The Microprocessor Industry has grown since the 1990s into a multibillion dollar industry affecting the entire world’s economy. In today’s world no industry and no ones personal life remains untouched by the Microprocessor. The Microprocessor is in everything from our cell phones to our children’s toys. People all over the world are employed by this industry and even governments change fiscal and monetary policies to accommodate this giant business. This essay covers the Microprocessor Industry and the effects it is having on some undeveloped countries and the economy of the entire world market.
Moore’s Law
According to Intel (2007) Moore’s Law is the prediction of Gordon Moore Intel’s co-founder in 1965 that the number of transistors on a microchip increases every two years. Looking at the below chart it can be seen that he was right. This means incredible advancements are just around the corner for humankind. It also means the microprocessor industry is here to stay.
Politics, the Labor Market and the Microprocessor Market
Alan Greenspan (2000) reports that who is politically in power has a big effect on the microprocessor industry. The reason for this is the differences in tax structure from one political party to the next. Conservative Republicans generally support a tax structure that spreads more evenly across all incomes of the U.S. taxpayers. In other words, corporations and higher income individuals pay lower taxes than the middle to lower income bracket. The republicans argue that this produces more jobs and less unemployment. Therefore, Republicans favor lower taxes for the rich and a smaller government. This means less social programs and less pressure on large industries such as the microprocessor industry to hire minorities or improve labor conditions, and salaries. The Democrats on the other hand support higher taxes and larger government. The Democratic Party places emphasis on a better life for all individuals rather than for the higher income class. The Democrats favor higher taxes on the Rich with the rule that the more you earn the more you should support the government through higher taxes. On one hand, this decreases profits in the microprocessor industry and one would think that this would also cut the amount of jobs the industry would offer. However, strict tax laws affect the industry in another way and that is to influence a push to outsource and relocate. This arguably causes a loss of jobs in the U.S. but increases the opportunities for jobs in other countries and chances for expatriates to relocate.
According to Alan Greenspan (2000) the other aspect of a more liberal government ,that may occur, is more relaxed immigration laws which produce a larger supply of assembly line workers for industries such as the microprocessor market., the uncapping of the immigration quotas is one way of protecting a more robust economy.
Usinfo (n.d.) presents the information that the U.S. economy has increased dramatically over the last 40 years and especially since the 90s. It has been suggested that this increase is largely due to the IT field and especially to the microprocessor market. This increase in productivity has raised the living standard of Americans and created many jobs for those who were struggling to get started with basic employment. Since this produces increases in income, it also produces increased ability to buy products. The problem with this according to Alan Greenspan is that rapid increases in productivity tend to produce a larger level of aggregate demand than potential aggregate supply.
The Asian Demand
Global Information Incorporated (2006) contends the well-known adage “when America sneezes developing economies catch a cold” may not be as true as it used to since Asia has developed fiscal and monetary safety measure policies to control the depreciation of its currencies and the balance of foreign capital with its own domestic capital. However, the fiscal and monetary policies of the U.S. still have a big affect on many of the countries, which are the home of microprocessor corporations such as Intel. More and more the market of these kinds of corporations is becoming dependant on domestic demand in these countries. Therefore, when the stock market drops due to monetary policies such as increases in the prime rate of loans the demand on products in Asian countries can be reduce or forestall which can cause a decrease in profit predications. This can cause further problems for the stock market and thus for product demand. Less product demand means fewer jobs and an overall worldwide economic cold.
Intel’s Move Into Costa Rica
In 1997 Intel chose Costa Rica as the spot to open a $300 million manufacturing plant. (TSGM, 2006) The positive effects to the economy in terms of jobs and the improvement to infrastructure are clearly obvious. (TSGM, 2006) The negative aspects are a more subtle area and easy to overlook, but are just as relevant. (TSGM, 2006)
The following paragraphs will identify the more obvious of both positive and negative externalities
Construction Safety
To begin with the construction project itself supplied many jobs. (TSGM, 2006) In addition, as an added benefit the safety standards of Intel had the immediate effect of raising the national construction safety standards of the country of Costa Rica. (TSGM, 2006)
Education
According to Spar (1998) the next improvement was in the education system. Since Costa Rica’s technological education field was not adequate to meet the needs of Intel’s work force. The Costa Rican Institute of Technology (ITCR) formed a group to visit and study Intel plants in the United States. The group interviewed employees so they could understand the kinds of changes they would have to make in their curriculum to train potential employees of the Costa Rican facility. They reported their findings to the Ministry of Education and the Costa Rican government implemented the changes. This is a direct benefit to the Costa Rican people. The ITCR also agreed to give intensive courses in Spanish to the expats who would be coming from the Philippines and the United States. They also agreed to give English lessons to the first 50 Costa Rican employees.
Spar (1998) reports Intel donated land to the Ministry of Transportation of Costa Rica to provide an access road to the plant. The Ministry of Transportation agreed to build an overpass ramp and reword traffic patterns which benefited locals as well as the employees of the plant.
After study was done the Ministry of Transportation decided to give licenses to foreign aircraft carriers which previously had not had routes to Costa Rica. (Spar 1998) This opened Costa Rican airspace and thus generally improved the travel industry as well as the general economy. (Spar 1998)
Energy
Intel needed power immediately and in order to meet this need expediently it donated the land and provided the funding to build a power substation for its own use. (Spar 1998)
Intel also funded a second substation for a neighbor industrial park. (Spar 1998)
Taxes
Spar (1998) reports Costa Rica already had a good tax system in place to encourage foreign investment, but there was still one tax which was a 1% tax on all assets of free zone developers. Since the tax had lapsed it was reviewed and it was decided that it did not apply to free zone developers after all. This decision was a positive externality for all future free zone developers.
Negative Externalities
Agriculture
According to the Global Exchange (2006) since Intel moved into Costa Rica a shift has happened. The shift is from a focus on Agriculture to Technology. Money that might have been there for Agricultural development has been shifted to Technology. Intel and other developers have been given tax exemptions that have reduced funds for other areas.
Local Harmony
Corporate moves like Intel’s have disrupted local harmony through development of housing areas and through a disparity of income. (Global Exchange, 2006) The new Tech jobs are high paying and bring a new life style to rural areas and the cost has been a cultural one. (Global Exchange, 2006)
Tourism
In Costa Rica the influx of money and development along with increased air travel has brought about a dependence on tourism. (Global Exchange, 2006) This has led to beach resort development and a dispute to water rights with locals in those areas. (Global Exchange, 2006)
Costa Rica has a national health insurance system in place that is in danger due to corporations which are supported by the Central America Trade Organization (CAFTA).
(Global Exchange, 2006)
Telecommunications and Power Companies
In Costa Rica the telecommunications and power systems are nationally owned and run. (Global Exchange, 2006) These systems are in danger of being privatized because of companies like Intel and CAFTA supported corporations. (Global Exchange, 2006)
Conclusion
The recent affects of the Microprocessor industry have had a significant effect on the global economy. Economic policies and the politics of the entire world are affected by this giant of an industry. Chili is certainly one of the most affected economies but it is only one of many that has been affected in both good and bad ways. The example of Chili shows that a corporation like Intel can change an entire countries economy and affect the lives of all its inhabitants including the animals and plants. It is up to all of us and the corporations like Intel to make sure that the Microprocessor Industry is handled with great care and responsibility. After all technology is here to stay and like it or not we are all dependant on this Industry for a comfort and ease of life and now what is even more important… our existence.
References
Greenspan A. (2000) The federal reserve board, Testimony of chairman alan greenspan, the federal reserves semiannual report on the economy and monetary policy, retrieved March 1, from http://www.federalreserve.gov/
boarddocs/hh/2000/February/Testimony.htm
usinfo.state.gov. (n.d.), Outline of the U.S. economy, Chapter 7 monetary and fiscal policy, Retrieved March 1, 2007 from http://usinfo.state.gov/products/
pubs/oecon/chap7.htm
Global Exchange, (2006), Global Exchange, Programs in the Americas,
Intel (2007) Moore’s law, Retrieved March 11, 2004 from http://www.intel.com/technology/mooreslaw/index.htm
Spar D. (1998) Harvard Business School, Whale in a swimming pool, Retrieved February 5, 2007 from http://www.ifc.org/ifcext/publications.nsf/AttachmentsByTitle/
Solouki M. (November 7, 2006) Antitrust law blog, Court dismisses amd’s “foreign commerce claims” against intel for lack of subject matter jurisdiction and standing, Retrieved February 1, 2007 from http://www.antitrustlawblog.com/
TSGM, (2006), Thunderbird school of global management (TSGM), Costa rica president, intel chairman visit thunderbird Retrieved February 1, 2007 from http://globalgateway.t-bird.edu/about_thunderbird/
