February 26, 2004

Friedman on Offshoring

Thomas Friedman argues about the hidden benefits of outsourcing in What Goes Around . . .:

I was prepared to denounce the whole thing. "How can it be good for America to have all these Indians doing our white-collar jobs?" I asked 24/7's founder, S. Nagarajan.

Well, he answered patiently, "look around this office." All the computers are from Compaq. The basic software is from Microsoft. The phones are from Lucent. The air-conditioning is by Carrier, and even the bottled water is by Coke, because when it comes to drinking water in India, people want a trusted brand. On top of all this, says Mr. Nagarajan, 90 percent of the shares in 24/7 are owned by U.S. investors. This explains why, although the U.S. has lost some service jobs to India, total exports from U.S. companies to India have grown from $2.5 billion in 1990 to $4.1 billion in 2002. What goes around comes around, and also benefits Americans.

This is in addition to the more obvious benefits to American consumers (e.g. shorter hold times and better service) and American businesses (cost savings to keep them more competitive globally).

Good to see someone getting past the demagoguery.

Posted by richard at February 26, 2004 04:18 PM

Ummm. Wow.

I'm not sure that he said what you seem to think he said. The only thing that had anything to do with "shareholder democracy" was that 90% of the Indian company's stock was owned by US investors.

The rest of the paragraph (and my post) directly addressed issues that help workers. The fact that we are selling Compaq computers, Microsoft software, Lucent phones, Carrier air conditioning, and Coke bottled water helps the US workers who make those products (not just the investors who own stock in those companies).

Exports are an important part of the economy, and having more people (in India or elsewhere) who can afford to import our goods is good for both businesses and employees. That's why it's important that exports to India have gone up 72% in the last 12 years.

Protectionists often argue that cheap imports are bad for American workers because they compete with domestic production, eventually leading to lost jobs. If you buy that argument, you can't turn around and say that increased exports don't help workers – it doesn't make sense.

My point that I tacked on was the more oft-mentioned one that American consumers and businesses also benefit through lower prices – which in the case of businesses, let's them stay more competitive and not lay off as many workers.

Understand the argument before you go off on one of your "legitimize the discourse" rants, blood boiling or no.

Posted by: richard at February 26, 2004 06:57 PM

I think I'm somewhere in between you two on this one. First, in support of offshoring: can you honestly ask me to sympathize with the lower middle-class American worker who loses his job to a foreign competitor whose national economy is in such dire straits that he will do the same work for 1/2, 1/3, 1/5 the price? It's an ugly nationalism that says the American worker is more important, and ironically it comes from the left, which is quick to point to the dozens of Iraqis who perished in obscurity for every celebrated and honored American casualty. I read last month's Wired article, and the cubicle rat who started the "Save Our Jobs" movement sounded more like a pickup-truck patriot than a marginalized worker. He's a spoiled brat; screw him.

And what's more, if entrenched American businesses are, by virtue of their economic muscle and product quality, going to crowd out domestic competitors in these countries, I should think it only fair that we give some of these people jobs.

On the other hand, it certainly does depreciate the gains that labor has made in America when corporations can look elsewhere for workers to oppress. So I agree that some international-level collective bargaining needs to happen to keep Big Business on the straight and narrow. Or some minimum workplace standards should be incorporated into free-trade treaties. Thing is, the more unconscionable conduct — the sweatshopping, the child labor — occurs in manufacturing and has gone on for years. The call-center and systems jobs target a more skilled worker who likely has other economic alternatives; in spite of themselves, Big Business has to install water coolers. And they might even allow a ten-minute lunch break. Sadly, that's progress.

It used to be a high-school graduate could make sixty grand per year in my hometown at the steel mill. Doesn't happen anymore, and because of the limited options available to workers with a grade-12 education, more people from the area go to college. It was a big screaming deal in Youngstown when the steel mill closed in the late '70s. So this has been going on for years. Manufacturing jobs bit the dust first; now sit-by-the-phone and systems jobs (each of these one step up in desirability from the last) are going the way of the dodo. The important thing is to make sure that, with each new job export, the American Worker become better skilled and better trained for higher-level pursuits under better conditions, not to protect his have-cake, will-eat-it-too situation with protectionist legislation and demagoguic gestures of "patriotism."

Sure, it's a miserable bait-and-switch to train yourself for a job, settle in, and then — bam! in your late thirties your entire field evaporates. And America could always do a better job of retraining and helping displaced workers get back on their feet; the Limbaugh moralizing, the regressive anti-safety net dogma is so pronounced that I know people these days who, after losing their jobs to furloughs, actually felt stigmatized accepting the compensation their union had negotiated for them. But once the dust settles, the American worker should be in a better position — e.g., out of the furnace, off the assembly line, out of data entry, off the telephone . . . And even if he isn't better off at the end of the day, a lot of people will be better off overseas. We should care about them just as much, if not more — they probably don't have a DVD player in every room of their house.

Anyway, I think it's funny — and certainly telling — that this has become a hot-button issue now that the consequences are hitting the Dilbert crowd.

As for "shareholder democracy," you'll find me proud to say I kicked last year's dividend tax-cut savings right back into the economy. A crisp ten-dollar bill saved for just the right moment . . . and finally spent on a "People's Republic of Cambridge" T-shirt from Revolution Books in Harvard Square ("George Bush is a corporate whore" was, apparently, on back order).

Posted by: Brad A. at February 26, 2004 07:42 PM

Richard, what percentage of your posts involve you making an argument by anecdote?

Posted by: T McGee at March 2, 2004 08:51 PM