Wednesday, February 05, 2014

Outsourcing and War

Half a century ago, the world war was won, because the US redirected all its industrial might in building weapons. And since then the arms lobby have held special attention in this country. Why then are these lessons being easily forgotten when the US allows its industries to freely outsource their manufacturing might to China. Little does it realize that it is this manufacturing might which will weigh heavily in any conflict with China.

It is a different context when the industries outsource their software development and maintenance capabilities to India. In most cases, the controls (servers / licenses / IP) reside in the US itself. And software in itself being a virtual asset, it is easy to revoke such licenses, and take back control. Can anyone do the same with actual physical machines? And that too from an authoritarian nation? Why is there no concentrated, strategic effort to shift manufacturing capabilities to allied nations that believe and honor similar tenets of democracy and individual freedom.

The lack of people's will in government policy reflects in China's government actions towards both its citizens and foreign nations. For example, US intelligence establishment now rates organized hacking from countries like China and Russia as the biggest threat to national security than even terrorism. Why isn't such pertinent information not reflecting in sound, strategic countermeasures by the administration. While a democratic US is being railed back by its citizens even in the realm of ethical-hacking, it is not a level-playing field when there exists no such control in the hands of Chinese citizens.

The means to fight back are fair and clear. The Chinese currency still maintains artificially low exchange rates. Force it to be controlled by market forces as most currencies doing global trade do. Or cause a boycott of China using the WTO. Of course, political realities like China propping up the lion-share of the US debt does not help. They can cause a currency-war by selling it fast causing the dollar to fall also.

And that is why the "spread-the-wealth" strategy by pushing US companies to outsource or build manufacturing capabilities in allied countries, will be of more help. These companies are patriotic, and are just looking for a level-playing field. If the government directs them so, it should apply to all US companies in their field.

Such balance of power is of prerogative to avoid the looming total tilt in power (currency, military and hacking).



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