The other day I came across an interesting statistic from the late 90’s.

From 1971 to 1991 the top 500 global companies increased revenues by a factor of seven from $721 billion to $5.2 trillion. During that same period total employment at these firms had remained flat hovering at around 26 million.

How did they squeeze so much output from the same employee base?

Some of this is no doubt due to technological advances, but in hindsight one can see that much of it comes from shifting work to service providers in lower wage countries.

The manufacturing firms were the first to do this because it was natural for them to see their work in terms of discrete projects that could be outsourced. Hence the first wave of globalisation which dates back to the early part of the last century when multinationals set up factories in Asia and other locales - Malaysia’s economic miracle, for example, was triggered in the 1970’s when 17 US semiconductor companies set up final assembly plants in Kuala Lumpur and Penang.  The Japanese semiconductor companies followed.

Other sectors now treat ‘business processes’ in the same way today. Something that can be pulled apart, executed in low wage/low tax locales, and then reassembled for delivery to the customer. Loan applications, tech support, software development, medical transcription, debt collections are just some examples.

The search for better and cheaper ways of doing business seems to be an unstoppable force that drives multinationals to locales that offer the greatest ‘incentives’ – subsidies, low taxes, low wages, easy access to markets.

These locales almost never include the home country whose very success has made it unattractive due to high wages and societal protections such as workers rights and employment laws. For example, Malaysia agreed to ban unions in the electronics industry to protect the US firms when they first came in. The ban continued for 25 years.

And so, globalization blazes its path around the globe looking for the low ground.

The lives of many are improved as low wage economies raise their standards of living. But unskilled workers in high wage economies lose. Companies have become skilled at redeploying the very elements of production that were once local. So now these workers must compete with other unskilled workers around the world...