As I See It: Looking Ahead
December 12, 2011 Victor Rozek
|
Twain and Corleone, the unsung duo of economic prognostication, aptly describe two probable scenarios for IT in the coming year. One prospect is hopeful and the other is cautionary. One provides reason for celebration, the other frustration. In one scenario, we are the masters of our fate, in the other, not so much. “Rumors of my death have been greatly exaggerated.”–Mark Twain “Just when I thought I was out, they pull me back in.”–Michael Corleone First the good news. Who knew that Sam Clemens was a closet economist? Indeed, predictions of economic collapse appear to be premature. The economy, which has been writhing on the canvass for a count of nine, is slowly getting up again. It may be wobbly and out of breath, but it’s starting to throw punches. The housing market is still anemic, but cars are moving, retail sales soared this Christmas, consumer confidence is up, unemployment is inching down, and the economy appears poised to move beyond the recession. All of which means that IT professionals will, once again, be in demand–a probability enhanced by predictions that global IT spending will rise by over 7 percent next year. Over the last decade, most of what could be outsourced has been outsourced, and because of the grim job prospects, fewer students gravitated toward careers in IT. But that may be changing. Outsourcing contracts have declined by nearly 20 percent. And no less an authority than Bill Gates worries that the recent downturn in computer science majors will leave the U.S. short of qualified IT professionals as the economy rebounds. Which means the competition for talent will force stagnant wages to rise, and IT professionals are predicted to do better than most. If the median household income had kept pace with the economy since 1970, it would be approaching $92,000, not $50,000. But IT positions are inching closer to their true market value. The Bureau of Labor Statistics listed the ten jobs predicted to grow fastest through 2014. Each of them ranges from about $61,000 to $81,000 annually, and IT accounts for five of those jobs. The positions include systems software engineer, applications software programmer, systems analyst, database administrator, and network/data communications analyst. After years of job drought, “fast growing” and “good paying” are about as welcome as rain in Texas. Many of the people laid off during the past few years had either marginal technical skills or expertise that was no longer current. There was also a large culling of managers and project managers who found themselves without people or projects to manage. But as the economy heats up, competition will force companies to replace obsolete servers, outmoded applications, and slow networks. Project managers and IT business analysts will be welcomed back, as will network engineers and developers. And because IT continues to be the hub of the economy, the central indispensable service around which all other industries revolve, our numbers may be greater than we imagine. Despite years of media coverage about jobs migrating to India and China, the IT employment market in the U.S. is bigger today than it was at the height of the dot.com frenzy. Rapidly growing industries such as domestic security (i.e. spying on people) and healthcare (keeping Boomers alive beyond their due date) guarantee that those numbers will stay high. So, under the Mark Twain scenario, IT rocks. But under the Michael Corleone scenario, IT–and pretty much everyone else–gets rolled. The fortunes of IT professionals are–more than ever–tied to the health of the economy. And, the health of the economy is–more than ever–dependent on events taking place in locations most of us have never visited. It’s one of the unfortunate consequences of globalization, like being Michael Corleone’s younger brother. If European monetary policy issues aren’t addressed quickly, the economic outlook for 2012 may take a decidedly Corleonesque turn: just when the economy is showing signs of nascent recovery, distant forces are threatening to drag it back down. Unlike the original causes of the recession, however, this time it has less to do with greed and fraud and more to do with the realities of globalization. It’s the economic butterfly effect: Greece sneezes and America may damn-well catch cold. Having survived bubbles and bailouts, our well-being may now depend on what happens in places formerly regarded by Americans as vacation destinations: Portugal, Spain, Ireland, Italy, and the cradle of the democratic welfare state, Greece. For all the hysteria about Greece defaulting on its debt, it should be noted that economically (at least according to Paul Krugman), Greece is no more significant to Europe than “greater Miami is to the United States.” But symbolically, Greece has precedent-setting value far beyond its economic clout. Namely, it embodies the sum of all banker’s fears: that once the first domino falls, there’s no telling where the defaults will end. The dilemma in which Europe finds itself is not unlike the dilemma facing the United States. The surest way to pay off the national debt is to grow the economy, which would create additional jobs and provide badly-needed revenues. Growing the economy also reduces the demand for government intervention on behalf of the poor and unemployed. But rather than creating the conditions that promote prosperity, international banks are forcing nations to unleash austerity which, in the short term, raises unemployment, hobbles economic growth, and increases deficits. It’s hard for computer science graduates to pay back their student loans if they can’t find jobs. Like graduates, debtor nations are caught in a lose/lose bind. In order to raise money they have to attract buyers for government-issued bonds. But buyers want a hedge against the risk of default which, in the financial world, means offering unrealistic, growth-crushing interest rates. The billions in interest paid to lenders can no longer be invested in the economy. Like pay-day lenders who profit from the desperation of the poor, debtor nations are being preyed upon just when they are most vulnerable. For example, as a hedge against Italy defaulting, investors can lock-in a nifty 7 percent rate of return. By contrast, the U.S. only offers 1.75 percent interest on bonds–and not because it’s less indebted. (In 1980, the U.S. was the world’s leading creditor. Just 30 years later, we are now by far the world’s leading debtor.) Rather, it is because foreign investors have greater assurance the U.S. will still be able to repay its loans. Investor confidence is all, and if you don’t have it, it must be purchased. If Greece defaults and the sun still rises the next morning, why not Italy, or Spain? The fear is that uncontrolled defaults will start a chain reaction, leaving banks insolvent, crashing the euro, and freezing credit around the globe. Game over. In the words of Dean Baker, co-director of the Center for Economic and Policy Research, “The finances and the economies of the eurozone are too intertwined with the rest of the world to envision a meltdown that doesn’t also push the rest of the world [back] into recession.” The Fed and five other central banks are now providing Europe badly needed cash by buying more sovereign debt, bringing American exposure to about $5 trillion. Whether those bonds end up being toxic assets that taxpayers will, once again, be forced to cover, remains to be seen. The frustrating, mind-bending irony of the global economy is that American IT jobs can be saved by saving the euro. Do your part, vacation in Paris. As for me, I’m betting on the Twain scenario. For one thing, I don’t own any euros. For another, you can’t bet against a man who, more than a century ago, so clearly explained the reasons for our economic discontent: “If you pick up a starving dog and make him prosperous, he will not bite you. This is the principal difference between a dog and a man.” If IT professionals could speak to European bankers, I imagine they’d say: Bad dog, no bailout.
|
