Software Outsourcer Infosys Sued for Alleged Large Scale Visa Fraud

Corporate miscreance takes so many forms that readers may wonder why I am highlighting the allegations against Infosys, the second biggest IT outsourcing company in India. The answer is that this case provides a window into a much bigger problem, namely, the lack of anything resembling coherent US industrial policy.

Infosys faces a lawsuit by former employee Jack Palmer over charges that it abused US visa programs. Per the Economic Times of India (hat tip reader May S):

In a case that threatens to scald Infosys in the North American market, from where it gets over 60% of its revenues, and intensify the debate on outsourcing in the US, Jack Palmer said the company was circumventing H-1B visa rules by sending low-level and unskilled employees to the US on B1 visas instead.

H-1B visas, which are needed to send employees to work in the US, have become more expensive and harder to get than B1 visas that are only meant for meeting, conferences and business negotiations. Palmer, who has been working with the company since 2008, further said that Infosys managers in the US were intentionally committing fraud to avoid paying taxes locally and that the company mistreated him when he filed a complaint as part of the whistleblower policy..

In addition to Palmer’s suit, the company is under criminal investigation in Texas and Senator Charles Grassley has also taken interest.

The Infosys charges illustrate the growing conflict between the desires of multinational corporations to source cheaply (even if “cheap” has been mismeasured by not not being adjusted for risk) and what actions need to take place at a country level to make sure these very same multinationals have decent market for their goods.

The conundrum in the US is our lack of a coherent industrial policy, and our denial that we have one. We have industrial policy by default. Certain sectors, such as banking, defense contractors, agricultural producers, and Big Pharma, get large subsidies. But the US has an ongoing problem with employment and competitiveness (and the latter is made worse by rampant short-termism in large companies). Since at least the mid-1990s, there is lip service given to the idea that the US can become a knowledge society. Aside from the fact that it is questionable whether this vague idea will provide enough jobs, the outsourcing fad is assuring that it can’t happen. Entry level and yeoman work is being sent abroad. I read the tech site Slashdot occasionally, and for years there have been frequent comments about how it is extremely difficult for young computer professionals to find and create career paths. Similarly, in the law, the sort of research that was bread and butter work that helped train young attorneys is now sent overseas.

The Infosys case is disturbing because it suggests the displacement of young workers has gone even further. It is one thing to send certain types of well-defined work to staff overseas. But bringing people to the US to do face to face work says that even the places where local staff would seem to have an overwhelming advantage are under pressure.

If it is any consolation, Infosys had a major contract cancelled, apparently as a result of recent bad press. But that is a small reversal in a trend of US executives showing they have more loyalty to their pay packages than to their communities.

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  1. Jules


    Good work as always.

    There was a video posted in 2007 by the Programmers Guild outing an Immigration Law Firm on how they assist employers in running classified ads with the goal of NOT finding any qualified applicants, and the steps they go through to disqualify even the most qualified Americans in order to secure green cards for H-1b workers.

    Also, it appears the major stockholders of Infosys are JP Morgan and Blackrock, if I’ve understood this correctly?

  2. bob goodwin

    Working at Amazon and Microsoft, only about 30% of technical employees were born American citizens. The visa issue is absolutely limiting the competitiveness of tech companies.

    1. alex

      bob goodwin: “The visa issue is absolutely limiting the competitiveness of tech companies.”

      What does that mean?

  3. Parvaneh Ferhadi

    Reminds me of the story of Satyam, PWC (later IBM Global Services) Francine McKenna wrote about a few years back.

    It might appear that all these outsourcing attempts are frought with issues of legality.

    It’s a device to lower costs for the customers and a device to enrich a few individuals in the process, while other folks, who are very-well qualified, get their pink slips because their job will now be done by a (maybe not so well qualified but cheaper) person.

    1. psychohistorian

      Parvaneh Ferhadi said: “It’s a device to lower costs for the customers and a device to enrich a few individuals in the process, while other folks, who are very-well qualified, get their pink slips because their job will now be done by a (maybe not so well qualified but cheaper) person.”

      This feature of our current society is not limited to any one industry but is prevalent throughout the world. Did we ever agree as a society that this attitude should govern us? Not any more than society agreeing to build throw away commodities to make more money for the rich as we deplete our world’s resources.

      We live in a very sick world bent on now destroying itself because it can.

  4. WK

    As a victim of this process, I would love nothing more than if this type of issue is investigated thoroughly. This fad has been going on since the late 90s, and increased dramatically with the onset of high-speed internet circa 2002 or so. Young IT are not the only potentially displaced people in this, I am in my mid 50s and seem to be included in this radioactive community that corporate America wants nothing to do with today in spite of 30 plus years experience. It is easy to become bitter, the only option is to continue to explore other opportunities that may be out there and see if I can latch on with someone (right place at the right time).

    The current administration has not done nearly enough on jobs, in fact it has been his lowest priority although it is the highest priority among the American public along with the economy. Obama is going to pay the price on this next year if he does not pivot very very soon and crack down to get decent paying work back to the United States at a macro level, with any government tools, incentives and leverage they can bring to bear. Unfortunately, this nation is much weaker economically than even 10 years ago. I would like to stay optimistic and hope this can change. All of the decline in the USA has taken place in my lifetime, and it saddens me how great we once were in so many ways now to be second rate on so many things. But this got very bad once outsourcing became mainstream in my view, this country will never be the same again economically until jobs insource back to the States and economic power restored to its once high level. Hell, we can’t even raise the credit limit any more without a lot of acrimony all around, I have major doubts this country is capable of doing great things any more in ways recognized by the world, but I would love to be proven wrong. The USA use to be the envy of the world. It isn’t any more.

    1. curlydan

      Too many older programmers with tons of experience and know-how are dumped from corporations so the economic rent extracters can pay a poor guy from India a lot less. I’ve seen it for 15 years, and it’s brutal.

      All the blather about creating scientists and engineers in this country is just that–blather. Corporate policy is to send these computer scientists packing at the first sign of a company’s EPS faltering.

  5. ChrisM

    This is a problem that has existed for over a decade. If you want Americans (specifically, college graduates) to have jobs, then H1-B has to be curtailed.

    H1-B is a joke. What happens is Fortune-100 companies tailor a job posting so that the person on the street cannot qualify; only someone with internal knowledge can. Posting gets filled by a H1-B, who is effectively a slave.

    Anyone (w/ H1-B) who would contemplate complaining would be immediately laid off.

    So… we have Indians who are economic slaves, and Americans who are grossly in debt and cannot get a job.

    PS – for multinational companies it is even better – Indians get promoted to mgmt positions, and they then infill with Indians. Endgame: Americans no longer have a say. Ask me now I know……
    Win for everyone!

  6. Middle Seaman

    “Born American citizens,” is not the law nor our tradition.

    “Knowledge Society” or “information economy” where way more than lip service. It is the philosophy that moved factories to other countries and created the financial sector monster.

  7. Chet Murthy


    I saw this myself at a very^N large bank in NYC in 2001. *2001*. Armies of nearly-unskilled guys from India rotating thru on “meetings” visas.

  8. KnotRP

    Indentured servitude, by a new name.

    Try granting all H1B employees instant and employer-portable green card status first day on the job, and watch the program vaporize as it’s reason to exist vanishes.

    1. Dirk77

      While indentured servantry is part of it, I don’t think it is the whole story.  In Ha-Choon Chang’s recent book, “23 Things…”, he was arguing that one reason for the income disparity between rich and poor countries is the quality of public infrastructure (and institutions) built up over decades and generations and the current tax base of say, the middle class, that supports it.  You still get that essentially free when you bring people in from other countries.  (This is not an uncommon view, but I was surprised to read it from an economist, but then I’m no expert.)

  9. Saahil

    I read the write-up and the comments. Personally, anything that is done illegally has to be questioned and investigated but then turning the thumbs down on Indians, calling them slaves (albeit economic) is all so uncalled for. Here’s why:

    If a similar revolution happens back down in Asia, it will cause a problem to US. E.g.,

    1. Coke and Pepsi are the only aerated drinks that take-up 95% of the market share. These are US companies
    2. Most ‘technology companies’ in India use:
    – Philips lighting
    – Intel or AMD processors
    – Employees buy shoes (Adidas, Nike or Reebok)
    – Suitcases American Tourister
    – even bottled water (Pepsi)
    – Electronic items (mostly US, a few from Europe and Japan)
    – Cars (Chevrolet, GM, etc.)

    Notice the fact that such brands can be afforded only now and where is this money going to, all to the US. So, handling the issue by banning work going to other countries is not the answer. Trying to get the best brains work with global citizens as the workforce are some ways of handling this. Again, just a perspective…


    Saahil (from India)

    1. K Ackermann

      She’s not suggesting a ban on all work…

      She’s saying that workers are being imported into the US under false pretenses. There’s nothing wrong with saying that when it’s true.

      I don’t believe she’s trying to stir up divisiveness along nationalistic lines – we’re too smart for that. She doesn’t like cheating, though, as is in evidence here daily.

    2. Externality

      You do know that Pepsico is headed by an Indian citizen named Indra Nooyi?

      And that Ms. Nooyi has been criticized for her anti-American remarks?

      And that Pepsico and its subsidiaries have been repeatedly to compensate White and Black Americans who they discriminated against?

      Calling Pepsico, a multinational company headed by an Indian citizen with a history of anti-American comments, and which has repeatedly discriminated against Americans seeking employment or advancement, “American” is highly misleading.

      1. Externality

        Should be:

        And that Pepsico (and its subsidiaries) have been repeatedly forced to compensate White and Black Americans who Pepisco (and its subsidiaries) discriminated against?

        1. DJF

          Pepsico is not an American company anymore, its a globalist company and in most situation they will admit it. Only if they want some sort of subsidy or deal will they bring out the USA flags

          Its like AIG, which was actually founded in Shanghai China in the 1930’s, which had large parts of its business outside of the USA, who also claimed to be a globalist company, until it needed a bailout and suddenly it was a US company. The derivative and other crazy trading which drove AIG under was mostly done in its London office yet it was the US taxpayer who got stuck with the bill

    3. Daniel Pennell

      Coke and Pepsi are the only aerated drinks that take-up :

      – Philips lighting made in China

      – Intel or AMD processors made at least in part in China

      – Employees buy shoes (Adidas, Nike or Reebok)made almost exclusively outside the US in Asia

      – Suitcases American Tourister – Made in China

      – even bottled water (Pepsi)- WOW

      – Electronic items – Made almost exclusively in China

      – Cars (Chevrolet, GM, etc.) — Chasis made in Canada, engines made in Mexico, various other parts and assembly made in US…EXCEPT for the plants in Europe and China.

      Sorry dude, but the fact is that India and the rest of the world are going to have to figure out how to sell to themselves. We have carried the load for too long and have nothing left to fork over. We sure as heck cannot afford to have you shipping labor over.

    4. JimS

      I wish Indian labor only the best, but it must use Indian means of production. Using migrants to undercut organized labor has always been bad even for the migrants, in the end; and excluding migrant workers from other workers’ means of production has been good even for the excluded workers, in the long run.

      This is as true when the migrants are bussed in from another country as it was when they (then known as “blacklegs”) were only bussed in from the next town over.

    5. alex

      Saahil: “If a similar revolution happens back down in Asia, it will cause a problem to US. E.g.”

      Without going into the silliness of some of your examples (e.g. when did Philips become an American company?) I have one term you should consider: trade balance.

      Saying India, or any other country buys stuff from the US, is silly if you don’t look at the numbers. And the numbers all say the same thing: the US buys more than it sells. Other countries have more to loose than we do.

  10. Externality

    The conundrum in the US is our lack of a coherent industrial policy, and our denial that we have one. We have industrial policy by default. Certain sectors, such as banking, defense contractors, agricultural producers, and Big Pharma, get large subsidies.

    The sudden government interest in H1-B visa abuse stems from industrial policy, specifically the part relating to the defense and nuclear industries.

    The Clinton, Bush, and Obama administrations greatly expanded H1-B and other visas to entice India to open its markets to Wall Street and to buy American weapons, nuclear technology, and other sensitive materials. The Bush administration even changed US and international law on nuclear technology transfer, allowing India to obtain Western nuclear technology despite its illicit nuclear weapons stockpile and production facilities. The Obama administration is now pushing more pro-India changes through international organizations.

    Then, despite intense lobbying by the highest levels of the US government, India announced in April that it would not US fighter jets, choosing instead the (French) Rafale and the Eurofighter Typhoon as the final candidates for its planned purchase of 126 fighter jets. (The company that sells the jets also gets to sell, for decades, even more lucrative spare parts, upgrades, plane-specific tools, and materials to train the ground crews.) Separately, India will also buy most of its civilian nuclear technology and other military hardware from non-US sources.

    India’s decisions were a blow to the US defense and nuclear industries and to the Obama administration’s efforts to increase exports to India. Without the (angry) defense industry’s protection, visa-abusing Indian companies suddenly became fair game for a humiliated (and reelection seeking) Obama administration. Starting in January, 2011, when the deal was falling apart, a parade of investigators feigned surprise at Indian abuse of the visa system. In reality, they were as shocked as this fellow:

    1. pws4

      Yes, this makes a lot of sense. I notice that my Indian coworkers, before they were all laid off, truly hated Obama. This surprised me because normally they didn’t pay too much attention to American current events. (I was friends with many of them, having worked with them closely for a while.)

      So, something piqued the God-King, and he took out his wrath on the nearest peasants. Not surprising.

      Heh, if this ends up as long lasting as the Cuba thing, IT could end up being built back into a decent career for an educated American. (I’d still advise caution to people going after that Computer Science degree for now, though.)

  11. Mondo

    It is absolutely justified to put Infosys on the spot for their misdeeds, as well as sue them. I don’t think however this case should be used to argue for curtailing H-1B visa issuance.

    The reality in the industry I am working in (specialized IT consulting/software) is that it is extremely difficult to find US natives or citizens, which is not necessarily the same of course, who are qualified or at least qualifiable to work in our field. Our people need to be pretty smart to be able to manage a mix of technical, organizational, and human challenges, and to me it appears that most Americans who are smart enough have gone into different fields that promise much higher pay. A seasoned consultant in our field will make around $90-120K p.a. which isn’t bad at all but not in any way close to what a trader or big-firm lawyer can make. For foreigners however, going into a technical/IT field still is a really good way to advance their fortunes.

    And btw, the current H-1B visa allocations seem to fill only very slowly. I’d say it would be good to try to retain the US’s attractiveness to smart and/or entrepreneurial foreigners willing to come and stay. This is by no means a given, many actually have a choice.

    The above does not necessarily apply to the kind of standardized IT services that Infosys and others offer, using resources from India and elsewhere. There is a case to be made that at least some of those jobs can be filled locally, without having to use foreigners. Incentives do matter however, and when big services contracts are awarded based on cost only, you do get what you pay for, including the occasional IT services provider cutting corners illegaly.

    1. JTFaraday

      “A seasoned consultant in our field will make around $90-120K p.a. which isn’t bad at all but not in any way close to what a trader or big-firm lawyer can make.”

      But there is a huge glut of lawyers and we want to curtail financialization of the US economy, with its attendent culture of fraud.

      When your field needs to rely on systemic fraud to sustain your pay package, provoking financial crises all across the globe, then something is drastically out of balance and cannot be sustained.

      US industrial policy should help us make these (and other) necessary shifts.

    2. Larry Barber

      Why in the world would an American go to the time, expense and effort to become an expert in a technical field when he knows that he will be undercut in the marketplace by H1-B’s and outsourcing? Given the huge student loan debt that the seems to be the norm nowadays this is a recipe for poverty! I’m actually amazed that very many Americans study engineering and science. Much easier to study finance and accounting, easier to get good grades and you have more time for parties.

      1. Mondo

        Yep, that is exactly my impression as well. Just don’t complain about foreigners taking jobs away, when there aren’t nearly enough US citizens for those jobs.

        Otherwise, this thinking seems to be based on the hope that Tim Geithner is right with his idea of strengthening finance at all cost, so that the US is positioned to continue being the primary provider of financial services for the world. We will have to see you that will work out. It seems a bit of a dangerous, one-dimensional view to me.

        1. toxymoron

          Two days after I arrived in France (as an expat), there was a pamphlet from the local union complaining that others and I (as foreigners) were ‘stealing’ french jobs.
          Two years after I arrived in France, the unit where we were working had changed from a single contract with the local monopoly to nearly 300 contracts in 5 continents.
          I think most people would love to have such ‘thieves’.
          [This was not about outsourcing, however, but about sharing, whatever that means for R&D]

        2. Larry Barber

          There are plenty of Americans for these jobs, or would be if they offered decent job security. The “there are not enough Americans to do the work” is a self-fulfilling prophecy that self-serving corporations employ to hold down their costs and increase executive bonuses. That there is not a shortage of people who can do this work is obvious to anybody who actually works in a technical field, if there were such a shortage corporations wouldn’t have engineers and software developers and the like doing work that others, with lower skills and less training, could be doing. From a macro-economics level, if there were a shortage of these types of people we would see wages going up. They aren’t, ergo, there is no shortage.

          1. Gordon

            The mth of skills shortage of American engineers and IT professionals is a LIE, perpetrated by Sr American executives that do not know what goes on in their corporations or care only for the lowest labor costs.

            I have worked in the hiring departments of many high tech companies and can tell you from first had experience that most American companies will always seek to make a commodity of technical expertise. They will always take the patch of least resistance and will undercut American workers.
            If you dont believe me – Try this test. Take any job in any high tech company currently being performed by an H1B contract worker and where the employer wants to convert that job to full time regular employment status. Look at the job advertisements and recruiting outreach, then look at who is ultimatly hired to fill that job. In over 80% of the job fills, the H1B doing the temporary job, will be hired on a permanent basis. The US Dept of Labor is clueless in this and in many cases does not care. High tech workers know better than anyone that for the most part they are on their own vs. the corporate hiring organizations.

            For many of you who think globalization and foreign labor hiring is a good deal, I say get a clue. We either protect our technical labor pool or we will all be flipping hamburgers at MickyD’s.

    3. Patrick

      There are plenty of Americans with the skill set that would work for $90-120K per annum. Ask the legion of them that have been ‘off shored’ from the major IT corporations. Any American who works for an American company in that salary range, or above, is basically a “dead man walking” as far as the long term future of their job is concerned. It’s not a question of if, only of when their job will be off shored.

      The country may not have an industrial policy, but the corporations do; it’s called ship all but the customer facing jobs off shore to so called “Growth Countries”. CEO’s of all, repeat all, the big corporations talk with forked tongue when they go on about their desire to create good paid jobs in the USA. The same goes for their paid lackeys of politicians, from the President on downwards.

      1. Lidia

        My DH would have worked for 1/2 that, but was already deemed “overqualified”. WTF? Either people are overqualified or underqualified… pick a story and stick to it.

    4. beowulf

      The reality in the industry I am working in (specialized IT consulting/software) is that it is extremely difficult to find US natives or citizen… A seasoned consultant in our field will make around $90-120K p.a. which isn’t bad at all but not in any way close to what a trader or big-firm lawyer can make.

      Good Lord, its funny how many people lurv Lurv LURV the free market until it starts taking money out of their pocket. I think the market is telling you that you’re not offering a high enough wage to “US natives or citizen” (or legal permanent residents too for that matter). But apparently its cheaper to buy congressmen instead.

      I don’t fault the H1-B visa holders themselves— they’re not the ones who bribed Congress, so they’re just playing by the rules as they’re laid out (as opposed to certain other new residents of our country). If the H1-B and B-1 visa programs are axed (and they should be), current H1-B workers should allowed to switch over to a LPR (“Green Card”) visa if they wish.

  12. LAS

    Corporate clients are now global and I have to work with both staff and suppliers based in places like Malaysia and India, etc. These people work at night to coordinate their schedules with the US. They are not “slaves” so much as the night shift; they get vacations and other benefits. Sometimes I enjoy them as people, but mostly they make my work harder and my hours longer. What disturbs is that they really are not as good as US counterparts (which you never hear mentioned in the reporting), particularly with respect to insight, strategy, service and problem solving. More of my time is taken in bridging (albeit maybe I’m not so important and/or managing myself poorly, but my time costs me and that’s how it seems).

    IMO, most of the USA is getting less effective service and someone (top corp/ownership) is getting higher margin, or richer (thru cost reductions). Maybe globally this is eradicating inequality, but in the US, it is exacerbating the problem. The surplus value I might reap from my time is opted by some corp. entity in addition to the cost saving they get from using less expensive labor.

    I cooperate with all this going in by rationalizing that our corp. client is giving us global work. Still most of the work is focused on developing the US consumer market, which is pretty mediocre now.

    As a small supplier to large corporations, I would further like to mention (altho not strictly on topic) that our business has gotten precarious in the last four years. Some of these corporations are taking a long time to pay as a matter of policy (like 4-6 months). Further, they are outsourcing accounts payable to India/Malaysia, etc. and making it harder to collect. We are squeezed for cash and see the writing on the wall if this gets any worse.

  13. me

    Palmer still works at Infosys as a Principal. Although the company has alienated him after he followed policy. He did nothing wrong..

  14. Ven


    There are a couple of issues with outsourcing programming jobs which most managers seem to be willfully ignorant about (some of which you have highlighted before)

    1) Off-shoring does not mean cheaper:
    If one factors in the extra hours worked, the project delays due to missed requirements, substandard deliverable’s etc. and
    2) Managers loosing “Management skills” (contributes to point 3 below):
    Off-shoring has resulting in IT managers in US companies loosing the skill set required to manage IT staff and projects. Once these managers “Forget” how to manage, I see them running into the open arms of Accenture, Wipro etc. I have seen managers struggle to hire the right people and grow teams for a project. Some are downright scared and are shrinking responsibility..with off-shoring, one can always point fingers.

    2) Underestimating numbers:
    If a manager does not know what it takes to build software he is totally at the mercy of these sweat shops and frequently make the mistake of underestimating the man power which the Offshore companies use. Example, Accenture, Capgemini, Wipro, TCS etc. routinely put more “bodies” on a project so that they can make more profits while the same job can be done by lesser number of American based workers (American citizens or LEGITIMATE H1B’s). The result is than even if the per-person billing rate is low, more people on the project actually makes the projects expensive.

    4) Inventory management :
    The culture of American companies has come down to a point where labor is treated like a commodity whose inventory needs to be “managed” (hired and fired at will). Those pesky US labor laws(the tenuous ones we still have) get in the way and this ” Inventory management” is also outsourced.

    Lastly, we always seem to be focusing on the H1B..while more focus needs to be on the L1 Visa and pure off-shoring. L1B visa and off-shoring are insidious attempts which make knowledge workers work in sweatshop like conditions. These two issues need to be tacked first and we should not be distracted…
    I agree that H1B’s do have issues (primary due to the fact that Green card processing is so slow), most of them actually are NOT low wage labor (From the client perspective) and pay ALL the US taxes (social security, medicare etc) while not being eligible for those benefits.

  15. Hillary Goldman Klanton Ta Ta Consulting

    Talk about a post that states the obvious. Wall Street was well aware of the threat knowledge workers posed, decades ago.
    Now, if workers, from anywhere in the world, could equally compete against the corporations, this little slave trade could come to an end.

  16. no big surprise

    IMO, the most egregious not-enough-qualified-Americans-when-they’re-really-are cry baby is the nursing industry.

    Why bother hiring Americans when there are literally airplane-loads of Filipinos willing to work at any price in America and a fairly straightforward H1-B channel (nothing against the Philippines just an obvious example).

    1. Idiot

      It’s not about the nation state as much as our beligerent status quo would like us to believe.

    2. JimS

      And if African-trained doctors and nurses (to use another example) move to the US, Canada, or Europe as soon as they can, where does that leave Africans, who need doctors and nurses too?

  17. Eclair

    Interesting article in yesterday’s LeMonde about the new Ikea manufacturing facility in Danville, Virginia. Apparently it was to be the economic savior of the depressed town, was granted the usual multi-million dollar tax breaks. Now there is labor dissatisfaction over low wages and working conditions. One observer. Is quoted as saying that Sweden regards the US as Americans regard Mexico.

    Maybe that’s the best we can hope for at this point – being Mexico to a bevy of Multinationals.

    1. Lidia

      I was talking to a guy whose career has been in automation. He waxed poetic about some sort of machines used by DHL or some such entity in Europe to sort packages, and scoffed at FedEx or UPS in the US, who apparently have countered by regressing in using HUMANS to sort packages instead. The human price-point has become low enough to make automation UNeconomical.

      Seemed obvious to me, but Mr. Automation Vendor could not wrap his head around this development.

  18. i

    The USA is dead. It just doesn’t know it yet. It will be the same with all other countries eventually. They may keep borders, and a semblance of government to keep the locals in line, but the real countries are now multi-nationals, with profits from all, and loyalty towards none.

    The “countries” that matter now are “rich” and “poor.” Globally, you live in one or the other, wherever you are.

  19. John F. Opie

    Interesting, but especially one of the underlying asides that Yves pulls out so often but are so meaningful: that there is no US industrial policy.

    The industrial policy of the US, since, oh, say, the end of WW2, was to not have an industrial policy. Which back then made sense: after all, the US virtually had a command economy, as factories were ordered – and few resisted – to produce military equipment, resulting in massive shortages in the civilian economy (duh) and rationing of important resources like gasoline and tires.

    After the war, companies were given a pat on the back and were asked to hire vets when they got out of the service so that unemployment wouldn’t be a problem, and that’s what many did. Converting to civilian production after the war did unleash significant demand and helped drive the economy during the immediate post-war period.

    The problem of not having any industrial policy (or, having one that basically said “go forth and do whatever”) is that some sectors of the economy never recovered: the US watchmaking industry, second to none in their quality and innovation, saw the Swiss take away their market shares before they could retool and get back into the game, resulting in the relatively rapid elimination of US watch manufacturers such as Hamilton (now owned by the Swiss and only using the name), Elgin, Waltham, Ball and many others.

    The real problem with industrial policy is, in the hands of unscrupulous politicians (I know, I repeat myself), that it becomes corrupted and a source of immense graft and waste. If congress or the president were to implement an industrial policy today, they’d be overwhelmed with lobbyists pressuring to support whatever industry was not very profitable. That’s not industrial policy, that’s industrial welfare.

    I know of two countries that do industrial policy well: Austria and Japan.

    In Austria, after WW2, pretty much everything was nationalized and run by a holding company. While most has been privatized by now, the holding company retains some ownership in most larger industrial companies, albeit rarely anything close to a minority blocking position. Austrian industrial policy can be simply described as choosing where to invest in educating future workers, of gaining the skill sets needed for future manufacturing. They did this by establishing academic chairs in chemical engineering, diesel motors and automotive engineering during the late 1950s and early 1960s: financing these areas meant that Austria had a lot of engineers in these areas in the 1970s, leading to the establishment of diesel engine manufacturing, chemical plants and automotive assembly and parts manufacturing. This has, over the last 25 years, led to Austrian companies (and those operating in Austria) holding a very large patent portfolio in these areas (most diesels made today world-wide use these patents, as do most 4-wheel drive assemblies; the chemical industry didn’t do quite so well…).

    Today the Austrian government is setting up academic chairs in nanotechnology, materials sciences and “new materials” in order to try to repeat these successes in other fields.

    Japan worked differently: here the industries were more than happy to accept government nudging that led to clearly defined market segments. Competition can be cut-throat, but not so much on prices as much more on services. The story of Japan’s industrial performance in the past doesn’t need to be retold here, but suffice to say: they had an industrial policy that worked.

    Looking at these two examples (there are many more), two things really emerge: first and foremost, politicians did not really get involved and as a result this wasn’t viewed as pork to get rich on; second, those involved transcended government & industrial circles in order to make a decision what was best for the country, rather than what was best for themselves.

    Given those two criteria, it is probably vastly better that the US doesn’t have an industrial policy. The closest we really came was Kennedy’s decision to go to the moon and invest in the technologies to get there. Today? All you’d see is the government bailing out sectors that knew that it’s be easier to get the government bailout than actually build products that people want (automotive sector) and extensive nepotism and corruption to the nth degree, destroying any chance of actually implementing industrial policy.

    It’s a shame, since countries with a functioning industrial policy generally benefit enormously. It’s hard work, though, and you need good, decent honest people to design and implement it. They are out there, but good luck in getting it to work…

    Oh, and the Japanese have fallen flat on their faces with industrial policy: massive investments in AI and industrial programming like fuzzy logic didn’t work and cost many Japanese computer companies significant market shares (indeed, it led to the dominance of Taiwan in making PCs).

    1. issacread

      Gosh, I hardly feel qualified to comment, but your description of US corporations coming out of WWll neglects the unprecedented amount of money spent by the likes of the American Advertising Council and others to maintain the level of ‘command’ they had enjoyed during the war, and to make sure their heroic peformance was fully endorsed for the future by the American public. No industrial policy or industrial policy by default became the only acceptable option; all else, excluding of course defense, would have been considered Socialism, or worse.

  20. John B

    Very interesting post and comments. To say US industrial policy made “by default” does not quite go far enough. It is actually made by other countries. We may retain whatever industry they do not want to encourage.

    Of course, what hurts US workers benefits India, Mexican, or other workers, who arguably need it more. But more of the cost of global development should be paid for by the global elite who benefit far more.

  21. WK

    I do see some posts in here trying to rationalize the situation, but it takes a pretty different perspective when you are personally involved directly. I don’t mind Indian or Chinese getting along better in life, hell I don’t mind if the whole world does better, but that is not how this has gone down exactly. Like the one poster said, what is good for Indian or Chinese workers are bad for American workers now. Of course, the multinational corps and their management will defend the process, they are in it for self-interest in their corporations. Their notion of doing things that better America left the building long ago.

    I know incentivizing work insourcing may be required, but so many people have been displaced in the States that it has become a political issue in a large way as we know. Look at how the jobs report is the most important publication by the Federal government and how that metric is quoted anywhere and everywhere in the blogosphere to support opinion on issues. Wall Street reacts strongly each time there is bad news with this.

    Outsourcing (in this discussion offshoring) has sapped major economic strength from America, to the point that American jobs continue to be a major political issue for next year’e elections, in fact, the key issue among American voters. I am not naive to think that however work visas are approved in this country that it isn’t going to continue, because we all know this practice is too entrenched now. This has become a standard business operating model now, whether ireegularities exist or not. But I do not subscribe to the notion that taxes should not be considered on the elite to ‘punish’ job creators, a GOP talking point. They are not creating American jobs now, and we move to new uncertainty du jour why they continue not to hire. There will always be a reason why they do not hire, I remember when people were actually hired here once, LOL. The state of the global economy suggests our business leadership may not be as great as many Americans would like to think it is. And for those that are profiting from the current scheme, they should help pay to function the country they are profiting off of.

    1. Joe Rebholz

      All the above (the post and comments) is further evidence that multinational corporations operating within the cult of neoliberalism have no allegiance to, do not care at all about, do not have any incentives to care about, individual nations or the welfare of individual people, in any nation or the welfare of people generally. Globalized neoliberalism may be making things better for a small fraction of the population in some countries like India and China. But it’s making things worse for most people (all but the rich) in the US, Europe, and other “developed” areas. And it has been and still is exploiting most of the rest of the world.

  22. magoomba

    Oh well. Many of the older, more experienced programmers now joining the ranks of unemployed will eventually turn their skills to keeping the internet free for the ever-growing disenfranchised users.
    Open source, etc.
    Some software purveyors will whine, but really, the market is only left to psue the still enabled ‘customers’. Fine.
    But most of the world will continue to be on the net even if they can’t rub 2 nickels together.
    It is useless to prosecute them, because they have NO money anyway and will NEVER be able to buy software products. It’s actually better to just let them be, so they are still in the cyber world.
    A typical 2 tier solution.

    1. Lidia

      I don’t know about that. It’s expensive to “be on the net” when you think about it. Further investments are always required, and the societal and environmental costs are staggering. I don’t even want to think about the energy that storing all the fucking YouTube videos and so forth burns up, a great deal of which is, sadly, duplicative to begin with.

      The vast majority of data stored is not only useless, but redundant, which behooves the makers of both software and hardware.

      1. David

        This will become less and less relevant as hard drives are able to store more and more data on smaller chips. Eventually computer storage will be almost limitless, and we won’t have to worry about storage problems. But that is still decades away. As for now, I’m just waiting for tech companies to stop making old fashioned spinning hard discs and completely switch over to flash memory.

  23. beowulf

    Our industrial policy is military Keynesianism. Any American engineering or computer science student not angling to work for Uncle Sam or a defense contractor needs his head examined.

    There’s basically only one thing that can’t be replaced by Chinese outsourcing or Indian H1-B labor– work requiring a top secret security clearance.

    1. alex

      “Any American engineering or computer science student not angling to work for Uncle Sam or a defense contractor needs his head examined.”

      Wrong – and I speak from personal experience. This isn’t the 1980’s, when Reagan’s excessive defense buildup at least created plenty of good jobs. I remember that era, and in electronics you could walk down the street and get three job offers during your lunch hour. Nowadays there are plenty of layoffs and closures of small/medium defense contractors. I’m not saying we should build weapons for the sake of jobs, but I am saying that wherever our current bloated defense budget is going, it’s not engineering jobs.

    2. KnotRP

      Wrong. Most of that work is contracted out to American Companies (who use some US labor and a lot of offshore foreign nationals) to produce those products. It would be
      pretty easy to place an employee at almost any global
      corporation and get some back doors inserted without regular employees detecting (or expecting) it….in fact,
      I’d bet it’s already been done at both the hardware and
      software level for all the major products we use day to day.
      Congress will consult with corporations, who will tell them
      whatever they need to hear so they can go back to twittering their stiffie to some girl somewhere…

  24. Cruzin

    With regard to H-1B visas, keep in mind:

    1. Employers are not allowed to undercut the market in terms of pay or labor conditions.
    2. Given the opportunity to hire an H-1B or a US worker of equal qualification, it’s going to cost the employer five to ten thousand dollars more up front (in visa costs) to hire the H-1B.

    So, what is the nefarious scheme here?

      1. alex

        Not lies, jokes. That’s the company/government line, and for all I know Cruzin believes them. If so, I’ve got a bridge to sell him.

        Oh, and banks are not allowed to operate if insolvent and “campaign contributions” don’t influence politicians votes. I draw the line at Santa Claus, the Easter Bunny and the Tooth Fairy though. Unlike the political myths I mentioned, there is at least some evidence for their existence. So yes Virginia there is a Santa Claus, but I’m sure that even a very young lady like yourself wouldn’t believe an obvious myth like the H-1B requirements are enforced.

        1. Ven

          With all due respect…what you are saying is more like ignorance.
          Did you or do you work for the INS? Have you applied for an H1B? Do you know what an L1 visa is?

        1. Foppe

          cruzin seems to be under the impression that simply because something isn’t allowed, it doesn’t happen.

    1. Gordon

      OK Cruzin, I will bite and give you a factual answer and lesson in how it is done.

      H1B person works for a contractor, most likely a foreign company doing business in the US. Gets H1B visa in the name of his contracting company good for 4 years in the US, plus 1 four year extention. Assigned as a contractor for a US company. At some point during that time the US company decided to convert the job to a full time employee hire. H1B person wants the job, applies and gets it because he has the experience to do the job. The company gets his services at a lower cost of pay then they were paying to his contracting company. As an added bonus, since the H1B visa is now transferred to and held by the US Corporate employer and they also agree to sponsor him for US Permanent Resident status (Green Card,) they have a captive employee for a period 3 to 7 years.
      US citizen never had a chance at applying for this job – why?
      – When original job was planned for a contractor only, a US citizen working somewhere else and having benefits would not apply to a temporary job.
      – When the job became full time permanent hire, the US citizen was automaticly rejected, because the employeer naturaly wanted to hire the person doing the job on a temporary basis anyway.
      No fuss here. The department of labor is none the wiser. Happens every day with thousands of open jobs. As an added bonus Corporate CEO’s, PhD academics and politicians can claim that US citizens do not have the skills to do these jobs. You would be laughing at all of this, if you were not crying already. Welcome to the new world of globalized labor.

    2. Ming

      Is there any trustworthy third party that can confirm your two statements? We all know that business will follow the ‘rules’, but their actions may be a different story.

      In Canada, skilled Indian tech workers were hired at 1/4 a Canadian wage (which was still a fortune relative to what they would earn in India) plus all living expenses (4 guys to an apartment… Not bad relative to how they lived in India and relativy cheap for the corporation) plus money was spent to setup a future tech office in India, of which they would become the future managers….all part of the cost of paying for the skilled foreign labour.

      1. Cruzin

        I’m fully aware of how the system is abused. I offered those two facts only in response to those who want to do away with the H-1B program completely. And to point out that US workers are at no disadvantage when applying for jobs vis-a-vis a foreign national. If the H-1B system is being abused, must we throw the baby out with the bath water? Be careful with your nativist, close-the-borders attitudes.

        Gordon, sorry buddy, but your grasp of the US immigration system is pretty weak. I understand the point you’re trying to make though. Unfortunately, it’s nonsense. US workers won’t apply for a temp job (that, according to you, inevitably leads to a perm job) because they’ve already got a good job? So what’s the harm to those US workers! And keep in mind, getting that green card is no sure thing. If a US worker is qualified and available for the H-1B’s job, it’s game over.

  25. kaj

    The year was 1967, that is 45 years ago, and I was doing simulation work at an institute which was collaborating with the Univ. of Illinois, a major Tech University, supported by the DOD. At that time, we found that many under-grad (seniors) were terrible programmers, an electrical engineering near- Ph.D., who was an ex-IBMer and part time consultant for us, did not know balls about mathematical equations that I was working on, and even graduate computer programmers could not translate my equations into IBM-360 code.

    And then in 1969, I bumped into a Princeton math Ph.D. when working at a the geological institute in Hawaii translating lunar analog data into digital code. I was having difficulty with it, and this guy came up with beautiful mathematical equations that made the problem much easier.

    Smart people in this country get hired at high wages and deservedly so, while grunt work gets shipped out. Should it stay here or go abroad to low wage countries? That is both an economic and a moral issue. But it is also a trade or empire/imperialism issue. Even in the 1950s and 1960s, especially in the 1960s, very few people (percentages) went into math, science and engineering. Things are just shades of gray not black or white.

    Starting with Reagan, who single-handedly gutted the great UC system and his recent and current acolytes who want to destroy the United States yet pose as its saviors, it will only take total ruination before some thing changes. The progressive community is just not large enough and the money just isn’t there to to fight back both the media and the political establishment. And, with Obama, or his Republican counterpart, this country faces further hell.

    There are serious cultural and constitutional issues here. This country was built on plunder and exploitation, of both the land and its people. The ones who stayed behind in Europe and did not migrate to this country, especially those in Northern Europe, seem to have an inner-sense of belongingness, that land should not be plundered in our life-times. Germany, especially, seems to have strong Green Party and a social-democratic ethic. The economy seems to be doing reasonably. The Japanese nuclear crisis has triggered a massive migration from nuclear power by a CDU (conservative party) chancellor! Could this happen here? We know how Obama behaved when the BP pipe burst in the Gulf of Mexico. The judge and the Republicans possibly forced his hand, but, we now know how he thinks and frames the issues

    There is something to be learned from Europe. May be a better constitutional configuration.

    1. alex

      kaj: “in 1969, I bumped into a Princeton math Ph.D. when working at a the geological institute in Hawaii translating lunar analog data into digital code”

      Is there a point to this anecdote?

      “This country was built on plunder and exploitation … The ones who stayed behind in Europe and did not migrate to this country … seem to have an inner-sense of belongingness, that land should not be plundered in our life-times.”

      Oh please, the US was a pioneer, as far back as the establishment of Yellowstone National Park, in preserving land. TR and the national forests, etc. And back in the 1960’s and 1970’s we were pioneers in creating environmental protections. The question is not whether there’s some mystical cultural shortcoming, but why we lost our way.

      1. Ven

        “The question is not whether there’s some mystical cultural shortcoming, but why we lost our way.”
        Its not that we lost our way…more like got distracted with all the junk on the tube, busy in the mall etc…
        what were we doing when NAFTA and the Free trade agreements were being signed?
        What are we doing about the fact that companies get tax breaks for Off-shoring?
        We can’t even get the facts right about the visa programs, do you think we can gave an educated debate about any policy be it immigration or industrial policy?

  26. slumdog

    Outsourcing is fantastic. It has lifted living standards in the developing world and given rise to millions of middle class of consumers — a direct benefit to several of America’s largest businesses (GE, McDonalds, Coca-Cola, Ford, Nike, etc).

    It’s natural that the displaced American’s are going to howl and cry about losing their once high paying jobs to unskilled Indian’s.

    The whiners essentially have two choices: either compete with the unskilled Indian’s on wages, or do something value added that the Indian’s can’t — America does have the world’s best universities and every other benefit of first world infrastructure. With all this, how hard can it be to compete with unskilled slumdogs?

    The simple truth of the matter is that if American’s want to be laggards in a globalized world, they better get used to living on third world wages. Or else get off your lazy arses and work at a level commensurate to the privileged lifestyles that you feel so entitled to.

    1. Chester Genghis

      One of the more insidious undercurrents in much of today’s discourse is the moronic & myopic tendency to blame the individual.

      So, for instance, it was a relative few lazy, stupid individuals who took on mortgages they didn’t understand and couldn’t afford that crashed the world economy. The banksters had nothing to do with it.

      Same goes for the lazy, stupid, whining American worker, eh?

      We just need to suck it up, spend a couple hundred grand to get a world-class education, and then gleefully join the global economy and undercut the wage demands of Indians, Chinese, Eastern Europeans, etc. Yup, that’s the ticket! Problem solved.

      Of course, GE and other “American” companies have downsized their American workforce over the last 10-15 years in numbers roughly equal to their expanded hiring overseas (despite consistently receiving about 60% of their profit from the U.S.), so we’ll just have to suck it up, learn Hindi, move to India, undercut wage demands of the local workforce, etc. etc.

    2. KnotRP

      Oh look, it’s our newest overlord, slumdog, with the race to the bottom of the globalization sea somehow lifts all boats argument! Horay! Work harder for less, or even no work, bitchez! Who cares about your societal organization, national sovereignty and natural resource wealth, or self determination and freedom. The Slumdog has spoken — you are no longer free Americans….you are now global citizens who must assume the global position!

      LOL, slumdog. As if average working stiff Americans will just roll over and play dead, instead of burn the globalization house to the ground. Welcome to the start of the new dark ages…

    3. WK

      I can see your seen as a troll based on a few other comments. Well Slumdog, from the Indian perspective, I’m sure you feel you have a point, but India/China do not have any special sayso to come in and mess us up for what we were doing as a living. You are not entitled to disrupt our economy, but that is what is happening, isn’t it?

      There are plenty of Americans who are plenty pissed off about how things are going here. Some idiot like Putin calls us a parasite, when our running trade and fiscal deficits had floated much of the world’s economy. If it wasn’t for us, your economy would be the one in the shambles, not the US, as exports have to go somewhere and currently they mostly go to the US and the UK. I resent that you think you are entitled to be able to export your cheap labor and feel we have to keep taking it in the rear.

      If the US is such a trashbin in the global economy Slumdog, how come scared capital keeps taking flight back to the USA when uncertainty rises as it is once more with the European debt crisis popping up again along with renewed spook on the economy. How come the whole world focuses on our debt issues? Because they know they are hammered when we stop buying your crap, if we were unable to buy any more. That day may be coming very soon when useless money is used to pay for things. If you think for one minute that American protectionism can’t rise when injustice is seen in trade, history would suggest you might want to review any of that kind of thinking. The global economy so far has sucked major lifeblood of the vibrancy out of the American economy. I don’t mind Indians or anyone bettering themselves, but where I draw the line is when they better themselves at Americans expense.

    4. JTFaraday

      “It’s natural that the displaced American’s are going to howl and cry about losing their once high paying jobs to unskilled Indian’s.”

      Dude, it’s “displaced Americans” not “displaced American’s,” “unskilled Indians” not “unskilled Indian’s,” “Americans want to be laggards” not “American’s want to be laggards.”

      Sorry to be pedantic.

  27. Petecus

    It is amazing how some topics like H1B are so popular.
    Some facts: h1b visas issued every year: maximum 50k
    Total visas issues a year: 1000k.
    Come on guys, dont be so naive and try to understand what 50k means in the US work market, NOTHING.

    They could elminate the h1b visa, and nothing would change. The problem here is that part of the US citizens are concerned about the fact that some jobs are going abroad, together with a lot of resources. This is part of a broader shift in the global economy. Resources are being redistributed more evenly (the reasons are irrelevant for this analysis), with the effect of lowering the total wealth level in the US. It doesn’t matter what the Gov’t does to stop that, it will eventually happen. Now, American population, similarly as Europeans is going to have to adapt to a lower living standard. It is painful to accept, but the free lunch era is over. No empire consciously accepted its fate, but the end of it still arrived, always, no exception here.

    1. heey

      I don’t know if I would go to the extent of predicting the end of an era as you mention. However, it is clear for me that americans lived above their means since the 50s, and due to many circumstances, the rest of the world was able to sustain that behavior. I believe that is no longer the case, but no politician can tell that to his voters! Let’s keep pretending all this will eventually go back to normal!It surely will! NOT

    2. kk

      50K/year for 10 years, that’s half a million people in an industry, and almost all of them are putting downward pressure on industry wages. Sorry but it does not look like a small number to me.

    3. reslez

      Facts? Yours are completely wrong.

      Over 200k are issued every year and tech giants cry the limit isn’t high enough. Furthermore the limit was much higher earlier in the decade, universities and non-profit research are completely exempt, and there are enough other holes and exclusions to drive a truck through.

      The current law limits to 65,000 the number of aliens who may be issued a visa or otherwise provided H-1B status each fiscal year (FY). In addition, excluded from the ceiling are all H-1B non-immigrants who work at (but not necessarily for) universities and non-profit research facilities.[4] This means that contractors working at, but not directly employed by the institutions may be exempt from the cap. Free Trade Agreements allow a carve out from the numerical limit of 1,400 for Chilean nationals and 5,400 for Singapore nationals. Laws also exempt up to 20,000 foreign nationals holding a master’s or higher degree from U.S. universities from the cap on H-1B visas.

      A yearly shortfall in available visas arose beginning in the mid 2000s, despite a temporary increase in the yearly cap.[5] The number had been increased to 195,000 in FY2001, FY2002 and FY2003. The Department of Homeland Security approved about 132,000 H-1B visas in 2004 and 117,000 in 2005.[6] April 2, 2007 was the first day on which an employer could request a first-time visa for an H-1B worker, to become effective on October 1, 2007. On April 3, 2007, United States Citizenship and Immigration Services announced that it received more applications on April 2 than the 65,000 cap. Per agency rules, when the limit is reached on the first day of filing, all applications received on the first two days are put into a lottery to determine allocation of the available visas. In 2008 the US 2009 fiscal year H-1B visa quota was reached one week into the application process. In 2008, a total of 276,252 visas were issued and in 2009 that number decreased slightly to 214,271.[7] The American Immigration Lawyers Association (AILA), described the situation as a crisis

      OMG, a crisis!


      The little number things in the quoted text are citations, which you are welcome to read.

      1. Ven

        What about the next few years where the H1B cap went back to 65K and even that was not reached?
        Do you want to know why? Just like you looked up H1B in wikipedia, look up the L1 visa program.
        Cannot believe the misunderstanding about wages here. Let me give an example about “Body shops” hiring H1B. The Client (US bank, PEPSI etc) pay out a MINIMUM of $85-$90 per HOUR (which is almost $180,000/Year) to “Preferred vendors (Capgemini, Accenture etc)” who either send their own H1B’s or sub-contract out to others.
        Do you see a LOW wage being paid by the CLIENT (i.e) the person wants the work done? Why the hell does the client want to do this instead of hiring an American worker?? — I DO NOT KNOW.
        Have you searched for a job at ANY tech company???? Look at how much MS, Google or Netflix pay…irrespective of them being H1B or not…

        You guys are just thinking what the mainstream media want you to think and are throwing hissy fit at H1B’s while the BIGGER and more IMPORTANT issue of off-shoring/out-sourcing and L1 visas is being ignored. The mainstream media WANT you to blame the minority…want you to belive that IMMIGRANTS are the source of ALL your problems…they do NOT want to you see OUR ELECTED REPRESENTATIVES selling out the USA. They want you out on the streen going after IMMIGRANTS with Pitch forks…so that they can just sit back and enjoy the show.

        L1’s do not/cannot immigrate…they do not pay any damm US taxes…they are bonded labourers…
        Off-shoring/Out-sourcing…how the hell are H1B’s responsible for this???

  28. Chester Genghis

    Amen! We need an industrial policy, alright. And make no mistake: it needs to be an INDUSTRIAL (i.e. manufacturing) policy.

    The notion of a “service” or “knowledge-based” economy –without the foundation of a healthy manufacturing base– is pure mythology.

  29. A

    It is clear that ‘Free Trade’/Outsourcing and easy immigration keeps wages down in the affected industries, or destroys them.
    The proper method to deal with this is:
    1. A social safety net for displaced workers
    2. An industrial policy to encourage new industries to absorb displaced workers (so that workers retrained under 1. actually can get jobs).
    Without these two, people suffer more than needed, and can be expected to oppose free trade (at least those suffering, but there are also many benefiting from cheap prices at Walmart). And unfortunately, some of those suffering from trade displacement will possibly become xenophobic.
    Both policies to deal with free trade’s consequences are lacking in the U.S. (except that there is actually an industrial policy, giving enormous subsidies to the ‘financial industry’). One has to recognize that industrial policy is difficult, and should contain a segment for manufacturing. After all, Microsoft & Intel together employ some 100,000 workers or so; GM in its heyday more than half a million. So it is not easy to replace a GM by, say, biotech. And financial services, like most services, are not exportable. —

    The availability of cheap labor prevents progress:
    The absence of cheap labor in Japan certainly encouraged their industries to invest in robotics technology (and in the US, development and deployment of agricultural technology is certainly delayed to the abundance of relatively cheap farm labor. legal or illegal).

    Regarding: “it is extremely difficult to find US … citizens, which is not necessarily the same of course, who are qualified …. to work in our field. ” That comes clearly from the fact, that wages in Science Technology Engineering Math… are not high enough (compared to other similarly qualified: corporate lawyers, ‘Financial officers,’ traders…) and their careers to uncertain. Here in Silicon Valley, high school graduates observe the careers of their parents, and see they are better off going into financial services than actually producing anything (which they see as out-source risky); if interested in biology, better to be a MD than a scientist. (There are a few idealist holdouts though).

  30. Lidia

    My husband ran up against this when he immigrated to the US with a green card: no one wanted an older, permanent resident, tech worker whose accomplishments were many, but whose first language wasn’t English. The same outfits that rejected him were happy to hire less-articulate and less-experienced H1-B visa people for the same job, though… people over whom they had leverage.

    1. Lidia

      Oh, and for folks like Mondo… this was at the same time that my husband’s resume was being faulted for being “too good to be true”. Even an old friend of mine from Sun refused to accept his resume at face value. Accomplishment = suspect/frowned-upon?? A designed-to-be-no-win situation.

  31. Ven

    With this level(or lack of) of thinking at this exceptional blog, I am dishearted to realize that we are right on track to do what Greece is doing:

    Fears of far-right rise in crisis-hit Greece

    ATHENS, Greece — They descended by the hundreds — black-shirted, bat-wielding youths chasing down dark-skinned immigrants through the streets of Athens and beating them senseless in an unprecedented show of force by Greece’s far-right extremists.

    In Greece, alarm is rising that the twin crises of financial meltdown and soaring illegal immigration are creating the conditions for a right-wing rise — and the Norway massacre on Monday drove authorities to beef up security.

    The move comes amid spiraling social unrest that has unleashed waves of rioting and vigilante thuggery on the streets of Athens. The U.N.’s refugee agency warns that some Athens neighborhoods have become zones where “fascist groups have established an odd lawless regime.”

  32. Vasava Dutt

    Yves, your comment “a trend of US executives showing they have more loyalty to their pay packages than to their communities” makes me wonder if you could be in your teens. The statement suggests that US executives in fact do have loyalties to something other than pay packages. Do mull this over.
    Further, the idea that a Corporation is tied to a Nationality may have merits early on, when the legal and tax frameworks of the host lend a helping hand. For mature companies, this idea loses all merit. Please realize that Corporations exist for themselves. They don’t exist for the IRS, the political class (except to feed them), and certainly don’t care about ‘American’ interests. Even a brief study of corporations will lead you to this.
    The exceptions don’t prove much, but may provide you & me with some temporary idealistic relief.
    As Sahill points out above, we live now in a very connected system. Your point about a US worked able to do the so-called ‘face to face work’ is meritless as the cost to the company is higher to hire for a US worker.
    Cost is the sole deciding factor. Yes, a US worker *may* be better, but this is not a tradeoff for us to consider.

    Abuse of the visa process.
    If Infosys is found abusing the visa system, by all means it ought to be punished for it.
    But the abuse of the visa process began *by* the US, *by* the Congress.
    H1B was working fine until all the socialist protectionism started. The H1B was abused, the fees hiked to insane levels to prevent its use. This is the US idea of ‘free trade’ and ‘free markets’. Very well, so a company slips in employees under another visa. Fraudulent? perhaps – let the case play out. The so-called ‘loss’ in tax revenue from the incremental workers on B1 visas pales to insignificance in the context of the biggest ‘US’ corporations paying abnormally low taxes on super-high profits.
    Perhaps time spent on that ‘problem’ of US corporations dodging, falsifying their tax obligations using creative means has a higher payoff than picking on a sector where US grad schools have hardly any Americans signing up for.

    1. Foppe

      Nice case of cognitive capture you’ve got there.
      Mull this over: The way in which globalization is occurring is largely a creation of the national politicians. Yes, there are some spillovers, and there is stuff going on they hadn’t anticipated, but the way in which it is occurring is still under the control of politics — even if they’re trying very hard to create supranational bodies that cannot be controlled by any given country, so as to dilute the influence of democratic politics.

  33. Ransome

    Interesting perspective. Marin has an exquisite pedigree. CEOs are bureaucrats. They are on a team of $1000 per hour consultants. What do you expect them to be paid for being told what to do? If a strategy fails, the CEO is not punished because it was a team decision.

    Outsourcing, off-shoring was invented by the business consultants. Originally accounting consultants, they expanded from Anderson Consulting to Accenture. Their first job was to get rid of IT. There is a long and expensive history behind IT that includes business silos. If you look at BLS, IT jobs were the first to be shed like fleas. Other jobs followed.

    There is only one economic rule of capitalism. Return On Investment, or follow the money.

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