The Global Economic Crisis and the Increasing Threat of Terrorism in the United States Economy - Research Paper Example

? Bill Clinton and Globalization David M. Savo February 21, Table of Contents Introduction 3 Bill Clinton and Globalization 4 Outsourcing as a step towards globalization 5 Benefits of outsourcing as a step in globalization in the USA 6 Conclusion 9 References 11 Introduction The global economic crisis and the increasing threat of terrorism has shaken the United States economy from the political slumber and has been initiating revolutionary works from the masses. The focus was on the possibility of mutually benefitting from alliances made with other countries. This gave rise to the need for globalization in the new economy. The world globalization became “absolutely tied to the new economy” (The League, 2003) whose existence became impossible without globalization. Clinton’s main focus was on handling the instability across the world through globalization. The other factors among the list of priorities were innovation and technology, decision making and finance. Integration of the world economy has been one of the prime concerns of Clinton. But the concept of transformation of the globalization into a unified and homogenous structure driven by free trade and capitalism was confronted with serious opposition also. It was said that the entire world has not been able to benefit from globalization and bringing the civil society in the scene was the only way of dealing with the problems. The project tries to bring forth the steps taken by Clinton in initiating outsourcing as a major step towards globalization (Weier-a, 2008). Bill Clinton chaired the “Global Fairness Initiative (GFI)” (Global Fairness Initiative, 2003, p.1) which was an organization created to introduce and enhance free trade which would simultaneously preserve the labor, environmental and human rights standards in the world. The promise made by Clinton was to implement responsible investment and trade which would create economic opportunities and jobs across the world and would lead to the improvement of millions of lives while protecting the human rights, environmental and labor standards (Global Fairness Initiative, 2003, p.1). The promotion of outsourcing was one of the major steps towards globalization by Clinton. Outsourcing was considered to be inherent to free trade. Outsourcing was considered to be a new variant and a budget balancing tool which required farming out whenever possible. Clinton recognized that outsourcing would allow firms to provide service at a low cost at a higher quality that which the Government would produce. In the recent years outsourcing has evolved as a positive business evolution which moved towards flexibility and nimbleness Bill Clinton and Globalization It was Bill Clinton’s assumption that globalization was something inevitable. He encouraged the concept of free trade which was a major step towards globalization. He believed that low process would lead to low prices, increased exports and this would eventually build a stronger economy. “The economic benefits of the tariff reductions we negotiated during the Clinton administration represent the largest tax cut in the history of the world” (Klein, 2003). In 1998, the economic transition which he had predicted long back was actually taking place. The economy was appearing and functioning in such a way that seemed to be beyond imagination few years back. Unemployment rates were falling significantly and the inflation rates seemed to remain at historically low rates. Prosperity was appearing and increasing at all levels of income. The average household income increased by an amount of 35% during the span of eight years that Clinton has remained in office. Technology had changed the conventional notions of time, space and borders. Globalization was able to change the traditional and regular routines of the middle class family. This was a significant transformation according to Clinton (Klein, 2003). He said the globalization would yield a global economy which would have profound effects on workers, their works and their wages. It would create a world in which millions of people would be successful in raising their families with integrity and dignity. Despite globalization, Clinton still felt that there was still the existence of a gap between those who were residing at the knife’s edge and the cutting edge of the global economy. His focus was to reduce this gap completely (Klein, 2003). The aim was to assume shared responsibility as a means of making the world embody their shared values. The United States, under the leadership of Clinton promised to stand with its allies under all circumstances and ensure the benefits of trade to all people belonging to all nations which would lift the lift up the lives and hopes of millions across the world (Klein, 2003). The vision was to remove walls and build bridges to enhance globalization. In a world which had been facing stiff competition, Clinton tried to bring about free trade which would have fair rules. That is why he had fought for ‘NAFTA’ which consequently, opened the markets in Canada and Mexico to the products of the United States. Another step towards globalization was GATT which was aimed to create a common platform for all US companies placed abroad. Since 1992, Clinton had done numerous negotiations on more than 200 agreements on trade with Japan (Klein, 2003). Outsourcing as a step towards globalization Primarily, outsourcing was considered as a step towards enhancing relationships with other countries. Moreover, it was also considered to be the most cost effective way of growing. However, the process of outsourcing demanded tight control and monitoring as the pace with which technology and innovation was progressing was very rapid. Many scholars have commented that outsourcing partnerships have been ruined because of lack of control and proper monitoring (Weier-b, 2010). Outsourcing was done by inducing a certain spending on the part of the United States which would benefit both the outsourced and outsourcing nations. The outsourcing activity was taken up by the US economy as a step towards attainment of mutual gains for the two parties (Baily & Farrell, 2004. p.3). There was no doubt about the fact that a trained brain belonging to a third world country would be as efficient as that belonging to the United Sates. Companies in the United States were expected to outsource more than 200,000 to third world countries. India was also a major destination for outsourcing among a number of countries (Pink, 2004, p.11). Most companies in the United States have rated India as the best place for outsourcing. It is considered to be the first choice for outsourcing software. Bill Clinton had also applauded the country’s brainpower. He said that India and the United States have been successfully running numerous companies in the Silicon Valley of California. Clinton had even commented that the country was able to gain a rapid pace for economic growth after having liberated its markets. According to him, India had emerged as one of the most famous IT Superpowers (Gupta & Krishn, 2009, p.3). Benefits of outsourcing as a step in globalization in the USA Some critics had argued that outsourcing would lead to the decline in the number of while collar jobs in the United States. But in reality it was seen that outsourcing gave a new shape to the sector without undermining the service sector in the country. It improved competitiveness of the companies on the global front and also enhanced the export businesses of the country (Irwin, 2004). The economy was said to have benefitted in more than one way from outsourcing. Firstly, the consumers would be given the services that they demanded at low costs. Moreover, a number of businesses themselves would purchase services. Their low costs would result in greater savings which would then be passed on to the consumers (Irwin, 2004). An example can be cited to this effect. If an efficient radiologist is able to read Ray plates at just one quarter of the entire cost, various other healthcare services can also be delivered at lower costs. Additionally, the exports of goods and services from the United States would also be benefitted from the generation of extra income abroad. The outsourced services to India or other nations are counted as the import of services in the “balance of payments” (Irwin, 2004) in the US. If the United States economy began importing more of these services the imports would have to be paid for in the form of exports of some other service. Thus the dollars which would be spent for purchasing the services would come back to the United States economy through the demand of the country’s goods or services. It would also gain in the form of foreign investments coming to the United States. It is also said that countries where the US outsourced services required computers from the United States. They also required other hardware and software components and telecommunication equipment from the United States for continuing their work. In addition to this, they also needed to procure financial, legal and other marketing services from the United States (Irwin, 2004). In fact “the United States is a major exporter of services, accounting for nearly a fifth of the world's trade in services” (Irwin, 2004). The value of these services amounts to about 30% of the nation’s entire value of exports. In 2003, when the United States suffered a deficit of $550 billion in traded goods, it was simultaneously able to rack up a surplus of $60 billion from trade of these services. Outsourcing however could create problems for some firms which had to undergo adjustments as they learned to do business in a new way. Specialization became more refined when taken place across various economic activities, but it also changed rapidly along with the shifts and changes in technology. Authors have claimed that the previous trade rules no longer remained relevant in today’s scenario of “mobile factors of production” (Irwin, 2004). However, it is the technology and not the labor movements that had been creating opportunities in services trade. This does not undermine the importance of free trade or open market operations. Policy makers do not support the original concept of protectionism. It also appeared that they had very few options which could be used to halt the process of changing technology. A number of state governments have been implementing limitations on entering into businesses that have been outsourcing from developed nations. Labor unions, like “the Communications Workers of America, have been lobbying Congress to follow suit” (Irwin, 2004). Moreover, the policies of penalizing firms which have been importing foreign services were not considered to be a favorable option. This is because, such imports helped firms using high technology gain more efficiency. Forbidding the US companies from operating freely in the way they would consider appropriate to compete with rival firms would result in handicapping the US firms. The US firms have already been facing competitive challenges from the other foreign producers. This would appear like forcing the companies to fight with their competitors with only one hand (Irwin, 2004). Rather than penalizing the firms, outsourcing reinforces the public policies which allow the workers to administer their performance during this phase of economic change (Irwin, 2004). Apart from that, the United States was also demonstrating a rapidly declining talent pool in the fields of physics and computer science. This is the reason why companies had to seek talent from outside the country. The other alternative included sending the jobs to another country where there was a large talent pool. In this regard, India and China were considered to have the biggest talent pools which could assist the companies in the United States. Most importantly, India had a large number of technical and engineering graduates with the best technical skills and who were also willing to work for low wages. Also, China is said to produce numerous computer engineers each year. This was an added advantage for the United States to outsource its information technology jobs to India and China. However, this was a serious issue that the United States had to look into. Greater amounts of outsourcing were demonstrating greater skill shortages in the United States; it also had to compete with the increasing competition from the developing talents which were successfully producing numerous technical and engineering graduates. This required a radical change in the US education system. The United States had to encourage its students to take up courses in technical fields. Simultaneously it also encouraged schools and universities to increase and enhance technical education (Ghimire, 2005). Despite the many negative effects of outsourcing Clinton viewed it as a prominent and effective step towards globalization. He saw in it the flow of economic activities in both directions and also a boost in its economic activities. There was an added advantage that free trade would ultimately create opportunities in the United States as the foreign economies would gain strength. As the level of incomes increased in the foreign economies, simultaneously the demand for goods and services also rose. The demand for imports would eventually create opportunities for the United States. These are the few areas which were viewed by Clinton as an added advantage to the US economy. Conclusion Globalization was an active concern of President Bill Clinton. His approach was primarily initiating and implementing free trade policies which were viewed to benefit all the trading partners. His focus was to stand in support with the country’s allies in all situations and share the trade benefits to all nations which would eventually improve the lives of millions across the world. One aspect of globalization which became predominantly important was outsourcing of jobs to the other nations. This was done with the aim to benefit both the concerned nations. The outsourced nation would be able to provide employment to numerous workers who were skilled and educated. On the other hand, the United States would be able to employ workers to get the job done at lower costs. Outsourcing was also viewed as a step towards globalization which would reduce the gaps between the developed and the developing nations. Outsourcing was said to have benefitted the US in more than one way. It was said to have enhanced the competitiveness of the companies in the world market. Furthermore, services would also be made available to consumers at lower costs. Various large and small businesses would also purchase these services. The generation of increased income in the foreign company would eventually increase the demand for goods and services produced in the United States and would consequently come back to the nation in the form of foreign investments. According to Clinton, India was considered to have the best talent and was among the best destinations for outsourcing of jobs. In fact it has also emerged as one of the superpowers in information and technology over the years. This can be attributed to the large amounts of IT services being outsourced from the United States to India. But, there was a major concern for the economy. The growing number of outsourced services reflected talent shortage in the United States. This was regarded as a growing concern in the country which required attention. The problem had to be combated by encouraging educational institutes to increase and encourage technical talents in the United States. References Baily, M. N. & Farrell, D. (2004). Is your job headed towards Bangalore?. Retrieved from http://phoenix.liu.edu/~uroy/eco41/articles/33_41mr24.pdf. Ghimire, B. (2005). IT job outsourcing. Retrieved from http://ubiquity.acm.org/article.cfm?id=1088430. Global Fairness Initiative. (2003). Clinton, world leaders launch new globalization initiative. Retrieved from http://www.globalfairness.org/about/news/gfilaunch.pdf. Gupta, A. & Krishn. (2009). India’s Competitive Advantage in Outsourcing. Retrieved from http://www.ripublication.com/gjfm/gjfmv1n1_4.pdf. Irwin, D. A. (2004). Outsourcing Is Good for America. Retrieved from http://www.aei.org/issue/19814. Klien, J. (2003). Bill Clinton on Free Trade. Retrieved from http://www.ontheissues.org/celeb/Bill_Clinton_Free_Trade.htm. Pink, D. H. (2004). The New Face of the Silicon Age. Retrieved from http://www.emory.edu/BUSINESS/readings/grm/WiredNewFace.pdf. Weier-a, M. H. (2008). Clinton And McCain On Globalization, Technology. Retrieved from http://www.informationweek.com/blog/main/archives/2008/01/clinton_and_mcc.html;jsessionid=RLR3IV5HGIKJBQE1GHPSKHWATMY32JVN. Weier-b, M. H. (2010). What's Your Outsourcing Vision?. Retrieved from http://www.informationweek.com/blog/main/archives/2010/03/whats_your_outs.html. The League. (2003). Economic and political instability. Retrieved from http://www.lrna.org/c2.doc. Read More