo Park, Calif.
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You are leaving everything to chance and preying that something will come from entrepreneurs. If you had examples how America will compete with lower wage competitors then I would feel confident you know what you are talking about. The reality is you don?t. The logic you present has many faults. What makes you think that other nations that are now using our technology will not also get as advanced in nanotechnology or any technology.
Fix the education system first and create an educated work force in these new technologies. Before giving up the technology you already have also make sure that the playing field is leveled or you are just asking for an economical Iraq.
Many economists believe that Americans will immediately enjoy the benefit of cheaper products/services in corporate America's race for the cheapest labor. While this may be true for TVs, this is NOT true in many cases. Do you think Bank of America will charge less for a mortgage if they service it in India. It won't happen. They may make a bigger profit but that savings won't get passed on to the consumer but certainly a bigger bonus will go to the senior corporate executives. Heck yeah...they took a 15% profit margin up to 18%...dang they are smart!
We should all realize that the race to the bottom is not India but rather it will be China. This is because China country with an oppressive government that won't let their people rise on any level. They will never allow their people to enjoy a significantly better standard of living it would hurt their most precious commodity of cheap labor.
I believe that it considerably much more "perilous" for the government to take care of the affluent of this country while ignoring the views of the majority (reference the French Revolution).
#1: Outsourcing cost benefits are far less than corporations estimate because it is perceived that projects are carefully managed. Many projects simply aren't "cookie-cutter" enough to be suitable for outsourcing. Wait & see on that one.
#2: If outsourcing exponentially increases (refer to #2 on why I think it won't for long) then the American worker will have to retrain to survive. What happens when people lose their jobs or more specifically FEAR losing their jobs.
They will STOP buying and STOP investing. So much for those big CEO bonuses when that happens.
#3: While protectionist measures "may" have contributed to the Great Depression the antitrust legislation of that era most likely saved the stock market from itself and took the power from the corrupt corporations. Sounds like history is repeating itself in so many ways.
#4: The WTO is much more powerless than you think. Unfortunately, US corporations truly run Washington...everyone should be fully aware of that by now. The politicians do whatever the corporations want (the WTO is pretty much a non-factor). Politicians should have the interests of the people and this most definitely should not include the people/corporations that contribute the most money to their respective campaigns.
#5: I'd like to see how you'd feel if you're job was on the line Mr. "J. William Gurley". You need to have a better understanding how the public really feels.
Roger Williams
http://www.whomovedmyjob.org
He will fit in with the rest of the geeks at my local Walmart.
If we put a labor equalizing tariff on products and services from China and India, exactly how will that hurt us? It will create a level playing field - making the companies doing business there and here compete on quality of the product - not the price of the labor.
There is no competition with China and India anyway. The companies that are doing business over there are U.S. They are just executing a game of global labor arbitrage putting us in a race to the bottom. How do you feel about working 14 hours a day for a bowl of gruel and a bed in a dormitory? Think about that because that is what the multinational corporationas are asking you to compete with.
If you think that we can maintain a first world infrastructure on third world wages, do some rethinking. If you think you are in some way special or exempt from being crushed economically - think about. China and India each have UNUSED labor pools larger than our entire labor pool. It is just a matter of time until your job goes.
now that China is manufacturing consumer products for export. Taiwan,
Japan, South Korea all ran up against a finite labor supply. China,
however, with its vast hordes of potential factory workers,
technicians, engineers, entrepreneurs, etc., could (don't you think?)
continue to increase the variety of its exports while maintaining very
low prices over the course of many decades to come.
Perhaps when U.S. auto workers are, in effect, competing with
$0.30/hr. auto workers in China they may have to
grow their own food for fifty
years before the standard of living in China even rises to meet the poverty
level in the U.S. Of course, before that happens there will be import
barriers erected....unless free-market economists come up with a better solution.
http://www.commondreams.org/views04/0110-05.htm
.
The Price of Globalization
"...The iron law of wages is also simple and logical. It says that wages will tend to stabilize at or about subsistence level. That seemed inevitable to Ricardo, since while workers are necessary, and so have to be kept alive, they have no hope of any better treatment since they are infinitely available, replaceable, and generally interchangeable.
Ricardo's wage theory has seemed untrue. The supply of competent workers in a given place is not unlimited; neither workers nor industry are perfectly mobile, and labor demonstrated in the 19th and 20th centuries that it could mobilize and defend itself. The iron law of wages would seem to function only if the supply of labor is infinite and totally mobile.
Unfortunately that day, for practical purposes, has now arrived, thanks to globalization..."