Sure, an Indian living in Mumbai can live decently at a much lower cost than a Norwegian living in Oslo. But, technological advances in communication and shipping mean that the Indian has to compete with the Norwegian over a growing list of commodities that have a fixed, global, price. This includes oil, gas, precious metals, as well as wheat, fruit, and even soft drinks. Increasingly, It also means that a computer programer in Oslo must charge an hourly rate low enough to compete with that of a programer in Mumbai.
Everything becomes a commodity, everything is exchanged based on a fair price. 'Fairness' is overtaking morality as the ethical basis of all transactions. It's business, not personal. In this way, the world is becoming one big mass of workers, employed by investment dollars that jump from one opportunity to another at the speed of modern communication. Any organization that does not strive towards the highest possible profit, at all costs, is deserted for the sake of those that do.
At a time when, in most large companies, ownership (shareholders/investors) and management are separate entities, this applies not only to workers, but also to CEOs and companies as a whole. In fact, it also applies to investors. Anyone who makes decision based on anything other than 'fairness' is immediately punished by the market by losing its value.
And so, the economy keeps growing for its own sake. Humanity finds itself working in the service of this growth, spiraling towards the commodification of everything and the proletarianization of humanity. All of us - workers, managers, investors - work in the service of capital itself. Our creations have taken control of our fate and we don't even stop to ask how it happened or what could be done to take things back into our own hands.
This is the real financial crisis. And it's not going away any time soon. The good news is that it's not viable. At some point, it will break.
So where is this "fairness" going? ... Towards depriving skilled workers in India or towards lowering the prices of skilled people from non-under-developed countries?
Do you mean growth of the economy will slow or that fairness will break? If so ... how? Either or, there would be chaos. It's hard to imagine the greedy becoming non-greedy.
@V Pan: This is exactly the point. This 'fairness' is serving neither the Indian nor the Norwegian. More than anything, it serves capital itself. It serves the growth of the economy for the sake of the economy's growth. Profit, it seems, now has a life of its own. It flows towards those places that can generate more and more profit. Sure, at any given point, someone is benefitting from this profit, but only as long as he is willing to play by the rules of 'fairness'. Once he tries to make decisions based on factors other than profit and growth, the benefit is immediately transferred to someone else. Humans, in effect, have little say in this process. Investors, managers, and workers are all serving the economy's growth. At each given point, each one of them derives more or less benefits from this arrangement, but overall, they are all pawns in a game they no longer control.
Important to remember that huge numbers of jobs and segments of economies are not exportable. Cabdrivers, homebuilders, gutter cleaners etc. etc. So even in this globalized era, foreign trade still represents less than one-third of GDP in the U.S., and a large portion of that trade is with Canada and Mexico.
They are not exportable, but their costs are affected by globalization. Cab drivers, for example, are affected by the price of oil, iron, rubber, and what not. Same goes for home builders. Also, indirectly, the logic that everything can be done as long as it is 'fair' grinds the workers, regardless of the availability of direct competition elsewhere.
On top of that, more and more countries are importing their cab drivers, homebuilders, and gutter cleaners, often employing them at substandard conditions.
Perhaps what is needed is global democracy, where Indians can vote for redistribution of wealth
These are indeed important points when looking at the future perspective for today's global economy.
Some contradictions are hard to get around when looking at it viability.
- There are numerous "externalities" (term coined by macroeconomics) not taken into account when determining fair price for commodities. That is most types of environmental impacts, social and human welfare impacts. As an example, transport is priced low according to the price of fuel, air pollution, harmful levels of road dust and particle levels in cities, pollution from shipping (99% of harbors in the world are poisonous).
These "externalities" are cumulative with time, and they reduce the total output level of food, water and other resources from the world (ex. global warming reducing fresh water deposits and increasing drought). We have an industrial agriculture feeding the "world" which is based on killing all other life on the pastures, in the ground and in the vicinity, fertilizing with Phosphor, mined in third world countries and which will be depleted on a world basis in 60 years or so. Meanwhile the fields are overfertilised and the fertiliser and pesticides ends up in our watersheds. The EU is now spending billions of Euros to clean up this and save the watersheds and some coastlines in Europe from becoming permanent poisonous and free from any life.
The Stern report shed some light on the ambiguity on the costs of some of these "externalities" that are not really priced into the economy. The total economy of the world may be illustrated but the US economy, which has growth driven by increased debt. For the world economy as a whole, including all "externalities", the case is similar. There is economic growth, but the growth of debt in terms of reduction of total output potential of world resources is higher.
You said. "But, technological advances in communication and shipping mean that the Indian has to compete with the Norwegian over a growing list of commodities that have a fixed, global, price. This includes oil, gas, precious metals, as well as wheat, fruit, and even soft drinks. "
Soft drinks have a fixed global price, you got to be kidding me. Are you high on them?
The only thing which India is dependent on is Oil and hopefully once we develop our nuclear energy for power that too will reduce. Precious metals?? Can you substantiate? And we grow enough wheat here thank you, so much so that it rots unconsumed in the national storage.
Lastly, the world seems to be in so much pains because some kids here have learnt programming. Obama has begun to quote Bangalore in his speeches. But thats only because we are 'relatively' poor, is this fair?? well its the only thing which perhaps the Americans didn't see coming otherwise they would have found ways to protect themselves around this too, fact is the pool of talent goes and does research in the US which American kids don't want to do. I am amused that jobs loss which helps save a few billion in high tech USA is even considered.
Thanks, Ajit.
Believe it or not, soft drinks are being traded as commodities by some people, together with many other products. I know people who buy Coca Cola in Thailand, for example, and sell it in Central Europe. It's a type of arbitrage trading, and advances in communication and shipping makes it possible.
As for your other points - not sure what your question is. I pointed out that precious metals and other commodities are traded at a global price. Let me know if that's not the case.
I got the impression from your post that globalization itself is bad or not sustainable, I making a leap here by connecting it with commoditization.
Next, yes you are right more and more things might be approaching a 'reference' price due to commoditization. I don't necessarily believe that India cannot survive or do better than before than what it has been due to this, because it 'seems' she is more decoupled from the entire world. At the same time, a low cost programmer in India forcing a shift in how labour is used in a developed country, is not necessarily something that is 'bad' in the long run. Doesn't theory say that this type of labour was being used inefficiently and can be redirected to something more productive?
Sorry, I've changed the scope of discussion to something else.
Ajit - I have great faith in India and its people, and I believe (and hope) that the future holds plenty of additional development for your country. The above post was not about whether or not the process of globalization is sustainable, but about the fact that this process turns all of us into laborers - commodified laborers.
Indeed, it means that India will continue to develop, but it also means that as it does so, it's people become part of the current global cycle of never-ending consumption and addiction to economic growth for the sake of growth (as opposed to growth driven by social/ethical goals and human needs). At the moment, we are all working in the service of this growth, but this growth is not necessarily working in OUR service. The only way for it to work in our service would be for us to figure out our priorities and realize the political and social implications of how we spend our money. Every consumer decision you make is similar to a political decision.
In a sense, these are the type of things that you probably don't need to worry about. India has more pressing priorities, and all it wants to do is develop. As it becomes more developed, the questions above will become more and more relevant.
I get what you are saying and well totally agree to it as well, sadly in a democracy which is more like a free-for-all coherent policy is sacrificed for 'any' growth because then you can claim to have x% performance vs something which you might achieve in the long term.