Clyde Prestowitz Interview: Conversations with History; Institute of International Studies, UC Berkeley

The Changing Balance of International Economic Power: Conversation with Clyde Prestowitz, President of the Economic Strategy Institute, August 9, 2005, by Harry Kreisler

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Globalization of the Service Economy

Bottom line here, if we go back to this discussion of your graduating class, when we started to lose those kinds of jobs and that kind of security, the idea was, okay, let's not worry about manufacturing, we'll move into services. Now what you're describing is that these services, for example financial services, can move to India because of the Internet.

That's exactly right.

And the Internet, which as you already discussed, we helped create.

Right. Exactly. We helped create this Internet largely as a matter of national security, and it has become a global tool which is changing the competitive dynamics in a way that right now is creating enormous challenges for the United States.

But an important point that you alluded to here is services, because for a long time manufacturing has been leaving the U.S. and also leaving other developed countries. Manufacturing has been moving to the less developed parts of the global economy, and particularly to China. China has become the location of choice for most manufacturing. As that has been happening, our economists and our business leaders have been saying that we're going to be a services economy and we're going to do the sophisticated design, and development, and finance, and consulting, and so forth. They've been saying that the services economy, because it requires more face-to-face contact and so forth, will be more fixed and immobile. Well, the Internet changes that.

One of the amazing new developments is a new industry called medical tourism. If you go to the Apollo Hospital in Hyderabad you find that medical tourism is going to be a billion-dollar-a-year export industry this year for India. And the way this works is this: I noticed you were limping a little bit walking over here. Maybe you need a new knee. Well, if you need a new knee, I've got a deal for you. You call the Apollo Hospital, they will give you a package, round-trip airfare from San Francisco to Hyderabad, first class; new knee, private nursing care and recovery care; side trip to the Taj Mahal; all done by U.S. Board-certified surgeons at 20 percent of the cost of the procedure here in San Francisco. This is a billion-dollar industry. Who ever thought that you would outsource the doctor? But that's what we're doing.

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