Out goes globalisation as US turns and twists

In a significant speech that signals further tectonic shifts in US policy, vice-president J.D. Vance has rubbished globalisation and attacked the system that enabled US companies to profit from immigrants and cheap labour in outsourced facilities. The focus of the speech was the negative impacts on Americans when US companies divorce product design (done in the US) from manufacturing (done elsewhere to save costs). Undoubtedly, the cause for Vance’s protest can be linked to China moving up the value chain. Vance named China thrice but not India.

Yet, the thrust on the ills of offshoring left no doubt that India’s software and related services (exports of over $200 billion for 2023-24, more than half to the US) were not excluded from the broad theme of the argument. In the past, US President Donald Trump has mocked Indian call centres, the bulk of whom serve US-based clients but are already under a different threat from the increased deployment of AI-powered solutions.

Vance was speaking on 18 March at the American Dynamism Summit, a tech event hosted by venture capital firm Andreessen Horowitz. The summit works for what it calls the “national interest”, and promoted the 2025 meet with the message: “It’s time to build for America”.

While it is difficult to say how Vance’s narrative might play out in the immediate and if unravelling a complex and well-oiled global value chain is a realistic venture, several interesting strands stand out from an Indian context. 

The first is that India can no longer hope to build or become a manufacturing hub by copying the Chinese model, getting companies like Foxconn to bring their factories to Indian sites and manufacture for American giants. The game of building that kind of a manufacturing base is past its expiry date. Even if India persists, it will remain confined to the lower end of the game, a place that China left behind to capture some value up the chain.

For example, 2009 data for the iPhone 3G showed that the total value added for assembly in China was merely $ 6.5, or 3.6 per cent of the bill of materials for that model, attributable only to assembly by Foxconn.

A decade later, for iPhone X in 2018, this jumped to  $104, or 25.4 per cent of the bill of materials as China very slowly integrated into the supply chain. The data is from a well-cited study published by Yuqing Xing of the National Graduate Institute for Policy Studies, Tokyo.

While the US is understandably unhappy that globalisation has taken jobs away from America, it is also uncomfortable that the process has benefited the countries that offer products or services, which in other words is admitting that globalisation was meant to serve only US interests and not work for the manufacturing hubs.

Vance said so in as many words: “… we assumed that other nations would always trail us in the value chain, but it turns out that as they got better at the low end of the value chain, they also started catching up on the higher end. We were squeezed from both ends. Now, that was the first conceit of globalisation.”

The fact that India is less or not mentioned as a threat is also an indicator that the country, for all its claimed tech prowess, remains trapped in low-end labour arbitrage, with limited aspirations seen in prescriptions like Narayana Murthy’s 70-hour work week. India should have been ahead with exciting and innovative software solutions, but its businesses are stuck pushing the bullock cart while missing the huge strides that the Chinese have made, an example of which are Chinese AI models like DeepSeek, Manus or Alibaba's QwQ-32B.

The second conceit of globalisation, according to Vance, was that cheap labour became a crutch, even a drug, to stifle American innovation. If this “drug supply” is cut off, in Vance’s scheme, companies will be forced to pay more for the same work, which will propel them to innovate to keep up productivity and margins. In the past, many have called outsourcing an innovation. Now, outsourcing is being seen as the death knell of innovation, a dramatic reversal indicating how deep is the angst and anger of everyday American workers.

The other point that stands out is that consumerism has left America “empty in the soul”. What greater proof of this than Vance pointing out that “alienation of workers from their jobs, from their communities, from their sense of solidarity” has harmed America.

The vice-president's deep anti-consumerist flavour was crystal clear when he said: “You see the alienation of people from their sense of purpose. And importantly, they see a leadership class that believes welfare can replace a job and an application on a phone can replace a sense of purpose.” Vance indeed went on to argue that money, even if it’s available, “can’t replace something that was dignified and purposeful about work itself”.

These are significant shifts that will resonate elsewhere in the world as America’s might, power and reach of its large businesses realign to suit the new political climate. Forget Q-Anon and its far-right fabricated claims and conspiracy theories. We are in new territory, with influential behind-the-scenes players like Curtis Yarwin, tech leader and founder of the neo-reactionary movement called 'Dark Enlightenment', which wants American democracy to be turned into a monarchy.

The rise of a techno-libertarianism opens its case with less government and more freedom for individuals but is ready to use the government to silence the opposition with extreme measures.

Then there is, of course, Elon Musk, who holds that government is a violent monopoly and needs to be demolished, and Peter Thiel, the PayPal co-founder who believes death is not inevitable. And above all, there is Trump who is happy to be the king forever.

As for the hope of some in India that Trump was the partner of choice for a right-wing government, well, a rude awakening may be in order.

Views are personal

Jagdish Rattanani is a journalist and faculty member at SPJIMR. You will find more of his writings here

Article courtesy: The Billion Press