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Giuseppe De Francesco

Owner - Games Designer and Coder, DFT Games

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Global economy: how to cope with that?

Here a few facts:

* - There is a huge online market over the Internet with a lot of different escrow websites facilitating clients to meet and hire contractors.

* - Over the last 24 months we have seen an unexpected increasing of excellent professionals from Asia (especially India, Pakistan and Nepal) offering their services online.

* - On those escrow websites the jobs are awarded to the bid providing the best value for money (lowest bid with highest professionalism).

* - Playing the game of lowering the bids, Asian professionals have practically set the price for professional services at a very good level for their countries, but impossible for US and EU people (like 1 month of work for 500USD).

I totally understand the client point of view: why to pay 2,000USD for a service that I can get at the very same level of professionalism for 500USD?

Borderless, free money circulation allows the above phenomenon to rapidly grow, but... what about people that cannot live on 500USD a month?

This is extremely sensitive issue among people working online (like myself) but the extension of this on the actual goods production is also happening here in EU: many companies move the production sites to Asia, winding down EU factories.

What's your take? How do we solve this situation? Is it even possible to think to a solution? Should we go back to put strong money borders with heavy customs fees for sending and receiving money?

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    Oct 22 2013: Giuseppe, I have been around the world a few times and around the block quite a few. The reason the economy, and I will speak of the USA, but it applies other places as well, locally here has went overseas is obvious. In a talk with Obama Steve Jobs was asked about moving his ops to China. He wanted to stay here but he had problems with unions, state and federal requirements, work force, and other considerations that would cost him millions and delay his production for up to five years. In talks with Chinese he said he needed XXX engineers, XXX workers, XXX buildings with XXX floor space. The Chinese ask if he wanted inland or seaside and would two weeks be soon enough. He moved.

    These deals are made in holidays in the Islands and shopping trips to France by corporate and state officials. They ensure all needs are met and the US company greases the right palms. The money saved in paying the work force salaries, benefits, insurance, overtime, cost of facilities, and in general all operating costs ... not even mentioning US state and Federal taxes is billions in profits.

    So it is evident that capitalism is every where ... the communist leaders take the money from the capitalists but just do not want to share or allow the citizens to do it. The global economy is about money and power ... the economic health of the country is about politics. The choice of the communist preferred Keynesian or the democratic Austrian economic models. The bottom line is ... greed.

    The problem as I see it .... is that you are a nice guy playing by the rules. You are going to lose. The only way I see for you to survive in your line of work is to hitch your wagon to a international player and let him be the SOB and you work under contract. In essence allowing the international player to find the comparative advantage.

    I know this is not what you are looking for. But it is my two cents worth.

    Good luck in figuring it out.

    I wish you well. Bob.
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    Oct 21 2013: You have to find a comparative advantage.

    http://www.ted.com/talks/matt_ridley_when_ideas_have_sex.html
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      Oct 22 2013: Can't see any, but I'm open to any idea... that's why we're here... right? :)
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        Oct 22 2013: The hard reality is that you have to find one or find something else to do for a living.

        If I were you I would make sure that I understood what business I was in and what the emotional reasons people have for using your services
        .DO NOT ASSUME YOU ALREADY KNOW, you do not to the extent you need to. This is one of those FIND OUT moments in life. If you don't find out you did not do what you need to. However it may just be that this problem is unfixable


        FWIW the Chinese have kept their currency undervalued for a long time. This forced up their savings and lowered their consumption. This has to end as there has been so much over investment that their economy is in for a rocky road for quite a while along with either an increase in unemploment or the value of their currency.
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          Oct 22 2013: Dear Pat,
          I've been a software developer for 32 years and I've seen a lot. There is no emotional reason to pick a developer that costs 5 times another one, no matter how good he is. BTW, writing software is not rocket science, so the quality of my code can't be that better than any other Indian colleague... this is just a problem of economics... no motivational crap can change a global economy downfall.

          Dell moved out from Limerick sending home 600 workers simply because moving the plant to Poland was a better deal. Now they plan to move to Asia. Same goes for so many companies... even historical Irish brands now produce where they pay a few bucks to get excellent workforce .

          In Italy the automotive sector is down to 1978 figures and there is no hope to see it back in shape: over 25k workplaces were lost in 3 years just in that sector, not counting the related sectors' losses.

          Capitalism can't cope with global economy, so we need a serious change... not motivational speeches. The problem as I see it needs a radical intervention to be solved, but I don't see people moving in the right direction... I see people struggling and becoming isolationist instead of joining forces to change the world... pity.
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          Oct 22 2013: Exactly Pat, I totally agree!

          It is very important, that this 'hard reality' aka 'capitalism' appears to be a natural constant, a never changing entity of the universe, something which is beyond any change!

          This 'appearance' becomes particularly important in countries in which each citizen has the right to vote and in which each citizen has exactly the same voting power. Democracies for instance, to name one example.

          This is very important at times, at which the mechanics of capitalism manage to hurt more and more citizen unless the majority of them is finally cornered.

          As we all know, cornered people do funny and illogical things - very difficult to predict - we got to make sure, that none of them gets the idea to use their voting power to change this 'hard reality' in their favor. Especially then, if this favor would serve the majority of the people!

          This got to be avoided, at all cost! So how do we do that, that none of those cornered people start to question or even to blame the economical system which corned them?

          Well Pat, I think you are on the right track already. People like Giuseppe, who feels cornered in his situation and started to question 'the system' have to insured, that it is their and not 'the systems' fault!

          You rightly reminded him, who works in his business for many years, that he actually has no clue about what he was and is doing all this time! Well done! This way you put him into a defense situation! Beautiful! Now he has to explain why he didn't manage to adjust to this 'unchangeable' hard reality, which keeps his mind busy and general system critique low.

          Doesn't we all know that keeping a 'competitive edge' against low labour cost markets is a piece of cake? Just do better graphics no one else does for 1/5th of your price! Just make the people want your stuff and your problems are gone, it is that easy! Capitalism got nothing to do with the problem at all! Its just Giuseppe who is complaining for no reason, right?
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          Oct 22 2013: He was just doing 32 years a lousy job in keeping his customers interested, right? He was just exploiting his market all this years by charging high prices for no reasons, right? And it is HIS fault that he can not keep up with foreign programmers to whom $500 a month is a fortune, right? He could adjust to this level as well, correct? Or even lower the prices, to get the other side mixed up a bit in open and fair and good old competition, as this is what healthy markets are about, right? They correct themselves, right?

          A 'smell good' Mexican plumber for $5 per hour? No biggy, just smell even better for the difference of 20 bucks. Or start singing to entertain the people to make up for the difference. What about dancing? This will secure a plumbers job for at least 5 years, if not more ...

          Let us make the majority of people who are cornered by capitalism chase their tails instead, before they choose to free themselves in voting their way out of their despair, because voting is dangerous, especially for large numbers of voters!

          Let us repeat our slogan, that it is THEIR fault why they find themselves cornered. It is THEM, who didn't work hard enough! it is THEM who didn't do good enough at school! It is THEM who choose the wrong profession! It is THEM who are not creative enough! It is THEM who didn't understand their business!

          And as more often we repeat that, Pat, as more likely it becomes they will believe what we keep saying and finally end up chasing their own tails in the corner we put them!

          Once this is done, we again saved this 'hard reality' against the danger of the majority vote,
          which really is just a pain in the but in our 'political reality', right? Maybe we can get this changed as well one time, what do you think?

          So lets cheer our capitalism, as for certain, this truly is a natural and unchangeable constant in all THEIR lives. And in the meanwhile, we may check how our investments in China, India and elsewhere are doing and if we did well .. :o)
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        Oct 22 2013: You miss my point. People have an emotional reason for buying anything. I come from the commercial construction industry which you might say is as cutthroat as it gets. But this still applies.

        You asked for ideas yet you whine when you did not hear what you wanted to. Good luck, with that attitude you are going to need it.
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          Oct 22 2013: So you are stating that there are emotional states that can make a client pay $5,000 for something that they can get for $900 at the same level of quality? Can you make any real life example? I can't pinpoint anything that fits this picture, and it's not about attitude... maybe I'm too stupid...
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        Oct 22 2013: I'm not saying your situation is fixable.

        It might be that there are software customers who do not view programming as you do (a commodity) and get quite emotional when the vendor they used is late or delivers a beta version, making them look bad to their boss.

        Another one is a local plumber who advertises as the smell good plumber because people get emotional about plumbers who smell bad.

        People pay considerably for an apple because it is friendlier and not a problem.

        People pay more for a Cadillac. What business is Cadillac in? They are in the vanity business, this is emotional reasoning.

        Like I said this is one of those times in life that you need to FIND OUT, cuz if you don't find out you are going to be looking for a new career
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      Oct 22 2013: Oh, yes Pat, 'looking for a new career' thats a classic! I almost forgot! Well done, Giuseppe is almost there!

      What do we need our expertise for, right? Who likes what ones does anyway, correct? If Giuseppe manages to create computer programs and games, why shouldn't he be able to flip burgers at Burgerking, right? Or what else one can do after a 32 year career of specialization, correct?

      Market regulations are no option anyway. We don't want governments to tinker with that one, do we?

      What did Giuseppe say? Governments are representatives of the people in democracies? Naah ... he must have understand something wrong to have said that, right? We don't want a nanny state, do we?

      We all know that markets have to be free and that it is not their intention to serve the people, right? People have to serve the markets, as otherwise, who on earth is doing all this plain boring work for the revenue of the ruling class?

      No Giuseppe, you got to be kidding! It is your fault that you can not compete anymore, so get yourself another job! Don't blame anyone else! It is you who is the looser here, not the capitalist system! The system is fine! It got us off the trees and cages and keeps increasing our wealth ever since! You as anybody else had the same chance to participate, so don't cry if you can't keep up! Right, Pat?

      You got to accept Giuseppe, that it is YOU and nothing else who brought you in that very corner you are in right now, so stop complaining and look for another job! Right, Pat?

      And don't you dare to question the system, Giuseppe! It got nothing to do whit it! Its a natural constant, remember? A 'hard reality' you got to face. Grow up, get yourself another job and shut up dammit!

      ;o)


      Giuseppe, I hope you understand my intention. I am not certain about Pat though ... ;o)
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        Oct 22 2013: Lejan

        You digress into a sea of conjecture which is it's own trap, the consensus which is irrelevant, mass agreement that it is all hopeless.

        I don't normally respond to your chatter, but since you went to so much trouble to covince
        Giuseppe that he can't possibly do anything for himself, I thought I better say what you blame on capitalism is really the product of government.

        Now I suppose that you will release endless amounts of conjecture, don't flatter yourself I will not waste my time responding
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          Oct 22 2013: Pat,

          I am on your side, really! And of course we have to blame the government that capitalism can not show its natural beauty! Thats what I meant in saying:

          'Market regulations are no option anyway. We don't want governments to tinker with that one, do we?'

          So what makes you think I just chatter while supporting your very standpoint?

          I didn't convince Giuseppe in any other way than yours. I even encouraged him not only to 'smell' better yet also to dance and sing on top of it to bridge this market driven gap in prices.

          And as you, and final consequence, I was suggesting that he rather get another job but to complain about the given situation.

          Complaining doesn't do anything. I agree with you and made this point even clearer in saying:

          'Grow up, get yourself another job and shut up dammit! '

          So don't you believe in your own views anymore, Pat? Or what makes you feel uncomfortable the moment someone supports them?

          I refuse you believe that you see your understanding of the world just as another conjecture.
          This would not resonate with how you appear.

          Anyway, I just tried to be supportive towards some untouchable subjects and to keep them as such just as you prefer to do, yet instead you feel to waste your time on it.

          Strange, yet now I will never know what motivates this your decision.

          Well, I guess 'a sea of conjecture' to some is just a puddle of facts to others and likewise, which may have caused this terrible misunderstanding of ours.

          :o)
  • Oct 22 2013: The genie is out of the box and we have to live with the changes. Even those in India and Pakistan will face some major changes. US corporations are slowly moving both software and manufacturing back to the US. They found that in sw they lost control of IP and with the ability of robots growing, labor costs for many products is not the major cost factor.
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    Oct 22 2013: Hi Giuseppe,

    I read most of the comments and I felt they were off the topic (Sorry); I think this topic should have been under Question heading for answers rather than in Debate heading as people like to debate and you don't get solution sometime.

    Practical solution is in order to survive in global economy one have to become global citizen.

    Like trying every new thing scare; this will also, but look around you, how Indians and other ethnic groups are getting adaptable to new customs, culture, language and place. Most of the Indians Work abroad send Money back to home and due to exchange rates they get benefited that too Tax free income, now the question arise can you do it, the answer is maybe no, age and many other factor's So how can you use your skills in which you are best like others. I think labelling will help in your case as you are a owner, you can search someone in India or other place who can work for you in comparative price then start a institution that teaches and provide Your country's Certification etc grow in this sector. Basically start business in this new destination and remain in business.

    and most important make younger generation adaptable to change send them to India, China etc after all these are developing beautiful countries, but there will be competition.
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    Oct 22 2013: I am old enough to remember a time before this free trade stuff when most Western Nations had vibrant, sound economies with low unemployment and decent wages for most. All gone now.

    I doubt we could return to those times but, for me, that is where all the fiscal problems we see occurring around the world today stem from.
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    Oct 21 2013: this argument was already alive 150 years ago. it was refuted 150 years ago.

    in 1845, bastiat wrote his "economic sophisms" in which he recommended (sarcastically) to destroy the railroads to protect local producers from cheap foreign goods. or even better, build broken railways in the first place.

    in another essay around the same time, he called for cargo ships throwing their cargo into the sea to restore positive trade balance with america.

    in fact adam smith described the correct theory in his "wealth of nations" in 1776. in this book, he correctly identified international trade as a source of wealth for both parties.

    so it seems we are struggling with this concept for 250 years, and we have learned not a single thing.
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      Oct 21 2013: I really don't see how the two things are related.

      You have a quite straight and simple problem here: the online market is being leveled to the costs of work in the Asian countries (see Elance, Freelancer, Guru and so on) and that is a simple and hard fact.

      On the other hand who lives in EU/US/JP (and similar western economies) needs to earn ten times that just to survive. This is another simple and hard fact.

      So we have two hard facts that bring to one result: western economies will either fall or find a way to balance the huge gap imposed by competing with people that can live off pennies.

      I can't see a way out and I'm among those that work online, so I'm banging my head on a wall... I'm currently planning to move to India with the family to be able to survive, but I'm quite sure that Indian govnmt will soon close the borders when realises what's happening...
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        Oct 22 2013: and you don't think that in 19th century france, very similar statements were made by french people about they can not compete with some cheap german product, and how would they make a living now?

        it seems to me that the real problem is not that you don't understand the parallel, but just don't want to.
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          Oct 22 2013: Maybe you should just give another example. Maybe one which dates back more than just 250 years. This usually helps, because as longer the distance, time-wise, to the 'now' an example is chosen, as more intuitive it becomes. I mean, we all know this, right?

          What about 586 years? Thats seems a good period! And 1427 was a perfect year too.

          I am soooo curious now ...

          :o)
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    Oct 21 2013: Welcome to the mechanics of capitalism!

    How to cope with that? Reboot into a more stable system!
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      Oct 21 2013: Sure, like ParEcon, but people don't seem to get it, so I feel that we live in a catch-22 situation here.
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    Oct 21 2013: Is there something you can offer in quality or service that would make your offering of greater value than what your professional competitors offer?
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      Oct 21 2013: Not to justify a price 4 or 5 times higher, that's the problem... this is not ordinary competition :/
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        Oct 21 2013: I do not know whether there are manufacturers of cars in Ireland. If there were, would you buy the car made in Ireland at five times the price over the same quality car made in Asia? Let's say the car made in Asia costs whatever cars cost now from Asia, but the Irish cars cost five times that much. Would you want your country to prevent you from buying cars not made in Ireland?

        Many people are happy to buy some things locally even when they are a little more expensive, but the willingness to do this depends on how much extra they have to pay and how big a purchase it is.
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          Oct 22 2013: Problem is that nobody wants to spend more to have that car, hence local economy is going down.