[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

eroded significantly in 2001 as a result of two factors. First,
the United States experienced an economic recession in 2001,
and many high-tech firms began laying off workers. Second, the
terrorist attacks on the World Trade Center in New York City
and on the Pentagon on September 11, 2001, led to a new concern
with homeland security and a desire to tighten controls
on the number of foreigners entering the United States. While
Congress did not move immediately to reduce the availability
of H-1B visas that could be issued, the number was eventually
reduced in 2004 from 195,000 to 65,000.
The movement of workers from India to the United States
represents just one example of how globalization promotes
the flow of resources—in this case human capital—across borders
in search of higher returns. The same process is at work
in the flow of investment capital from the United States to
India. In recent years, such giants as Microsoft, Oracle, Intel,
Cisco, and AOL have invested heavily in India. Operating
research and development facilities in India has several advantages
for these firms, chief among them the presence of a welleducated
workforce and significantly lower wages. As long as
there are limits on how many workers can be brought to the
United States, it can make sense for a technology firm to move
to where the workers are.
Opening facilities in India also enables firms to engage in
around-the-clock software and product development. Project
work does not have to come to a halt when night falls in Silicon
Valley—with a twelve-hour time difference, the workday is
just beginning in India, where workers can take up the uncompleted
tasks. The Internet has helped make this transfer of
work possible, as a software firm can electronically move new
code under development between its California and India
locations.
The inflow of capital investment has helped fuel the development
of local high-tech firms in India as well, and the area
around Bangalore is now known as the Silicon Valley of India.
Increased capital investment in India provides both new jobs
for Indian engineers and the funds that have enabled local
high-tech firms in India to expand.
2004 with plans to hire 500 workers. While some American jobs may move to
other countries, new jobs are being created by foreign firms that locate in the
United States.
The movement of jobs is part of the process of globalization. Like free trade, this
process can benefit all countries. But also like free trade, its overall benefits do not
necessarily translate into gains for each and every individual. Those workers whose
jobs are lost do suffer, just as they would if their jobs moved to another state or disappeared
because of changes in technology. In the long run, economies gain by implementing
policies that help these workers find new jobs rather than by trying to
preserve existing jobs.
THE PROGNOSIS FOR DEVELOPMENT
Overall, the divide between the haves and have-nots has not decreased over the past
century. There have been successes, where the gap has narrowed, and failures,
where it has widened. The choice of policies appears to make a difference. Some
countries have adopted policies that promoted increased growth and reduced poverty.
Others have pursued policies that led to some growth but had little impact on poverty
(or even increased it). Still other countries seem to have stagnated or declined.
Unfortunately, the prognosis is for these patterns to continue. China and India are
poised to take advantage of the new economy represented by the Internet and information
technologies and thereby further narrow the gap between them and the
DEVELOPMENT ∂ 807