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Archive for July, 2009

First came the Gurkhas, Nepali warriors who fought for the British in the First and Second World Wars. A big campaign last year saw them winning the right to stay in Britain. And that’s the least the British could do to repay their service.

During its rule in the Subcontinent, the British always had preferred ethnicities to fight their wars. The Gurkhas were one. The Pathans, where possible, were another. After the 1857 Sepoy Mutiny, the British steered clear of employing Muslims and certain Hindu castes as soldiers.

In the First World War, some claim that Sikhs formed 20 percent of the British army. With its worldwide colonial empire, the British had globalized its fighting force to great effect, and had no qualms about pushing out a steady supply of colonial recruits into battle. The First World War, as we all know, was a war of attrition, a contest about who can throw the most bodies into trenches and into machine gun fire till the guns run out of bullets.

Even after all that fighting for their colonial overlord, it took the Gurkhas many years to win the right to stay. And Sikhs, now, are guarding the Buckingham Palace for the first time.

One of them, Sarvjit Singh, was born in India. A member of Army Air Corps, he said he was excited about the opportunity to guard the queen: “My experience being a Sikh on the queen’s guard is beyond words. It is a once in a lifetime opportunity. I feel privileged to have this honor.”

Full circle of the globalization of the guards?

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But one sector seems to be steaming on. Legal process outsourcing (LPO), whereby corporations and law firms outsource some of their legal services to cheaper counterparts in other countries, is growing.
The LPO sector in India reported a 200 percent growth in the last 12 months. By 2010, it’s estimated to grow to $640 million, from $225 million in 2007. The top LPO firms are hiring people by the hundreds.

Despite a global slump in the export of services, Legal Process Outsourcing (LPO) to India is steaming on, with a a 200 percent growth in the last 12 months. (See my post from January.)

So, should corporations and law firms outsource more of their legal services to cheaper counterparts in other countries? What are the pros and cons? Are there gains besides cost advantages? How does this model of globalization work?

Let me suggest that you attend a webinar by my consulting firm, Red Bridge Strategy, to get answers to your questions on legal globalization. The first one is on Wednesday, July 29. More details and the sign-on form are here.

The presenter, Matthew Sullivan, is a founder and principal at the firm, where he leads the legal globalization advisory services.

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One war, numerous militarized incidents, competition for economic and political influence over the region, supply of military aid to each other’s neighbors, key players in overall grand strategy, and old civilizations with worldwide diasporas and competing cuisine.

Forget all that.

India’s external affairs minister S M Krishna met with his Chinese counterpart yesterday, and then reassured everyone by issuing the following statement:

India and China may be competitive in economic and trade areas, but they are not rivals. There is enough space for both India and China to grow.

“Space,” huh? I guess each other’s space programs don’t see it that way. From launching satellites to making plans for manned flights to the moon, the program of each has taken cue from that of its rival. It’s the next space race of the world.

Anyway, rivalry is actually not a bad thing. Rivalry, as opposed to competition, connotes the importance of strategy. Two countries, or companies, can be competitors just by existing in the same competitive space. But two rivals make policies by considering each other’s moves.

Strategic policymaking between rivals, as I have argued in my book and elsewhere, makes government efficient and privileges pro-growth economic policies. In the 1970s, improvements in India’s strategic culture, bureaucracy, and industrial policy owed much to the war and subsequent rivalry with China. The pace and extent of India’s open-economy policies since 1991 have been influenced considerably by China’s policy path since 1978.

And in the end, all that has been a very good thing for the Indian economy. So, long live the rivalry.

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Many analysts are putting trust in Asia to pull the West up from the slump into which it has fallen due to its profligate appetite for credit. In addition to production and trade, The Economist recently hoped that Asian consumers would become shopaholics, like their Western counterparts. Never mind that rampant credit-fueled consumerism was a major part of the problem facing the West.

But a dose of reality was injected recently by Minxin Pei, who doubted Asia’s ability to fill in for the West. Pei wrote in an article in Foreign Policy: “Even at current torrid rates of growth, it will take the average Asian 77 years to reach the income of the average American.”

The problem with most economist-driven expections of Asia’s ability to pull the world out of a slump is that such analyses ignore the crucial part that politics, and states, play in economic globalization.

But if lack of ability is one issue, so is a possible lack of willingness.

Political scientists and political risk analysts for decades have pointed out that international financial movements take place only within parameters allowed by states. Ian Bremmer of the Eurasia Group recently restated that observation, from the angle that post-financial-crisis state capitalism is now the main decision-making prism.

What this means is that competition between states will inevitably dampen Asia’s ability and willingness to clean up the mess left by the West. As I have argued in my book, India’s Open-Economy Policy, India’s political rivalry with China, whether in securing energy or in inward foreign investment, will be the first influence on its international economic policies. China’s assessment of the US and Japan will determine its foreign acquisitions. US interpretation of Chinese influence in the Middle East and Africa will also temper cooperation toward free markets.

On top, you have respective Buy American and Buy Chinese policies. These have stayed below maximum so far — but put all of these together and the expectation that Asian consumerism or dynamic growth will be West’s savior is just economic optimism, not political reality.

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