Scare-mongering

Newsweek recently published a commentary from liberal author Clyde Prestowitz that follows the standard liberal line that all the best jobs in American are migrating to China and India, and which promotes the myth there are billions of highly educated youngsters in the developing world ready to steal your job.  While some Americans, mostly in labor—intensive jobs like textiles, do face a serious threat from low cost countries, we must develop the better understanding of what is really happening in East Asia before we get too scared.

While promoting his new book Three Billion New Capitalists: The Great Shift of Wealth and Power to the East, Mr. Prestowitz presents what China and India offer:

Not only do they offer low costs, which the strong dollar further reduces, but—contrary to common assumptions about developing countries—significant portions of their populations are highly skilled. They can thus be competitive across the entire range of manufactured goods and services. The negation of time and distance by the Internet and air—express services makes this all the more true.

During my five years teaching business courses in Beijing and Shanghai, it has become more clear to me that many of my students (while they often work hard and can memorize anything) do not have the right skills and right personalities to excel in high—tech industries where creative thought and innovation are of paramount importance.

Yes, Asia is producing a large number of university graduates in engineering, but do Intel and Microsoft really want to hire them? No. Earlier this year, McKinsey Quarterly published a study that claimed:

On the supply side, developing countries produce far fewer graduates suitable for employment by multinational companies than the raw numbers might suggest. Nonetheless, the potential supply of appropriate workers is large and growing fast, and some small countries boast surprisingly large numbers of them.

The 28 low—wage countries we studied have some 33 million young professionals: university graduates with up to seven years of work experience. The eight higher—wage nations in our study have 15 million—7.7 million in the United States alone.

Yet interviews with 83 human—resources managers for multinationals operating in low—wage economies indicate that, on average, only 13 percent of the university graduates from the 28 low—wage nations are suitable for jobs in these companies.

The HR managers give a variety of reasons for the problem, especially a lack of language skills, an emphasis on theory at the expense of practical knowledge, and a lack of cultural fit (meaning interpersonal skills, as well as attitudes toward teamwork and flexible work, that are at odds with the norm in multinationals).

This is not the first time Mr. Prestowitz has tried to use scare tactics to sell more of his books.  Back in the late 1980's, when many Americans thought Japan was going to take over the world, he published a book called Trading Places How America Allowed Japan to Take the Lead.

In the past 15 years, Japan has suffered three or four painful recessions.  With many industries struggling with overcapacity and millions of migrant workers struggling, will China follow the same path? 

Brian Schawarz   12 10 05