Re: [CPF0000] The globalization of COMMON, or is this the right direction?

Joe!!

Trevor

To: "'Midrange Systems Technical Discussion'" <midrange-l@xxxxxxxxxxxx>
Sent: Thursday, June 08, 2006 2:18 PM

THIS is your "factual data", Trevor?

"You see, every time a white collar job gets shipped overseas to places like
India or, say, India, that benefits high-wage, high-prestige Americans.
Here's how it works. Let's say IBM ships 10,000 software engineer and
management jobs from California to Bangalore. Old software engineer salary:
$90,000, plus benefits. New salary in Bangalore: $9,000, sans benefits.

Do you see how that works? Everyone wins.

Now, when IBM gets an extra $81,000 in profits, it returns some of that back
to Main Street in the form of higher share prices for the shareholders, who
in turn need to buy goods from ma and pa stores owned and run by, you
guessed it, white collar Americans who lost their jobs to Indians. Moreover,
IBM can now sell its wares for a lot cheaper to all those laid-off
California software engineers. And believe me, they'll thank their Bangalore
low-wage laborers for making those goods cheap, now that they can't find
work in California!"

While I can't believe you're this naïve, let's assume you are and go through
this gibberish point by point.  First, outsourcing RARELY provides 10-to-1
benefits.  You're going to have to go and find some real numbers to back you
up, but in every study I've seen, the majority of those $81,000 in "profits"
are typically lost in cost overruns, late delivery and poor quality.

But let's say for the sake of argument that you MIGHT save 25% by
outsourcing workers.  I'm still saying this is rare, but let's say that's
the case.  So we're talking about a gross savings of perhaps $200 million.

The next bit of drivel is the "returns some of that back to Main Street in
the form of higher share prices".  Exactly how much has IBM stock risen in,
say, the last three years?  Well, it's actually dropped about 1.25 percent!
That's not to say that some fat cats in the executive chain didn't get huge
bonuses.  And that's across the board; two of the biggest yachts in the
world belong to Apple and Sun executives.  But to say these savings are
somehow bettering the lives of middle America is simply untenable.

Finally, the idea is that IBM can also sell its wares for a lot cheaper.
Well, if that was the case, then the price of software would have dropped
over the years, and yet the cost of software continues to rise.  So
evidently that part of the trickle down theory isn't working either.

Now let's get to the REAL economics.  First, you immediately lose the tax
revenues of $900 million dollars.  That's a hard hit to your tax base, and
while these workers may get new jobs at lower salaries, they'll considerably
reduce their tax percentage.  If three quarters of them get jobs at $40,000
(and that's a pretty optimistic number), that's a loss of a third of the
revenue.  But the taxes are even worse.  Even if all the salary were
taxable, the net loss is from $16000 per capita to $5600.  That's well over
$100 million loss in income taxes alone, especially when you consider that a
lot of those folks go on the Federal dole because they won't even be able to
find $40,000 jobs.  Oh, let's add their unemployment checks to the mix: use
a typical maximum of $500 a week and that $25000 per year for the 2500
people who couldn't find jobs, or nearly another $40 million.

And of course the economy now gets hit.  These people have far less
discretionary income.  In fact, they probably don't have any, so kiss your
high-end retailers goodbye.  Housing starts dry up since nobody can afford
them.  This affects not only the builders, but more importantly the local
school districts which survive on the property taxes.  Schools begin to
decay, businesses go bankrupt.  At the same time, fewer and fewer families
can afford college.  In fact, they get double whammied because not only do
they have no money, those institutions can no longer give grants because
they can't get state funding -- the state income tax dries up along with the
Federal, and so does sales tax.  Kids move away to try and find work
elsewhere.  There are no startup businesses.

With just a little scribbling on a napkin, you can easily extrapolate your
little move of 10,000 jobs to over $200 million in lost tax revenues to the
city, state and federal government.  That doesn't even begin to include the
the crippling loss of buying power among these people and the spiraling
decline in standard of living.  In the end, only Walmart and the Cash
Advance places survive.

So how much of IBM's "savings" (which even at the ridiculous figure of 90%
would only be $800 million) will see its way to these communities?  My best
estimate is that the real savings will be far less than $200 million, and
that the vast majority of that money will go to either acquisitions or to
executive paychecks.

Paul Allen and Larry Ellison each own yachts worth roughly $200 million.  I
wonder how much of THAT money was the result of outsourcing?

Joe

From: Trevor Perry

Joe,

Just thought that this might help you understand:
http://www.exile.ru/185/outsourcing_thomas_friedman.html