So, we are well aware that the world in reeling under the influence of a financial turmoil, one which has originated in the US. This meltdown has had a widespread effect on most of the economies in the world, leaving behind some in "Recession"(a period of negative growth).Thus there is widespread chaos all around the world, due to the mere enormity of this disaster. There are parallels being drawn between the current turmoil and those of "The Great Depression" in 1930
(for futher reading refer to:http://www.english.illinois.edu/maps/depression/overview.htm).
However, the purpose of my post in not talk about the financial turmoil, its causes and effects. I am here to analyze the fallout that this disaters has had on the US administration, with them bringing into effect new policies of protectionism. According to the new policies implemented by the Obama administration, companies receiving aid from the US bailout package are forbidden from hiring temporary workers which come from "H1B" category of visa.Thus a large number of companies which have received the US taxpayers money cannot rely on the relatively cheap labour coming from the H1B category of visa, these include the financial giants like Morgan Stanley, Goldman Sac, Citibank, AIG etc.Till now a majority of these firms were private, and thus were exempted from the whimsical influence of the government.With the new bailout plan, the US government has brought these firms under its regulations even though it may not have indulged in the purchase of shares of these firms.
In my opinion, it was but a natural move on behalf of the government to go for a protectionist policy, in the short term atleast. With the implementation of this policy, the government has depicted itself to be concerned about the welfare of its citizens, thus gaining their trust and favour. Although this policy seems to do well for both the parties, the reality is totally different.The companies rely on the cheap labour for their competitive advantage, and to do away with this resouce will hurt their core competence. So though this policy will be a great hit in the short term , it will certainly not be sustainable in the long run. Once a firm starts to loose its competitve edge, others start to take over its market share and thus its slowly and steadly starts to fade. We have seen this happen in the past, "The Great Depression" was the outcome of a protectionist policy pursued by the government and it left the economy in a bad shape.
In the current arrangement, the firms in the US are to great extent dependent on the"Software Coolies" in Bangalore to provide them cheap, skilled labour.This term has become a cliche in the western world and I differ from their point of view. Though the outsourcing industry in the India provides mere services to the western firms, we forget that we know their core businesses and thus these firms depend on our services for their day to day functioning.Thus to do away with cheap labour would infact be detrimental for the whole US economy.
India on the other hand has relied a bit too much on the services industy to foster its economic growth and create employement.This statement can be corroborated by the fact that nearly 70% of our GDP is from the services industry. Its high time we reduce our depedence on services and nurture some core skills which are purely our trade secret.Services industry is highly unreliable, as tommorrow it could be China which could provide cheaper skilled services thus taking all our business. It is imperative that we get on to the manufacturing bandwagon in order to slowly become an export driven country like China. China's export grow at an astonishing 25% whereas we struggle for a mere 15%, thus China leads the wolrd in the export driven countries alongwith the US and Germany. There is a lot to be done by the government to improve our infrastructre, exports, health and education. All these sectors can be driving force our economy, if they are tamed properly. Not to forget we have a large consumer base of about a billion people which remains to be exploited to it potential. This will provide a sustainable economy, which is insulated from events around the world.
For the Indians abroad their is no end to their plight, as even the automobile sector is in doldrums. Once the giant car manufacturing companies start to fall, there will be cascading effect on the various secondary and ancillary industries dependent on them which may lead to another turmoil. On the job front these firms have already received bailout money and thus they fall in the same boat as their financial counterparts.Hence companies like GM, Ford, Chrysler will not be able to seek cheap employement from the H1B category.These events are likely to lead to what is popularly refered to as "Reverse Brain Drain", and thus we can expect some good talent back in our country in the mere future.
So much for the financial turmoil, its a deep subject and rather serious subject. For all the MBA freaks, I happened to navigate across some really amazing webpages.
These are as folllows:
Hope they help you get a fair idea of what MBA is all about, though investopedia in for finance freaks like me.
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