NY Times columnist Thomas Friedman uses the metaphor that the world is now flat. By that he means that knowledge workers in India, China, and other lower-cost companies can take jobs away from Americans because of the Internet. But Columbia professor Jagdish Bhagwati, writing in the Wall Street Journal ($), thinks Friedman is overstating the competitive threat:
In truth, the flat road is not
flat at all. Take the supply of educated manpower in India.
- Of the
numbers in the age cohort for college education, only about 6% make it
to college.- Of these, only two-thirds graduate, and just a small
fraction can read English.- Of these, a further fraction can speak it;
- and of these, a smaller fraction still can speak it in a way which you
and I can understand.The truth of the matter, therefore, is that even
for the call-answer and back-office services, the numbers who will
compete are only a very small fraction of the numbers being thrown
about.India’s huge size and the dazzle of the few Institutes of
Technology are totally misleading. The road is not flat; the gradient
becomes steep as wages rise for those who can manage while others
cannot qualify.
Again, just think back on why China has not managed to
break into IT the way it has on a range of manufactures, while India
has. Surely, that has to do with the fact that India is democratic and
hence IT can flourish. By contrast, the CP (the Communist Party) is not
compatible with the PC: Authoritarian regimes are fearful of IT — a
gigantic pothole in the road!Such fears of a flat road were rampant when many
thought that Japan would be a fearsome Godzilla, trampling over our
activities all around. But then it turned out that the Japanese were
real klutzes in the financial sector. They still are.And remember that
while the Chinese and Indians have lower wages, we have better
infrastructure, stronger venture capital markets, an ability to attract
talent from around the world, and a culture of inventiveness.Comparative advantage persists; the road is simply not flat.
(Paragraphing edited, bullets added.)
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