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These authors say what business and government leaders are unwilling to admit, but what most workers know instinctively: in the global economy, big money calls the shots and workers are expendable. They demonstrate why downsizing will continue whether or not it makes America more competitive.

Tabla de contenidos provista por Syndetics

• Preface(p. ix)
• Chapter 1 Introduction: the Race without a Finish Line(p. 1)
• Chapter 2 Capital versus Work: Divorce, Postcold War Style(p. 13)
• Chapter 3 The New Leviathan: the Global Labor Pool(p. 33)
• Chapter 4 Downsizing or Cultural Revolution?(p. 57)
• Chapter 5 A Passage to India: the Case of Bangalore(p. 87)
• Chapter 6 Have the Elite Workers Had It?(p. 107)
• Chapter 7 Can We Depend on Wall Street?(p. 141)
• Chapter 8 A New Crisis of Capitalism?(p. 167)
• Chapter 9 Conclusions(p. 197)
• Endnotes(p. 223)
• Index(p. 233)

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Chapter One Capital versus Work: Divorce, Post--Cold War Style The change in world history after 1500 is quite without precedent. Never before had one culture spread over the whole globe. From the earliest observable stage of prehistory, the tendency had always been toward differentiation. Now the cultural tide was turning.... The remarkable transformation that began (and to go much further) was almost entirely a one-way process. Europeans went out to the world; it did not come to them. J.M. Roberts, History of the World They couldn't stand each other, but they stayed together because they needed each other. What has been said of many marriages has also been true of the relations between capital and labor throughout most of the modern history of the West European peoples. During most of these four hundred years of capitalism, Western capital and labor were locked in an icy kiss. It has been an extended, stormy and often embittered embrace that has lasted even though huge new pools of labor became available to European capital during the four-hundred-year expansion of the West European economy that followed the voyages of Columbus. As technology has been reinvented and diffused in each successive era of modern capitalism, first in the Netherlands, then in Britain, then in Germany, then in the United States, white ethnic Europeans have been at the cutting edge of change. As Western capital made new jobs available, educated Western workers in particular benefited greatly with each new advance; while those at the bottom of the economic ladder struggled mightily working for the railroad, in the factory, and doing the other tough physical labor that was vital to building and sustaining the core of each new phase of capitalism. In the years of European expansion, European capital interests unequivocally wanted Europeans to administer the British East India Company and the Dutch West India Company. They needed European soldiers to impose order in Latin America and on the Indian subcontinent. They needed European sailors and traders to dominate China. There have been, of course, many conflicts between capital and labor throughout the history of capitalism, but in the past ordinary people could, albeit in painful and hazardous voyages, escape to new lands and could rely on heavy overseas investment to equip them with the tools needed to work. The ties that bound European capital and European labor were perhaps most vividly, and confidently, displayed during the age of imperialism in the period from the second half of the nineteenth century until World War I. Those were the years when Rudyard Kipling bragged, and complained, about the "white man's burden." They were also the years, as British historian Eric Hobsbawm notes, that "saw a new integration of the underdeveloped countries as dependencies into a world economy dominated by the developed countries." And in the United States, it was the Gilded Age that saw the new industrial economy engulf the entire continent. Behind capitalism's drive for economic dominance lay the joint movement of West European capital and West European labor. There were exceptions to this convenient marriage. For example, when the British controlled India, they did encourage the development of a small group of anglicized Indian elites, but only out of dire necessity, to help out the handful of British trying to run a subcontinent that at the end of the nineteenth century already numbered 190 million people. In the end the British were replaced by these very "Westernized elites" who eventually became the leaders of a successful Indian liberation movement. But for the most part, up until recently it was the Europeans who continued to be the "special" heirs to the dynamic economic system of capitalism and the technology that evolved alongside it. As this global system grew, there were substantial shifts among the European populations and the system's Americanized offspring. In the mid-nineteenth century what had been a stream of European out-migration became a torrent. Before 1845 it was rare for more than 100,000 immigrants to arrive in the United States each year. But between 1846 and 1850 the annual average emigration from Europe to the United States suddenly increased to more than a quarter million people; in the next five years the immigrant population in America mushroomed to almost 350,000 annually. Enormous as these migrations were, they were still modest by later standards. By the 1880s between 700,000 and 800,000 Europeans emigrated on average every year; in the years after 1900 between 1 and 1.4 million a year. Between 1900 and 1910, more people migrated to the United States than in the entire second half of the nineteenth century. Within the United States population movements were also enormous, as the country's center of gravity continuously shifted westward. The proportion of the population to leave the states in which they were born for new states and territories continued to mount at least until 1895, when the last of the public lands in what became the contiguous forty-eight states were taken. But internal mobility continued high, as Americans trekked here and there for particular reasons, so census figures ebbed and flowed dramatically. A mighty emigration occurred from the Midwest to the new promised land, California, during the dark, dust bowl days of the 1930s; another mass exodus, this time of blacks migrating from the South during and just after World War II to find better wages and better skills; and most recently, the great movement of companies and workers to the amenities-based economies of Florida and southern California during the 1970s and 1980s. Importantly, during most of the history of capitalism, the movement of people was matched by a movement of capital--monies used to invest in the economy. Even the size of capital flows roughly matched the number of people who were moving. Thus, in broad outlines, the flow of capital out of Europe followed the flow of people. The United States, the country to which people migrated in the greatest numbers, was the recipient of the greatest flow of capital to build canals, railroads, and other industries. Similarly, in the colonial orbit, the flow of capital from Britain to India was closely connected with the movement of the British into administrative and business positions in India, particularly into the Indian Civil Service, whose top ranks were made up mostly of British. The symbiosis between labor and capital was maintained, even while emigration provided an important safety valve for European workers displaced by invention and innovation. As the Industrial Revolution swept across Europe, the workers displaced by economic change swarmed into the United States; the Scots and the Irish into the American South and Appalachia; Germans to eastern Pennsylvania, New York, and Ohio; Poles to western Pennsylvania and Illinois; Scandinavians to Minnesota and the Pacific Northwest; Italians and Portuguese to the San Francisco Bay Area; and Basques to the grazing lands of California and Nevada. As these people moved to new lands, their productivity increased, partly because of the enormous bounty of temperate-zone agriculture in North America, but also because industry and transportation (first canals and then railroads) benefited from the parallel migration of capital. The joint migration of labor and capital created a global economic elite with membership confined mainly to white ethnic Europeans. Non-Europeans--particularly black, Mexican, and Chinese laborers--were often used when domestic labor shortages suddenly appeared, particularly in the booming years between the 1870s through the 1920s. Thousands of Chinese workers were brought in as contract workers to help build American railroads in the 1870s. Many blacks continued to work southern fields as farmhands after the Civil War ended but left to fill industrial jobs in the North after World War I began. Mexicans took their places as agricultural workers. But it was inevitably white ethnic Europeans--from northern and western Europe--who rose through the job ranks to become America's nineteenth- and early twentieth-century managers and professionals because they had access to more schooling, family networks, and, ultimately, wage increases. No one understood more clearly than the economist Adam Smith the enormous boost this movement of labor and capital gave to ordinary Europeans who derived their income from work. The Wealth of Nations was published in 1776, the year of the signing of the American Declaration of Independence. By then the migration of Europeans into new lands had been underway for some two hundred years, but the Industrial Revolution was still in its early stages. In his famous book, Smith compares the position of those who were earning their living from work in Britain with their counterparts in what were then still Britain's principal colonies in North America. Though industry was already on the move in Smith's day, the global economy was still primarily agricultural. For this reason, Smith's analysis of the differences in the wages paid for in Britain and America leans heavily on comparing the position of landlords and workers in the two countries. Nevertheless The Wealth of Nations is still an extremely lucid exposition of one of the basic forces now transforming the world economy in a way that is betraying those who earn their living from work in the industrialized world. Smith's pathbreaking idea was that the relative incomes (or rates of return) of landowners, capitalists, and workers depended on the relative scarcity of what they had to offer. In Britain, where labor was abundant, those who earned their living from work were under the shadow of an axe: a British economy where "rent and profit eat up wages," and "the two superior orders of people [landlords and capitalists] oppress the inferior one." Unlike in Britain, where capital had increasing control over a relatively large workforce that had to bid competitively for shelter and daily wages, in the "new colonies" the interest of the two superior orders obliges them to treat the inferior one with more generosity and humanity. Waste lands of the greatest natural fertility, are to be had for a trifle. The increase in the revenue the proprietor expects from their improvement constitutes his profit; which in these circumstances is commonly very great. But this great profit cannot be made without employing the labor of other people in clearing and cultivating the land; and the disproportion between the great extent of the land and the small number of people, ... which commonly takes place in the new colonies, make it difficult for him to get this labor. He does not, therefore, dispute about wages, but is willing to employ labor at any price. This relative scarcity of labor, identified so early by Adam Smith, became a pattern during long intervals of the history of capitalism. It has put its unique stamp on the economic history of the British and the other West European peoples--until the last quarter of the twentieth century, that is. A NEW GLOBAL CAPITALISM With the end of the cold war and the global triumph of capitalism, the patterns of migration to which Europeans and Americans have been accustomed suddenly came to an end. As the free market has catapulted around the globe since 1988, it has become increasingly clear that Western capital no longer needs to take well-educated ethnic Europeans along when it moves into the developing world. In fact, for both economic and cultural reasons, elite Western workers are often better left behind these days. There was, of course, already a thriving managerial class--particularly in East Asia--years before the cold war ended. But only since 1988 has capital become really freed up from its centuries-old contract with Western labor--particularly professional labor, which can now be found anywhere on the globe in a highly motivated, talented, less expensive form than back home. A combination of socialist-backed educational systems, hard-won professional track records made abroad, and a pent-up, frustrated middle class in many new market-centered economies has produced large populations of elites in developing countries, eager for good work, and Western capital is finding this workforce justly appealing. In fact, Western capital has begun to compete hard with capital from other parts of the world to buy members of this new workforce, in increasing numbers, and in places where economic growth is moving off the charts. The result: the end of a four-hundred-year symbiotic relationship between capital and labor in the developed world. For while the mobility of labor has diminished, the mobility of capital has taken a quantum jump. The new, and largely unexpected, ability of capital to move across the seas without trailing either workers, managers, or administrators in its wake has stood conventional economics on its head. Economic analysts suffer from a not wholly justified nostalgia for the European age of imperialism that came to an end with the outbreak of World War I in 1914. Scholars in other fields no longer look at this time favorably: political historians, because national rivalries culminated in a pointless war; Marxist historians, because they see the period as a high point of the exploitation of labor; and emerging world intellectuals, because they see the time as a painful episode of colonialist oppression and economic degradation. Conventional economists, in contrast, see in the late nineteenth and early twentieth centuries their holy grail: a benign combination of currency stability (produced by the gold standard), price stability (mainly the product of huge new supplies of food from the United States, Canada, Australia, New Zealand, and Argentina), and rapid economic growth (produced by the stream of invention and innovation that poured forth in the late stages of the Industrial Revolution). Transportation costs fell, too, during this time, and with the underdeveloped world firmly in the control of Europe, and to some extent the United States, international trade grew astonishingly, producing, at least for the West European peoples, remarkable results. In the United States the outcome was indeed magical. Between 1865 and 1914 the country enjoyed its most rapid growth ever: a 3.9 percent annual growth in real GNP between 1870 and 1913. The advance of real wages was even more impressive, with an annual growth rate of 4.1 percent. All this was accomplished without inflation. Between 1870 (by which time the impact of Civil War inflation had been erased) and 1914 wholesale prices in the United States increased by less than 1 percent per year. Though there was a brief flurry of international investment in the 1920s, the years between the two great wars marked a retreat from dependence on the global economy. The gold standard was gradually abandoned, and countries pursued "beggar thy neighbor" trade policies imposing tariffs, quotas, and other trade restrictions in a futile attempt to shore up domestic employment. The consequences were disastrous in every conceivable way. When World War II ended, the democratic states among the victorious Allies had a deep longing to restore a vibrant international economy. They established international institutions--the International Monetary Fund (IMF), the World Bank, and the General Agreements on Tariffs and Trade (GATT)--under whose auspices the world economy began to revive in the late 1940s and the early 1950s. This vigorous effort to reintegrate the global economy (outside the Communist bloc, at least) gathered strength in the ensuing decades, producing a smashing success, beyond the wildest dreams of the most ardent economic internationalists. The sudden collapse of Communism raised the power of global capitalism to new heights. In a narrow sense, the victory was over a state, the USSR, which had represented a grotesque perversion of the appropriate role of government in economic life. But in a broader sense, the sudden and total collapse of the Soviet empire also damaged the case for milder forms of state intervention, ranging from democratic socialism to such gentle free market reforms as America's New Deal. The ideological losers in the cold war were not only the heirs of Karl Marx and V.I. Lenin, but also the traditions of such social democrats as Germany's Fredrich Ebert and Helmut Schmidt, and the legacies of American reformers like Franklin Delano Roosevelt and Lyndon B. Johnson who embraced free enterprise, at the same time believing that the people needed a measure of protection from its excesses. By the end of the 1980s, the global reach of capitalism had evolved far beyond its scope during the age of imperialism. With sweeping speed the victorious ideology changed the political and economic structures of those countries, in both the developed and developing world, that had been hostile to the market. The ideology of the free market continues to triumph, even though opposition to its harshest manifestations is intensifying around the world. Russian Communists made a bid to return to power but were beaten back in the election of July 1996. In the mid-1990s many Western countries, from Portugal in 1995 to Italy in 1996, elected parties on the Left that promised they would modify the harshness of the market. Within the old Soviet bloc, Communists are returning to power, as in Hungary. Even in the United States, there seems to be some backing away from the extreme free market stance that appeared to be in ascendance with the election of Republican majorities in both the House and Senate in 1994 that were dedicated to rolling back the role of government in the economy. But in an important sense, a movement should be judged not by the policies espoused by its own zealots but rather by the effect that it has on its opponents. And in this sense, the great capitalist wave seems to have lost little of its power. In the mid-1990s, eight years after the total triumph of capital, no significant political movement, no matter how leftist its roots, has sought to totally turn the clock back and readopt a socialist development model. THE DIVERGENCE OF FORTUNES The consequences of the victory in the cold war have been widely discussed in terms of their impact on economic events in the former Soviet Union, in China, Eastern Europe, and the rest of the developing world that were once client states for Communism. But the consequences for Western Europe and the United States have not yet been understood, possibly because they are so unexpected, but more likely because the new global economy differs so radically from the days of colonial imperialism and the gold standard, and even the post-World War II halcyon years. In the late nineteenth century, the Eurocentric world flourished while Third World Countries stagnated, and some, such as India and China, actually declined. In the new post-cold war global economy, what was the Third World has been energized while the developed world has languished. The expectations of many of those in the developed world who have hoped the new global economy will bring prosperity have been disappointed. And, for the first time in capitalist history, Western European elites have not automatically been enlisted to reap the rewards of globalization. For the emerging nations of the world, the decision to abandon socialist planning has proven to be, in many instances, an act of liberation. Economic growth had, of course, been more rapid in the developing world than in the developed world throughout the 1980s as more and more countries adopted free-market models. But with the end of the cold war, the margin by which developing world Table 2-1 Economic Growth in the Developing World: Annual Rate of Change in Real Gross Domestic Product, 1979-1996 Country 1979-89 1989-94 1995 1996 India 5.90% 3.87% 6.2% 5.7% China 9.78 10.63 10.5 9.7 South Korea 7.75 7.56 9.0 6.8 Hong Kong 7.18 5.25 4.6 4.2 Singapore 7.18 8.87 8.8 6.5 Taiwan 8.06 6.47 6.0 5.5 Malaysia 5.9 4.23 9.6 8.2 Philippines 2.06 1.53 4.8 6.5 Thailand 7.32 8.91 8.6 6.5 Argentina -.75 6.26 -4.4 2.7 Brazil 2.86 1.25 4.2 2.8 Chile 3.3 6.64 8.6 6.7 Mexico 2.16 2.98 -6.2 4.0 Industrialized Economies 2.70 1.72 2.1 2.2 Developing Economies 4.05 5.15 5.1 5.6 Data: DRI/McGraw Hill growth leads developed world growth widened considerably. Between 1989 and 1996, as Table 2-1 shows, the growth rate of the developing world has been over twice as fast as that of the industrialized world. In the decade ending in 1989, the developed world grew only one and one-half times as fast as the developed world. The growth rate of some of the important countries of the developed world is almost miraculous. The numbers truly speak for themselves. Since 1989, China has grown over 10 percent per year. The growth of India has been more erratic, slipping back in the early 1990s from the growth rates of the 1980s, but then spurting again in 1995 and 1996. Among the less populous countries of east Asia, Singapore grew by over 8 percent per year in the 1990s, and growth has also been strong in South Korea and Thailand. And in 1995 and 1996, the Philippines appear to have climbed aboard the Asian growth wagon. In Latin America, Chile has enjoyed a growth rate that puts it in the same league as many developing countries in Asia. In contrast, the growth record of some other important countries, Argentina, Mexico, and Brazil among them, has been marked by roller-coaster ups and downs. But as Table 2-1 shows, the adoption of free-market development models has raised their average growth rates. It is important to grasp the level of energy that the free market has unleashed in the developing world. When coupled with the availability of a technology that has had over two hundred years to improve since the industrial revolution, the pace of economic development has quickened. Britain needed nearly sixty years to double its output per person beginning in 1780. It took Japan thirty-four years starting in the 1880s, and in South Korea it took only eleven years after 1966. Commenting on this speedup of growth among countries that start down the path to industrialization, Jeffrey D. Sachs, a developmental economist at Harvard University, says, "At the turn of the century, stellar growth meant 4 percent a year. Now it means 10 percent plus." Stanford Business School professor Henry S. Rowan has noted the same huge growth potential for the developing world. "A process is underway," he says, "that promises within one generation to make most of the world's population a lot richer than it is today." But numbers on economic growth that look so wonderful for the emerging world tell only half the story. The developed world has experienced a sharp slowdown in growth. Indeed, even before but especially since the end of the cold war wages have stagnated, and unemployment has emerged as a major problem throughout the industrial world. The slowdown in growth is evident in virtually every industrial country, as Table 2-2 shows, and the economic recovery that began in the United States in 1991 has been the weakest since World War II. In the United States, the rate of growth is slower than at any time since the Great Depression. And despite repeated forecasts of recovery, the growth rates of key European economies, as projected by the International Monetary Fund, continue to be dismal. Throughout the 1990s Germany, the supposed industrial powerhouse of Europe and the linchpin of efforts to forge a single European currency, has had an economy characterized by painfully slow growth. Yet the IMF cut its estimate of 1996 German growth to 1 percent, down from its estimate in October 1995 of 2.9 percent growth, and at the same time unemployment rose above 11 percent. France, battered by many of the same forces afflicting Germany, is forecast to grow at only 1.3 percent in 1996; this forecast was shifted downward from an earlier prediction of 2.7 percent. For the fifteen-member European Union as Table 2-2 Growth in Per Capita Gross Domestic Product in the Developed World, 1979-1994 Country 1979-89 1989-94 Australia 1.8% 0.9% Canada 1.8 -0.2 France 1.6 0.6 Germany 1.9 1.3 Italy 2.4 0.8 Japan 3.4 1.8 Netherlands 1.3 1.5 Sweden 1.8 -1.0 United Kingdom 2.2 0.4 United States 1.6 1.1 Average(*) 2.4% n.a. (*) Weighted by 1990 population excludes the U.S. Data: Economic Policy Institute a whole, the IMF projected that growth for 1996 would be 1.8 percent, down from the earlier prediction of 2.8 percent. And Japan is essentially suffering the same fate as the other industrialized nations, experiencing a bitter recession in the mid-1990s and able to mount only a weak and halting recovery after that. THE BITTER DIVORCE Just as there has always been a sharp difference in fortunes between the developed and the developing world, there has been a sharp split between the reward to capital and the rewards to work within the developed world. The new global economy has been exceptionally generous to those who own capital, but for those who earn their living from work this economy has brought stagnant incomes, job instability, and economic anxiety. Location, location, location explains the divergence in the value of real estate. But mobility, mobility, mobility goes a long way toward explaining the divergence of fortunes within the developed world. In the old global economy, capital and labor moved together. In the new global economy, developed world capital globe-trots in a freewheeling

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Library Journal Review

Economist Wolman and writer Colamosca, both of BusinessWeek, address the insecurity felt by today's white-collar and managerial workers, arguing that like blue-collar workers they are increasingly expendable as corporations downsize and export jobs overseas to low-wage areas. The authors question whether America can remain capitalism's most creative leader while shedding its most trusted managers and professionals. They find some comfort, however, in signs that the virtues of unchecked global capitalism are now being questioned. Although the authors make some telling points, the force of their argument is often dissipated by loose organization and turgid prose. An optional purchase for academic libraries with large collections in economics.‘Harry Frumerman, formerly with Hunter Coll., CUNY (c) Copyright 2010. Library Journals LLC, a wholly owned subsidiary of Media Source, Inc. No redistribution permitted.

CHOICE Review

It is difficult to distinguish whether this book is disappointing because its florid language buries the substance of the authors' argument or because its meager substance is too easily buried. Its thesis is that the end of the Cold War, defined as Gorbachev's surrender of communism's hold on the Soviet Union, led to a significant increase in the mobility of international capital, thereby "divorcing" the economic fate of current and retired workers in Western industrialized countries from the capitalists. The book's middle three chapters are the most substantive. One draws an analogy between corporate downsizing and the Chinese Cultural Revolution to ask about the underlying purposes of downsizing; a second, which may be the most informative to readers, reports on the growth of professional and technical workers in India to argue that Western capital no longer has to remain "home" to employ the highest technology; and the third examines whether professional and technical workers in Western countries will still be able to compete against those in India and other developing countries. The authors are journalists; Wolman, a PhD economist, has had a long career at Business Week. They contend that in the new global economy, Western labor needs to be protected by more rapid economic growth and government spending. The book's endnotes are unusual in that there is no numbering or other citation to them in the text. For comprehensive economics and labor studies collections. H. Kasper; Oberlin College

Booklist Review

The authors, associated with Business Week (Wolman is its chief economist), are "great believers in the dynamism of the free market" and maintain that "the victory of free market ideology in the cold war has upset the balance between the market and the state that promoted unparalleled prosperity" in industrial nations since World War II. With increasingly mobile capital and a low-wage global labor pool, U.S. workers (including managers and professional and technical "elite workers") are contestants in a "race without a finish line." Wolman and Colamosca analyze the "divorce" of capital from work with charts and graphs as well as field research (e.g., on the software industry in Bangalore, India). To avert "the most plausible scenario" ("that those who earn their living from work in the U.S. will slowly be ground down by deflationary economic policies, . . . totally inappropriate in a global economy in which emerging countries are growing rapidly"), they urge government investment in education, infrastructure, and R & D and cooperation by developed nations to challenge the deflationary tyranny of bond traders and central bankers. Full of useful facts that will generate debate. --Mary Carroll