India IT exports seen growing 30 pct in 0506

Offshoring Still Has Serious Problems ---------------------------------------------- The following comments are derived from the book: "The Challenges of Global Capitalism -The World Economy of the 21st Century" by Robert Gilpin (c 2000, Princeton U Press, 373 pp., ISBN 068 plus 11049351) ----------------------------------------------- Although this author is pro-globalization, he also gives a very excellent and objective overview of all sides to the serious problems of globalization including the problems that have been solved as well as the problems that still remain. The book does not require any knowledge of economics and is easy to read and easy to understand. ----------------------------------------------- The most crucial statement by the author is that it is not at all clear that globalization will be ultimately succesful. The author gives many reasons, based on history, as to why globalism may yet fail in the not too distant future. These reasons include:

1. Unsolved problems in agreements (he says the WTO, the strongest international organization yet, has an agreement containing 20,000 pages weighing a total of 385 pounds and covers only about half of the known problems with globalization).

2. All or almost all countries come to the bargaining table with the idea that they want everyone else to do something that they want but they don't want to reciprocate (or compromise) themselves. There is a history much larger than I was aware of dealing with: a) protectionism both obvious and indirect or hidden, and b) provisions in existing agreements that are abused or exploited for purposes not according to the spirit of the original provisions.

3. Stupid mistakes, bluffs, bullying, and lack of cooperation. Gilpin did not leave out examples of arrogance and broken promises on the part of the USA. He also mentioned examples where the USA wanted something from its trading partners and didn't get it, either.

4. Japan clearly and actively excludes foreign entry into its system (Gilpin says that US FDI into Japan is half of Japanese FDI into the USA; but European FDI into the USA is about the same as USA FDI into Europe, and US FDI in Canada is about the same as Canadian FDI into the USA).

5. Gilpin explains that China is not doing as well as most people think. It was interesting to learn that about half of all new companies in China are owned by foreign MNCs, and almost half are owned by Japan, and almost half of the rest are owned by US MNCs. So, when you see all that stuff at Walmart saying "Made in China" just remember that half of it is coming actually from a USA corporation enbreasty or a Japanese owned enbreasty. However, trade surplus earned by a Chinese company that is owned by a US company shows up on the Chinese trade surplus line, not the US line.

6. European sentiment at all levels of society from high to low is mostly against globalization and for job protection.

7. Gilpin is seriously worried that the new world financial system has become unstable. (several other authors have, in their books, the same sentiments) This is based on the fact that billions of dollars can be moved around the world instantly along with a few keystrokes on computer keyboards. This allows speculative attacks (eg. through currency exchange trading) on small country currencies, etc. Gilpin went into considerable detail on the Asian economic crisis of '97-'98 which overflowed from Thailand to most of the east Asian economies and ended up putting 1-3 of the world into serious recession including many business failures and high unemployment and some civil unrest.

8. The Europeans have been working since 1950 to integrate their economies and Gilpin describes the progress to the present. In recent years, Europe decided to creat the Euro and integrate european countries (i.e. reduce all trade barriers, establish fixed exchange rates, and create a common currency). Among the accomplishments: Euro established in 2002 as a "world clbutt" currency and the transfer of central bank functions from the German Bundebank (the strongest bank in Europe) to the new European Central Bank. The exchange rates for the Euro, along with the US$ and the Japanese Yen are given prominent space in the daily US edition of the Wall Street Journal.

9. Miscellaneous items: Gilpin mentions for almost every issue covered in the book that as soon as someone says something or does something, economists get into serious debates, conflicts, or disagreements. Are economists good for anything? Gilpin also acknowledged that a great number of people will lose their jobs-careers through globalization.