THEIR governments may not be able to agree on the next threat and what to do about it, but the peoples of America and Europe are oddly united in their assessments of the challenge that really undermines their long-term security and their way of life.
Today’s rioting French students, striking German trade unionists and sullen Americans may differ on Iraq and how to handle Islamism, but they share the same fear that the modern global economy is rapidly stripping them of their livelihood; that, as far as jobs are concerned the world is not so much flat, in the current overworked cliché, but tilted sharply away from developed, expensive Europe and America towards emerging, cheap Asia and Latin America.
French students and German workers are trying to cling to a social model that has served them well for a century but is visibly crumbling under the pressures of change. But even Americans, with their history of freer markets and harsher economic individualism systems, are highly agitated about what seems to be the outgoing tide of globalisation.
The spectre of the low-paid foreigner, willing to work for subsistence wages, allied with the unscrupulous employer, only too willing to employ him rather than an expensive American, dominates the national conversation.
It haunts the immigration debate here, as the US Congress tries again this week to fashion legislation to deal with the nation’s 12 million or so illegal immigrants. Supporters of tougher measures to block illegal immigration are ranged against employers who would face a much tighter labour market if they were not here.
It hovers behind the rising protectionist sentiment that, as we have seen recently, seeks to block foreign goods, such as those produced by “unfair” competition from China, or foreign capital, especially if it comes from Arab governments.
And above all it animates the fear of “offshoring”, short for offshore outsourcing, the modern “giant sucking sound” of jobs hurtling down globalisation’s plughole to Latin America and Asia.
That these fears are grounded in reality is undeniable. Even as the US economy has thrived, creating five million jobs in the past three years, manufacturing jobs, often the highest-paid, have declined by more than 300,000. And few doubt this will get much worse.
Alan Blinder, the Princeton economist and former vice-chairman of the Federal Reserve, provides a startling new estimate of the scale of the phenomenon in the forthcoming issue of Foreign Affairs.
He calls offshoring a third industrial revolution, and asserts that it will result in as many as 40 million jobs heading overseas. As he explains, virtually all manufacturing is susceptible to being produced more cheaply overseas, but so too are many more service jobs than were previously imagined. Examples range widely from healthcare (lab work) to education (exam-marking).
Vikas Kapoor is a 44-year-old entrepreneur who is now surfing the globalisation trend. A few years ago he took over IRMC, a call-centre operator, in an industry that is, as he puts it, “the Gurkha infantry on the frontline of globalisation”.
When he arrived at IRMC, this particular company of infantry was being annihilated by the opposition. America invented the call-centre market but has been hammered of late. Three of the largest US firms have gone out of business in the past five years. But in the past two years, IRMC has turned around from near bankruptcy to growth-driven profit.
On the face of it, IRMC’s turnaround looks like a classic tale of offshoring — Mr Kapoor has opened call centres in India and in the Philippines.
But then you find something strange. It has also opened centres in Buffalo, New York, and Charleston, South Carolina. It has a thriving facility in Preston in Lancashire. Indeed, for every job created in low-wage Asia, Mr Kapoor says, the company has created one in the US, Canada or the UK.
The prevailing wisdom in this business was that the way to succeed was simply to send jobs as quickly as possible to cheap labour centres. But this quickly created problems. While the distant Asia-based employees could handle relatively simple tasks such as credit card applications, they were wholly unsuited for more complex transactions — restructuring a student loan, for example.
US and British-based employees can deal much more effectively with these tasks. And that is not just about differing educational levels, but about nuances such as language and cultural sensitivities.
This story of segmentation reflects a bigger truth about globalisation — radical changes now under way won’t change the laws of economics. Nations will still be better at doing some things than others. Comparative advantages, should, if markets are allowed to work, make everybody better off.
But that’s an important “if”. Labour markets need to be much more flexible – and that applies to the supposedly dynamic US as well as to the stodgy Europeans. Mr Kapoor says that one of his biggest challenges is a labour law structure in the US that is outdated and expensive. Laws that force companies to pay overtime, for example, are unsustainable in a genuinely global market, especially when many workers are willing to work longer hours.
For globalisation to work in the wealthy West requires embracing a paradox. Only by abandoning rules and structures that protect us can we possibly hope to have real security in the long run.
gerard.baker@thetimes.co.uk
