Globalisation is inevitable: (L to R) Daniel Griswold, James Carafano, Elliot Schwartz and Steven Clemons

A key feature of NASSCOM 2004, India Leadership Forum, in Mumbai last week was the presence of eminent policy makers and economists from leading American "think tanks". In an exclusive roundtable discussion with Business Today, these policy influencers took on the unwieldy animal called 'globalisation' and dissected it to carefully present its various implications for both developed as well as developing economies. As the mass migration of white-collar jobs in the US to countries like India creates growing resentment among the American workforce, these experts take the argument several steps further to explain exactly why this process is necessary in order to usher in the new world order. The participants:

Daniel T. Griswold, Associate Director, Center for Trade Policy Studies, Cato Institute

Steven C. Clemons, Executive Vice President, New America Foundation

Elliot Schwartz, Vice President and Director of Economic Studies, Committee For Economic Development

James Carafano, Senior Research Fellow, Defense and Homeland Security, Heritage Foundation.

The roundtable was moderated by Business Today's Priya Srinivasan.

BT: The most dominant economic phenomenon of the last century was the growth of the US economy. The most dominant one of this century will most likely be the growth of China and other Asian economies. How do you think the US should strategise to participate in this growth rather than lose out to it?

Elliot Schwartz: The US has to embrace the changes that are going on. It has to remain as open as it can be to international trade and investment. I think the attitude has to be one where it's a positive-sum game. It's not your gains or our losses but your gains can also be our gains.

James Carafano: Can I just take a slightly different perspective on that? One of the important changes that is going on even as economic changes happen is the effect it has on security. Nations have traditionally thought in terms of national security that began and ended at their borders and I think that the hallmarks of the economic growth that we have seen in the last decades really changed the nature of how we should think about security. We really need to think in terms of interdependent security. For example, the attacks on 9/11 in the US had economic effects around the world; the impact on the global airline industry was dramatic and future attacks could have the same kind of consequences, which is why I think as individual nations the US, India and China and all countries really need to think, for example, of the impact of global terrorism regardless of where it happens in the world. It could well impact their own economies, and what that will require is not just in terms of opening up economic markets but also in terms of increasing co-operation and integration of security concerns among nations.

There is a need for cooperation in security concerns among nations like US, India and China Daniel Griswold Associate Director, Cato Institute	One of the strengths of the American system of education is its adaptability James Carafano Senior Research Fellow, Heritage Foundation

Steven Clemons: From my perspective, which is again different, the worst CEOs of MNCs come in and basically spend down resources, build up debts and extract a lot of equity out of the firm, and in some ways the US management at a political level is doing the same thing. They are undermining the fiscal circumstances of the nation and not making the kinds of investment that we used to. Thus a lot of our growth has been taken for granted and a lot of the growth and gains, particularly the internet and part of the productivity gains, were directly related to the entrepreneurialism and the creativity that came after very important and unique national investments. Those investments both in the private sector and government sector have not been keeping up with historic rates. Our fiscal circumstances are limiting our choices in the future and I think the question you pose is important because it requires us to do some soul searching about what we need to do to put in place to train people and build a base that's going to be productive and competitive. There's an awful lot of triumphalism in the US about the model of the economy we have today but none of the deep level of investments and behaviour that we saw in the 40s, 50s and 60s that helped us achieve those gains.

Daniel Griswold: I think I am more optimistic than Steve and I'd like to echo what Elliot said: this isn't a zero-sum situation. I think the US can continue to be the world's leading economy unless we take some sharp turn in policy. We have invested a lot in places that matter like technology, and R&D. And the other thing that the US has going for it is an immigration policy that allows people in India and other countries to come to the US and contribute to our labour pool and human capital. So I think the US is well positioned to be the economic leader and I think that the fact that China and India and other developing countries are striving to achieve some kind of middle class status will make the US all the more prosperous.

BT: In sum could you outline a single point agenda that would see the US and developing economies in a participatory growth mode?

Clemons: I think that there are some major structural problems. There is an endemic structural overconsumption in the United States and a clear underconsumption in many important countries across the world. That's not sustainable. So to think your way out of that box, I think what we need is much more of a campaign within our government and within the G8, IMF and World Bank to switch our vector somewhat from worrying about how well capital can flow freely in the world to look at a different set of criteria for what does it take to create a true global middle class. Developing and cultivating a middle class in developing economies is about the most important thing we can achieve in the next 50 years. It provides a far more stable form of economic development that's less vulnerable to the booms and shocks we see in highly export dependent growth. That is what I would put on the table and if you look at the IMF and World Bank today, nothing of that kind of benchmarking exists. There are no great global champions at the moment for this sort of global vision, whereas we should be applauding what India's doing because our somewhat haughty advice to nations is get your policy environment right, train your people, and jobs will come and you will move up the economic ladder.

Griswold: I think there is going to be a lot of alarming rhetoric coming out of the US over this election cycle. Democrats have been competing with each other as to who can be tougher on foreign countries that are supposedly stealing our jobs. But tradi-tionally trade has not been a winning issue in US presidential elections so I don't think there is going to be any wholesale retreat in practice in US commitment.

BT: On the issue of employment generation within the US, what sort of gap are you beginning to see between the kind of jobs that are getting created and the existing employee skill base considering that white collar jobs are moving en masse offshore?

Griswold: It's difficult to predict the nature of job creation that will happen but I think in the IT sector it's going to be design and marketing. Taking a more holistic approach, the US is going to be providing the brain power that puts it all together and India will supply parts of it and China will provide parts of it and so will Canada and Europe. The higher end management, design architecture type of jobs will be created in the US.

The United States has to remain as open as it can be to international trade and investment Elliot Schwartz Vice President, Committee For Economic Development	Cultivating a middle class in developing economies is the most important thing we can achieve Steven Clemons Executive Vice President, New America Foundation

Schwartz: If you look at the US economy there are still shortages at the highest level. It's not that we have a surplus of the most skilled or highly valued worker. We don't. We need more of those folks and we need to continue to improve the education system and train people. This is a perfect point where globalisation can help lead a race to the top. We are all trying to move up the value chain, trying to build up skills and trying to educate workers better.

Carafano: There are some areas particularly that may be stimulated by R&D and the defence and homeland security communities that may have unprecedented growth maybe not in the near term but certainly in the next decade or so. Directed energy and the use of lasers for example, nanotechnology is another great area that could take off in the US, biotech sector and I do agree the US will forge ahead in areas of it architecture, enterprise architecture, systems integration, will all be strong streams in the US in the next decade.

BT: Do foresee any shortages in the skill base in the US?

Carafano: I do have concerns about our education system, but I think one of the strengths of the American system is its adaptability.

Clemons: I think that the question is focused on the wrong part of the equation. In areas like biomedical and genetic research, proteonomics, nanotechnology, these are areas that are hoped to be the very very high-end, wealth-creating industries. At the elite end I don't think there will be any issues on job creation, I don't there ever has been. What I worry about is America undermining its ability to feed its need, to bring in the skill base. America has traditionally been the most important cause of brain drain across the world. It is constantly sucking out the best minds in developing countries and bringing them to the US and it has had a very positive impact both for those nations in terms of expats returning and also contributing to the US. The model of the economy is that it's a sort of constant free trade zone in everything. Once you begin inhibiting the ability to bring in people you undermine the very base and chemistry of success that we've had. The question of skill base as such is more relevant to the lower middle class where the problem is that 40-50-year-old people lose their positions and have difficulty getting back into the mainstream with the skill base that they have. Retraining has not been successful.

Griswold: On the high end, as the it sector picks up, we are going to run into a labour shortage like we had in the late nineties going into 2000, and that's where I think the educated Indian graduate in engineering, science and computer science is going to play an important role again, and we are going to have to look hard at the h1b program and get that cap back up. It has fallen to 65,000. It wasn't that big a deal when the IT industry was in the dumps, but as it picks up that cap is going to really pinch. American companies are going to find that if they can't bring in qualified people from India and elsewhere to get the job done, it's just going to be more incentive to move their whole production offshore. The US Labor Department every couple of years does a job projection, you've to take those with a grain of salt but they project increasing employment opportunities in the high tech sector. Despite all the hand wringing about jobs going offshore, they expect the IT jobs to increase in the US. They won't be the same jobs we are doing today and I think if you look at the number of graduates coming out of US colleges who are capable of filling those jobs, we are going to have a shortage and that's where the h1b program and India's plentiful supply of labour is so important.