Capitalism Vs Socialism - Part2

Wednesday, May 27, 2009

This is in continuation of my earlier write up on the same topic on 23rd April,

Subprime crisis had been one of the factor economic recession. Banks, financial product companies were directly involved in subprime and hence there capital got eroded. Free slow of money stopped there by triggering a recession. Since people lost jobs, spending decrease and the revenue got hit, which led companies to move into a protective mode.

Since unemployment peaked up, there are talk at Govenment level as well, to look at ways to stop outsourcing to low cost destination, so that adequate employment are available locally. Offcourse this is a right thinking, there is no point in providing opportunities to outsider and displacing the local.

Now, on a different spectrum, none can deny that US has been one of the main innovators in Technology or Product. IT has been one of the major one, Right from CPU, Laptop, servers, Operating systems, open source software, package entreprise software, databases, the US corporates has been leaders in this sector. Its not only IT, US had dominated in many sectors as well.

Over the decades, all the US corporates have grown exponentially and for US corporates, US alone is not the market, world is the market. Truly so, the expectation of capitalist approach is to have a free market so that fittest one survive.

Having considered the above point, if one think of a sitution of restricting outsourcing, what could happen is corporate could think of having a plant or task allocated in US location for US and western market and plant in China or India for Asian Market. The implication could be since of cost of living is different, it might end up product manufactured out of US location is higher priced compared to a product manufactured in China or India location. Such approach will fail and can lead to other problems like the black marketing or illegal trade or even business getting closed or acquired.

So, I believe only approach for the world countries is a collobrative approach and
continue to have free market regime and thereby have competition, which allows consumer to get the best. Ultimately one has to look at root cause to get solved, there could many option, some of them might look like,

* Revaluation or devalution US currency against world currencies.

* Options of having salary cut instead of providing pink slips OR making salary parity based on skill level, attitude and experience instead of location based.

* Further,I really fail to understand, as what the benefit US economy get by trading or bench marking Oil in USD. I believe it creates artificial demand for US currency which in turn make USD to appreciate. But in long term, I do not see a no real benefit to US economy.

I still believe capitalist and free market are the best for world economy & for further growth as well, so that consumer have the best product at a best price at the right point of time.

I welcome readers comments ......

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