Global Decoupling Underway
By Bob Adams
Mar 06, 2008
Outsourcing Indians, relocating Americans evidence of transition.
[Editor’s Note: This contribution was made by Minyan Bob Adams and is being published for the benefit of the Minyanville community.]
I read Minyanville Professor Ryan Krueger’s recent article, “Honey, I Decoupled Myself” and enjoyed every word of it. I truly appreciated his closing comments:
“‘We see costs rising in India and people becoming less available,’ Gabriel Rozman of TCS said. ‘That’s why we’re going to places like Latin America, which has professionals and reasonable costs.'”
In an earlier piece, “Sweet and Sour Decoupling Clues”, Professor Krueger added this, “In terms of consumption growth my firm believes decoupling is quite clear and historically profound.”
As an American resident in Panama, I know exactly what he’s talking about. It’s not just Indian firms turning to Latin America to outsource. When I talk to Americans about expatriates coming to live in Panama, they all assume that Americans are the primary driving force. In truth, my firm’s research has found that other Latin Americans greatly outnumber Americans moving here. In recent months, as just one example, Panama has been flooded with Venezuelans looking for opportunities to invest their money and keep it out of the clutches of Hugo Chavez. A decade ago, even five years ago, most would have headed to Miami. Today, they’re coming to Panama, literally in the thousands. They rub shoulders at airport immigration with the Colombians, Mexicans, Peruvians, Bolivians and others headed this way too.
The current debate over whether or not emerging market economies are “coupled’ or “uncoupled” to the US misses the point. It suggests that this is an “either/or” situation. Nonsense. This is a transition from one to the other. The economies of emerging markets haven’t decoupled from the US economy, they’re decoupling. It’s a waste of our time to argue whether the transition is over (is a transition ever really over?), but it’s worth our time to accept that it’s underway. Ryan provides plenty of facts, figures, and sound reasoning in those two articles, plus a third, Kaizen vs. Complacency, but I suspect there are a good many folks out there who still have trouble believing in decoupling and my correspondence with Professor Krueger confirms that.
When I wrote an article for Barron’s last September describing my firm’s surveys (implemented by Zogby) of 115,000+ Americans over a two year period, I found that more than one out of every five American households were considering relocation outside the US (roughly 10%) or purchasing a property as an investment or second home outside the US (roughly 11%). I expected surprise. I got more than that. I found most people just couldn’t come to grips with the idea that millions of Americans were ready to take an action that few would have considered even ten years ago. It was just so un-American.
When Erin Burnett interviewed me on this topic for Street Signs, you could hear the surprise in her voice too. I wish you could have seen her face. Here I was, 62 years old, talking to someone exactly half my age and I was the one who was excited and positive about this new trend while she was concerned, even a little shocked, with the amount of money that must be leaving the US. Talking to someone who reports every day on the movement of money and jobs from the US to emerging markets and experiencing her surprise that “average” Americans might be doing the same thing made me both smile and wince.
Indians outsourcing, Americans relocating and Venezuelans looking for a safe haven; you might think that Ryan Krueger and I are talking about different things. We are in detail, but we aren’t in general. We each have different pieces of a much bigger puzzle. That puzzle is the global transition underway right now. No one has all the pieces, not by a long shot, but they’re out there and we know that. If you’re going to wait for people like us to put all the pieces together, fine. We don’t mind. But if you want to profit from it, come on over to the puzzle table. There’s still room.