Wrong, offshoring has grown dramatically on the consumer front as well, and an article in yesterday’s newspaper really drove that home. For $99 a month, school and university students can access tutors in India. That’s about a quarter of the cost of hiring a tutor in the same area code.

For those of us involved in Internet marketing, offshoring is no secret; it’s been around for several years. For example, I paid a service in India to do some keyword searches for me. That produced good work at a fraction of the price of what a North American or European service would need to charge.

In yesterday’s newspaper article, several conventional tutors downplayed the significance of offshore tutors. They say they haven’t seen any decrease in business.

But, that’s really takes us to the point of offshoring, and even outsourcing. When prices can be pulled down, a whole new market emerges. Remember when airlines first began offering low, low discount fares? They created a new breed of airline passenger: People who otherwise would have driven their cars long distances.

Offshoring and outsourcing give consumers more choices, and more choices often create new markets. That makes this form of globalization a win-win for everyone.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.

In my part of the world (the province of Alberta, Canada) we’ve had a big debate over the royalties paid by oil companies to the provincial government. At the heart of the debate was the idea of ‘fair‘ royalties, which is to say how much or how little the oil companies should pay.

Unfortunately, a debate framed in terms of what is fair and what is not won’t be a meaningful one. There can be no fair price when one party (the government) can unilaterally impose a price, which it did.

As Laurence M. Vance points out in The Myth of the Just Price “Free exchange is fair exchange. Free trade is fair trade. The just price is the freely agreed upon price.“ And, of course, on the other side of the coin, when an exchange is not voluntary, there can be no just price.

The futility of trying to set ‘fair’ or ‘just’ prices might be better illustrated by a couple of extreme examples.

For those of us watching the unravelling of Zimbabwe over the past few weeks, and for the past couple of decades, there’s a tragic lesson in ‘just‘ prices. President/dictator Robert Mugabe has attempted to set ‘just‘ prices to offset very bad economic policy (if you can call it policy at all).

By attempting to set a ‘just’ price for food, to make it affordable for the people he’s driven into poverty, he’s pushed farmers out of business. That’s magnified the problem, rather than fixed it. His unfortunate economic meddling has also driven inflation into quintuple digits, virtually ruining what’s left of an already desperate economy.

We can see the same disasters unfolding in Venezuela, under the leadership of Hugo Chavez. He, too, is making a shambles of his country’s economy, and attempting to fix it by setting ‘just’ prices for food. The consequences? Farmers close to Venezuela’s external borders cross over the boundaries into other countries and sell their produce there. And, the poor of Venezuela end up paying even higher prices and watching inflation suck away the value of any money they do get their hands on.

Getting back to home, we’ve seen the new royalty regime work wonders — for neighboring jurisdictions. As some of us expected, oil companies voted with their wallets and took a significant chunk of their business elsewhere.

Just price, then, turns out to be one of those damnable economic ideas that, when imposed by governments, has done exactly the opposite of what was intended.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.

I keep coming across the notion that stock markets in North America will take a hit as the Baby Boomer generation moves into retirement.

The thinking is that as Boomers reach retirement age, they’ll pull their savings out of stocks and mutual funds, and invest them in bonds, GICs, annuities, and the like. This will mean a reduced demand for stocks and mutual funds, pulling down prices overall. Therefore, the thinking continues, that in about 10 years or so, the market will not be a good place to invest.

Since the Boomers are the biggest-ever generational wave, and their passage through the life cycle has triggered countless other societal changes, that’s a reasonable conclusion. And, since succeeding generations are much smaller (the Baby Bust), they won’t have enough critical mass to keep stocks increasing in value over time, as they have for the last couple of hundred years.

Economist and humorist P.J. O’Rourke put it most entertainingly in his book, Eat the Rich (1998):

“We baby boomers have caused everything since 1946. We’ll keep buyings stocks until we retire. But when we hit sixty-five, we’re going to sell stocks. And the stock market is going to go down. And we’re going to wet ourselves. The math is simple: 1946 + 65 = 2011. Buy stocks until 2011, and then buy Depends.”

However, there’s a catch.

As the Baby Boomers get ready to retire, the Asians get ready to invest. In India, China, and other Asian countries, we see a vast new middle class emerging. And what will those new middle class citizens do with their savings?

Invest them in stocks and mutual funds, no doubt. And if North American stock markets offer good values, these Internet-enabled investors in Shanghai, Bangalore, and a million other Asian cities will no doubt find them.

With the Internet growing in both capabilities and geographic reach, there’s no reason for them not to surf the stock markets of the world and invest wherever opportunities exist.

So, I for one, don’t aim to withdraw from the markets for demographic reasons. Yes, demographics has driven much of the change we’ve seen in the past half century. But, the new prosperity of the Asians and the amazing powers of the Internet more than trump the power of the Boomer demographic in this case.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.

I see an increasing amount of chatter about carbon taxes that might reach across national boundaries. Tariffs, in other words, that would penalize nations that do not meet environmental goals set by other countries.

The Europeans have been big on this idea for a while, and now I see Americans and Canadians jumping on the bandwagon, too.

Trouble is, this bandwagon is in a parade that features the emperor’s new clothes (if you’ll pardon a mixed metaphor or two).

You see, one of the big targets of these proposed carbon taxes would be China, and to a lesser extent, India. In reality, these proposals have as much to do with protectionism as with environmental protection, but let’s leave that issue for another day.

For now, let’s start with an observation that’s been around a while, but remains critically important: Environmental improvements only come with prosperity.

If our would-be carbon-taxers get their way and impose new tariff hurdles on Chinese goods flowing into developed countries, there will be a problem. China’s environmental stewardship will take a hit, too.

Without prosperity, both at the individual level and at the national level, there will be little or no improvement in environmental practices. If China’s exports are reduced, China’s governments will have less money available for all purposes, including the environment. And, obviously there will be no grassroots push if China’s workers are pessimistic about their economic futures (not that Chinese governments care much about citizen input, anyway).

Yes, China is a major polluter, and will be one for some time. But, as its economy grows and its citizens become more prosperous, we can expect them to take a growing interest in the environment.

On the other hand, pushing back China’s industrial and economic growth at this point would put a green bullet right through its environmental progress. And that would be two tragedies in one: for China’s working people, and for the atmosphere above us all.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.

NAFTA makes a tempting target, but the wrong one. Autoworkers searching for the real reasons for job losses might starting looking closer to home —real close to home. They will find details in the new book by Alan Greenspan, the former Fed chairman.

In The Age of Turbulence, Greenspan devotes a paragraph to what might have been a book in itself. But that paragraph is telling.

Greenspan writes about the state of General Motors in November 2005, pointing out that GM was planning to lay off as many as 30-thousand employees and close 12 plants in the next three years.

Why? Because billions of dollars in profits that might have been reinvested in new plants or products were going in a different direction. And where was that? To the pension and health benefit funds for current and retired employees. In other words, GM couldn’t afford to create new jobs because it had to meet the pension and health obligations owed to its current and retired employees.

So, while it’s unfortunate that manufacturing jobs are disappearing, it’s certainly not because of a free trade, a conspiracy, or globalization. Jobs are disappearing because of a history manufacturing workers themselves created and insist on maintaining.

They hope to have it both ways, to have rich wages and benefits, and at the same time, keep all their jobs. That’s a miracle that won’t materialize any time soon.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.

Yet, I have to ask if we really have left tribalism behind.

A case in point. The Canadian Radio-television and Telecommunications Commission (CRTC) has just given a major pension fund conditional permission to buy Canada’s biggest phone company, Bell Canada (formally known now as BCE).

The conditions would ‘Canadianize’ the bid. You see, the pension fund may partner with several US private equity firms to make the acquisition, and that set off a furor when the deal was first proposed.

The idea that one or more American companies might be significant investors fanned the flames of tribalism among some Canadians. Unfortunately, there are quite a few Canadians who are tribal at heart, and so we go through foolish exercises like these all too often.

Free trade and globalization have made us somewhat more sophisticated, but like citizens of almost every country, we have some distance to go before we can claim to be above tribalism ourselves.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.

But, the essence remains the same: The need to curb pension costs, and resistance from the left and unions, which never seem to be able to resist the urge to kill the golden goose.

And, reform was needed. An OECD survey from last year was titled, “Pensions: a comprehensive reform is urgently needed.” It warned that the Greek pension system would not be sustainable unless spending was curbed and disincentives were removed for older workers.

Spending control involves more than just the amount of pensions paid out. For example, with the reform bill being passed, more than 130 pension and social security funds of various kinds will be consolidated into just 13 funds. That should reduce overhead and administrative costs significantly.

No doubt every one of those 130 plus funds has its own cadre of staffers, starting with receptionists and going all the way up the hierarchy to the presidents (or their equivalents). And every fund no doubt has actuaries, investment advisors, treasurers, and so on. Of course, once you have an organization with more than a few staff, you add a human resources department to hire, fire (well not very often, I’m sure), and help manage the staff.

Result: Overall the pension system spends far more on administration and overhead than it should. The unions don’t mind, though. They get to put all those people into their organizations and collect the monthly dues. It also gives them extra clout when negotiating collective agreements. After all, if the people who process pensions go on strike, seniors can be expected to put added pressure on the government to settle quickly, and to settle the way the unions would like.

Similar kinds of dynamics play out around the developed world, with the left and unions putting the interests of select groups of public employees before the interests of those who collect the pensions.

Fortunately, the Greek government has won its battle, and Greek pensioners, especially those who will retire in the future, can look forward to getting their pensions, and getting bigger pensions than they would had the system not been reformed.

But that’s just one battle, expect more battles in more countries as the pension efficiency battles continue.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.

It’s an irony almost too delicious to be true: A theme-park about former Soviet dictator Joseph Stalin. Called Grutas Park, you will find it Lithuania, one of the countries invaded by Stalin, and occupied by the Soviet Union for almost half a century.

No man has ever murdered or hurt so many in his quest to impose socialism around the world — and bury capitalism, as one of his successors put it. During his roughly 30 years in power, he imposed communist philosophies and practices at huge human costs.

Under his leadership, Russia and what was to become the Soviet Union became a command economy, through and through. Centralized planning replaced all free market initiatives. This system was imposed with brutality and absolutely no tolerance for dissent.

One sector which did resist, for a time, was agriculture. Farmers, who had just gained freedom from serfdom some 60 years earlier, did not want to be subsumed by huge collective farms, where all decisions were made by the state.

But Stalin would allow no deviations from his central plan. His collectivization of agriculture did go ahead, and led to widespread famine costing the lives of five to ten-million people. And they were just a fraction of the total lost through imposition of the communist version of socialism.

Yet, capitalism is getting the last word, it seems.

A few years ago, a Lithuanian farmer and entrepreneur thought it would be a good idea to save the Soviet-era statues that were being thrown away or destroyed after Lithuania gained its independence. And, he made these statues of Stalin, other Soviet leaders, and various artifacts the centerpiece of his theme park, in hopes future generations will never forget the horrors of Soviet governments.

Not only did he build the park, but he built it with his tongue in cheek. The Russians and other Soviets are getting a figurative stick in the eye. But the combination of bleak history and black humor seem to have won the hearts of other people all over Europe. In a story from 2006, attendance was put at more than 200,000 a year.

In the best capitalist tradition, entry to Grutas Park is by paid admission and you can even buy souvenirs.

It’s enough to make an old comrade roll up in a Five Year Plan and die, isn’t it?

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.

I see in a news story that the net worth of the average Canadian is now a whopping $165,400, more than ever before. The statisticians got that number by taking the country’s total assets of 5.5-trillion dollars and divided by the number of people in the country - - 30-million and a bit.

We could argue all day, of course, about whether that’s an accurate figure or not. And, people on the left would no doubt raise some sort of convoluted clash of classes argument, and demand more redistribution of wealth.

But, leave all that aside while we reflect on how far we’ve come over the past two hundred years. At least those of us who live in and whose forefathers lived in what has become the developed world.

Few of us know, apparently, that until the beginning of the Industrial Revolution our forefathers had an average net worth that was very near zero. They lived on the edge, so to speak, never sure when a famine or some other catastrophe might literally kill them and their families.

Like residents of poor countries today, there were no social safety nets then, except perhaps the kindness of neighbors. Of course, there’s a good possibility that the neighbors might be suffering through the same catastrophe and unable to help.

It’s also worth noting that before the Industrial Revolution, there was little communication and little transportation between towns just a few miles apart. That meant one town could be undergoing famine while another town a short distance away was enjoying bountiful harvests.

The average net worth of the people in your country may be greater or less than that of the average Canadian, but if you live anywhere in the developed world, you are undoubtedly far wealthier and far more secure than our forefathers of just a few hundred years ago.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.

In my last post, I talked about pension funds and mutual funds as the 800 pound gorillas of the investing world, as dominating the stock markets.

So, how many many people have become investors, or indirect owners of big business by saving for retirement? How big are the pools of money created by modest investments in pension funds and mutual funds?

The answer is summed up nicely in this introduction to an INSEAD Knowledge article titled, The Value Creation Imperative…

“It’s been just over 400 years since a Dutch company became the first organisation to sell shares and became publicly traded. By 2007, more than one billion people owned a stake in the world’s companies worth more than $75 trillion.” (INSEAD Knowledge, February 27, 2008)

Needless to say, that’s an incredible number of people, and an astounding amount of money.

Starting with the head count, at one billion people, we’re talking about a group that’s more than twice the size of the USA and Russia combined. It’s slightly less than the total population of India (1.1 billion people).

If we try to put the amount into context, well, quite frankly it isn’t easy. How do you imagine a trillion dollars, let alone $75 trillion? Let’s start by thinking of it this way: You win a million dollars in the lottery, a million times. So a trillion, quite simply, is a million times a million. Then multiply that by 75 to get the total amount invested by working people like you and me.

It’s really quite an incredible story, especially when you consider that until just a couple of hundred years ago, almost everyone in the world measured success by not starving to death. It’s hard to imagine now, at least for most of us who live in the developed world, but until about the year 1800, our ancestors lived like the poorest people in Africa live today.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.