We’re heading into an election year in the U.S., which means facts are largely going to be irrelevant to most public discussions of issues for the next fourteen months. Instead, we’ll be treated to spin, counterspin, and more spin. The big Indian software & services companies realize this, and the Times reports that they’ve decided to hire lobbyists to counterspin the inevitable protectionist rhetoric (the original spin, as it were) that “outsourcing is costing America jobs.”
The economic impact of outsourcing is complicated, far too complicated to be given justice in a 30 second ad or crowd-pleasing stump speech. While it’s hard to argue that no jobs have been lost to outsourcing, there’s no reliable number on how many jobs are actually being lost (it’s certainly nowhere near 3.3 million, as was predicted earlier). There’s also some evidence that “insourcing” creates far more jobs than outsourcing takes away (the U.S. remains a net exporter of business services, for instance). And yes, some Indian companies are now opening up decent-sized offices in the U.S., and hiring American workers. (As you’ll recall, this came up back in June, with the infamous Obama campaign memo on Hillary Clinton’s purported connections to India.) See the conservative Heritage Foundation for more; and see this article at IHT for why it may not matter anyway.
The lobbyists quoted in the Times article are even adding some new arguments and approaches to their arsenal:
But the core of the Indian vendors’ new strategy appears to be removing themselves from the limelight. Outsourcing is not about us, goes the new pitch to lawmakers, it benefits Americans, including ones in your district.
The Washington lobbyist who asked not to be identified said that a focus of the campaign was to collect data on Indian companies’ investments in the United States and then to lobby members of Congress from districts where those investments have created jobs.
For example, a lawmaker from Washington State might be told something like this: Indian outsourcing companies may funnel some Seattle-area technology jobs to India, but with the affluence that creates in India, more and more Indians are flying. That has made India a huge buyer of Boeing aircraft and thus a creator of jobs in the Seattle area, where Boeing does much of its manufacturing.(link)
I don’t know — the tradeoff described here seems awfully indirect, and I’m not sure a politican could really sell the rising Indian middle class as a positive to an American middle class that’s currently dealing with economic uncertainty. Readers, do you buy the argument above? Can people think of other instances where the trade-off works this way? What about cases where it doesn’t?
This is how it’s done… the check-writing school of political influence has not proven that effective… real power means getting to these people through lobbyists.
I look forward to promotional material they will use to defend outsourcing… just like the Simpsons… “the best kind of sourcing… outsourcing”
Well, another example would be outsourcing of basic municipal functions (traffic-ticket payment processing, etc.) leading to holding down taxes. I totally buy the “win-win” aspect of increased trade, whether in goods or services–it was said first and best by Adam Smith!
adam smith is nice if your sitting in an air conditioned office earning 100k a year. its a really hard sell to a factory worker that just lost his job cause the plant got moved to china. everytime i mention something about the benefits of free trade, my high school friends tend to shout me down with screams of “easy for you to say mr big time job in a nice office in a fancy suit”
Puli, You’re right–there are losers from free trade. So, even if both countries benefit (e.g., here, India & US), not every person directly benefits. The gains are greater than the losses though (Caldor-Hicks efficient even though not Pareto). But, in a disfunctional political climate it can be difficult to compensate the losers. Still, the evidence is pretty overwhelming that protectionist nations stagnate over time.
rob, read “wealth of nations” again, carefully (and I don’t mean this as a snark). Smith mostly talked about the “good” effects of trade among equals; and he meant equality of market and coercive power (in fact i can get the exact quote from book iv, of “wealth…” by tomorrow if you are willing to wait). That is the reason why he relentlessly criticized the East India Company and its actions in India. Whether his conditions apply in this particular case is debatable. Anyways the society being a complex system, you can almost always find both “good” and “bad” ramifications of any action. The question is, what is the net effect? The latter is an empirical question, and cannot be answered from an armchair…substantial legwork has to be involved.
Maybe your high school friends should have aimed for those kinds of jobs when they were younger (or had their parents push them towards that)?
easy for me to say. daddy paid for expensive private college.
sigh, sure–would like to see quote.
Those kinds of jobs are far out of reach for most of the people I graduatd with. Class mobility in the US is surprisingly low.
nasscom should start an ad campaign targeting the indian-american community, urging them to vote republican.
OK, my statement was unfair…I’ve also been very blessed and privileged. Personally, as a kid, I didn’t have much ambition…I was very lazy and would have never accomplished anything if left to my own devices. To a significant extent, it was the constant pushing (in a good way) by my parents, as well as the high expectations they had, that led me into the career I have today. I take no personal credit for it. They never forced me to pick a particular field, although in reality I think it’s fair to say I would have been restricted to medicine, law, business, or engineering. The thing is, I was on the same page so it really wasn’t a problem (except for engineering).
Now, I don’t know the background of Puli’s friends…what I do know is, plenty of kids in my town squandered the opportunity for an excellent public school education, and opted into various other realms/more short-term goals, where now they are left resenting people with better jobs. Part of that was from lack of parental pressure, part was from inadequate guidance at school, part of it was the ‘only nerds study’ philosophy.
I advise any high school kid who’s prepared to listen to study business and Chinese in college. Of course that’s not the only way to go…opportunities exist in myriad arenas. But the way the global and US economy are changing, lack of focus (and too much “I need to find myself”) will land kids in trouble financially when they get older.
That doesn’t mean they can’t pursue other things as a hobby, like literature, the Arts, etc. or, even go ahead and make a career of them…but they need guidance to help them decide.
Amitabh writes: >>plenty of kids …squandered the opportunity … and opted into various other realms/more short-term goals, where now they are left resenting people with better jobs.
Well put. Envy and Jealousy are extremely strong negative emotions, and if left unchecked have the potential to turn into criminal ideologies like Naxalism.
M. Nam
Hmm. I remember seeing a Toyota print ad where the emphasis were on the facts that the factories were in the US, they had X number of US workers and nearly Y% of the components were locally made. Guess this is a hot button for other countries too, not just India.
or protectionism
:D. Well said!
there is a school of thought that argues, in a pure meritocracy social mobility would be very low since the attributes of those who have high incomes—intelligence, hard work, valuing educational achievement—are largely inherited by nature and nurture.
since those who posses these attributes are more likely to produce children with merit, social mobility in a meritocratic society would be quite low.
Ouch.
I don’t associate those attributes with high incomes at all. Poor people, in my experience, work harder than anybody else just to get by, and they don’t get any monthlong European vacations for their troubles. Do you have any idea how difficult it is to do manual labor, or for that matter to work at Wal-Mart? It’s back-breaking and grueling, and people work multiple jobs just to stay afloat. I’d like to see your average CEO match the levels of hard work most janitors put in every day.
Poor folks also (at least in the culture I grew up in) value education more than anyone, because they see it as a way for their children to have what they don’t.
And if you think that poor people are unintelligent, you clearly didn’t grow up with them. Well-educated is not the same thing as intelligent.
Also, please don’t assume that those of us who are articulate and have Internet access have high incomes.
seriously, what a bigoted, hurtful thing to say.
Sarah, I’m glad you commented. I think a lot of us at SM type first and think second. I’m guilty of it more than anyone, even though I know words are important and potent. Thank you for reminding us of the obvious, and for being so civil about it. I appreciate the reality check.
More lurkers than you know would concur with your statement and one of the things I am worried about is that this is part of the reason why they’re lurking and not commenting. I’ve said it ad nauseum, I’ll type it again– I really do want everyone to feel welcome here. This isn’t SASA, the ISA, a sorority or a country club. Many of us came from privileged backgrounds, but some of us didn’t; it’s important for all of us to keep that in mind.
Now who else has that “The More You Know” music chiming in their head, while a shooting star/rainbow streaks past? 😉 Just me? Sigh.
sarah,
i think you’re jumping the gun here. I don’t always agree with Manju, but here he/she (enlighten me if you feel it is relevant) is clearly assigning this opinion to a ‘school of thought.’ If, in fact, that his his/her opinion, then your comment applies without question.
Excellent point, MM. But that damned music is still stuck in my head. 🙂
muralimannered,
Fair enough, but I read Manju’s comment as attributing the larger point about meritocracy to a ‘school of thought’ but filling in the details with personal opinion. If that’s not the case and Manju doesn’t in fact feel that way, then it’s probably a good idea to qualify that sort of statement, because it’s pretty extreme.
Now who else has that “The More You Know” music chiming in their head, while a shooting star/rainbow streaks past? 😉 Just me? Sigh.
Thanks for the support, ANNA! But if I ever start resembling one of those commercials, please shoot me. 🙂
you know me, Anna–as the anomaly in nearly every generalization made directly or implicitly by commenters on this blog about ABDs, there’s no music but there is a, “oh finally!” sigh of relief.
I honestly thought I was the only brown person who grew up way, way, WAY below the poverty line in America. That’s obviously not true, but I think my feeling is still valid with regards to rural areas. Reading the comments on SM have really only served to reinforce my feeling of isolation, as a brown person, in growing up in a very low SES.
with regards to the outsourcing, I find the “it is what it is” argument to be the most persuasive: the US has basically committed itself to competing in a global economy, however uneven and unfair it may be, and many sectors of the economy (not propped up by subsidies) have to compete with parts of the globe where costs overall are much lower. The inevitable result is that jobs move overseas. It’s not a phenomenon that an individual can hope to influence–it’s public policy.
of course and I hope Manju comes back to clarify that. I certainly hope that Manju is not using the FoxNews hearsay method of arguing, i.e. “some people say…that Barack Obama is actually a jihadist involved in a nefarious plot to bring down America!” without attributing the opinion to any source and implying that there is some meat to this odious bone that they tossing out.
In a pure meritocracy social mobility would be rather low. Heck in any society, social mobility is low. Barring a revolution / Depression / War social mobility is uncommon. Although most Americans believe that anyone can make it, hardly anyone realizes the impact of ‘luck’ or ‘fate’ or ‘God’. The social capital that arises from being the born / raised with the elite is impossible to replicate. Manju’s and Amitabh’s statements are rather typical statements from a person with a privileged background. Not false because it reflects the reality of their social situation. I would not condemn the statement as being bigoted- just explain that there is an alternative reality. I welcome the open ness – do we really need political correctness that drives certain opinions and words underground.
Several years a mate said : If your family is lower class / poor – then 9/10 times you will also be poor most of your life. If your family is middle class – then 9/10 times you will also be middle class most of your life If your family is upper class / rich – then 10/10 times you will be rich most of your life.
There is a book called “Class in Australia” by Craig McGregor – not sure if there is a similar book about USA. Very illustrative.
Oh boy, i hope you’re not insinuating that SM has suddenly become part of the great ‘left-wing’ conspiracy to drive un-PC blanket generalizations about millions of people in a certain SES underground? Perhaps you’d like to expand up on this point?
If you accept that Manju’s comment was merely informed by lived experience (anecdotal), then you should also accept my own (also anecdotal). I have changed several SES during the course of my life–as have my parents. And I did start out at the very bottom of the SES ladder. You say there’s no social mobility? Poppycock! (on an anecdotal level–it’s far more valid to say that you have a much lower chance of moving up than saying that you are automatically consigned to whatever SES you’re born into) I have seen many people move from circumstance similar to my own in childhood, to stratospheric heights (in terms of SES). This was mostly due to a parent’s emphasis on education (and in many cases, this parent was not someone who finished what we would refer to as a high-school education in the US).
I’m really not confident, however, that Manju was speaking from lived experience–it seems more like this was one of those sociological theories that bubbling beneath the surface of the mind and came up in this forum.
Well, 26 posts and no one seems to have mentioned it yet, so I’ll say this:
I’m surprised (I suppose that might mean I’m naive) that there needs to be a ‘surge’ of counterspin work. Isn’t the counterspin really simple – India is slitting throats to obtain jobs, as a US citizen, how about asking your friendly neighborhood CEO? It’s the american companies that in the quest for lower costs/higher profits are seeking to outsource, in-as-much-as Indian/other companies are trying to earn their business.
Also, it’s worth noting here (but really doesn’t make for good counterspin) is that all this booh-bah about outsourcing is a case of crying Uncle – as long as goods got cheaper, global trade was good. As soon as good jobs are done cheaper elsewhere, it’s outsourcing this and outsourcing that?
Bottomline – with global trade, everyone needs to keep moving up the chain. Not enough to be good at current job. But this too doesn’t make for endearing sound-bite.
India is NOT slitting throats to obtain jobs. (nothing Freudian here I promise)
of course not. it also overlooks the fact that in many cases, because of our belief in an open global market, at some point we ended up re-routing business our way that might otherwise have gone to another country, often at the expense of that other country’s workers. as many have said, being a proponent of, not just a player in, global free trade means that we cannot horde all the benefits for ourselves while keeping all the detriments out. however, this doesn’t help the situation of the average worker who is laid off. and i’m not sure it would be as big an issue as it is, politically speaking, if not for those pesky elections where politiciams have to win over their constituencies 😉 to be fair, though, any country will be concerned at such an economic situation, but sometimes in this country, there is a sense of entitlement and then indignation when things don’t go ‘our way.’ not to mention the racist undertones that have peppered this debate.
on a different note, some of the outsourcing has recently lead back to insourcing, e..g the lead scare in china for toys.
Murali – congrats on moving up the social ladder.
If you accept that Manju’s comment was merely informed by lived experience (anecdotal), then you should also accept my own (also anecdotal). I have changed several SES during the course of my life–as have my parents. Accepted. It’s far more valid to say that you have a much lower chance of moving up – Yes. I did say 9/10 not everyone. Further, social mobility is a two way process – persons need to go down as well as up. Paying the top marginal rate does not mean one is rich – just a sucker!! The SM community is not very accepting of un-PC generalizations of certain groups while slamming other groups is ignored. At least that is my perception.
To get back on topic outsourcing is different from offshoring. It is a pity that the two have become synonymous. Offshoring will continue as long as the elite dont hurt. When the Bushes / Kennedys hurt the debate will turn.
i used the “school of thought” qualifyer b/c i don’t have a strong opinion either way, though i’m open to these ideas (that a meritocracy would see little social mobility) despite them being hurtful as sarah pointed out. it’s not personal experience, my family is upwardly mobile.
i also was not sure about sarah’s assertion that the US has a surprising lack of sociual mobility. i recall in other threads people claiming that 50% of mexican illegal immigrants were middle class by the 2nd generation, which struck me as extraodinary, but i hope its true since i would hate to see this country essentially manufacturing inequality. so i added the qualifyer since i’m not even sure about the premise.
but that intelligence has a strong genetic component and that parents pass on their values to children are ideas that should be in the public discourse even if it does intersect with bigotry. i know, this was the topic of the bell curve (murray) and that’s one of the resons i treaded carfully. but i can do think the taopic should be discussed.
Rob, as promised (from book iv, “of colonies”:
There are many other similar quotes throughout the book, but I’m feeling lazy
sorry man, but you can’t say stuff like this without substantiating or admitting that you lack the courage of your (albeit only a ‘perception’) convictions about how ‘certain topics’ are discussed on SM. Either say that what you’re trying to get across is the odd, irrational shit nugget that everyone’s mind turns out at one point or another…or substantiate this with examples.
Manju,
color me intolerant, but this doesn’t this sound a bit like the John Derbyshire/Charles Murray school of thought?
Based solely on observation of my neighbors, relatives, acquaintances in Andhra, I believe meritocracy combined with opportunity can lead to widespread social mobility. Building a large number of engineering and med schools and allowing candidates to qualify purely on merit (and reservations in case of socially disadvantaged sections of the society), allowed large number of urban and rural Andhras to move up the social ladder. If you have pure meritocracy but few colleges, then those with the resources for prep courses etc. will be the only ones to benefit.
32 · sigh!
Thx! Am inspired to go back and re-read….
Yeah, he is one of my intellectual favorites (along with…hold your breath, Marx and Veblen). Actually all three were intellectually closer than people realize.
Yeah Rising incomes in India has let to consumption of lot of products owned by US multinationals from McDonalds to GM. So It does increase sales/profits of US companies
I forgot to add “the great” (as my prof. would say) David Hume…but then he was more of a philosopher.
I think it is the state of technology – and the particular manifestation of capitalism that is operative at any give time – as much as public policy, that is at work in the phenomenon we call ‘outsourcing’ or ‘globalization’. If high speed internet access were not as good and reliable as it is today, most of the outsourced jobs couldn’t have been outsourced. But the technology, of course, wouldn’t have gotten to the point that it has without the enormous public subsidy for research and R&D into all technologies related to ICT over the last fifty years. This was a question public policy could have affected – but two overriding considerations played into that.
First, ICT was positioned as the key to ‘smarter’ weaponry, so of course it had to be developed and subsidized; and second, ICT was expected to lead to gadgets and devices with ‘intelligence’, so we wouldn’t need to do our own laundry, or vacuuming, or lawnmowing, etc. An even longer trend, somewhat independent of public policy – is the need that businesses feel, to replace manual labor with machines when possible – seeking greater efficiency, and trading off a hopefully lower capitalization cost against a recurring wage bill. Sure, public policy could affect that equation, for example, by increasing the effective cost of labor saving machinery, but it’s been a long time since anyone argued for that. So technology, once developed for any reason, is going to have implications and consequences nobody could have anticipated, and sometimes the precise opposite of what was hoped for. Outsourcing is a consequence of the publicly subsidized development of ICT.
Generally speaking, when the mode of production is labor intensive – whether manual or intellectual – then that labor will be sought at the lowest wage consistent with acceptable productivity. If the nature of production requires labor at specific locations, then the labor will be relocated – whether it’s through serfdom, slavery, ‘coolie-ism’, indentured servitude, or H-1B visas. If the work is not tied to specific locations, and if technology makes this possible, while a healthy wage arbitrage opportunity exists, then of course you have ‘outsourcing’.
So outsourcing does not represent a radical departure from standard capitalism. Of course, in a free economy this creates opportunities as well, but the average worker certainly can get shafted, though that could happen even if machines substituted for jobs without any outsourcing. The counterspin of outsourcing creating ‘home country’ jobs by relocating purchasing power, may be true over the long term, but that effect is much larger if the original jobs were retained at home! So it does not convince.
Actually, on that issue, I think the massive purchases in nuclear and aerospace hardware that India is about to undertake is a sort of quid pro quo – send us the software and BPO jobs, and increase our incomes, and we’ll buy passenger and fighter planes and nuclear reactors from you. This will certainly create economic activity in the US, but the outsourced office or service workers are not going to become the welders, fitters, machinists that will build the planes and reactors. Nor will they become the healthcare workers and cardiac surgeons to whom Indians will supposedly be flocking in American hospitals – because their affluence ‘increases their incidence of cardiac disease’. But these sorts of examples will be used by the counterspinners. And in a large economy like America’s, something like this will be true somewhere sometime. Still, in the short-term, there can be plenty of negative effects in the aggregate – and lots of people could lose badly if offshoring really took off. Many of those could be South Asian Americans.
But most schools can’t run without ‘donations.’
THE FLIP SIDE OF OUTSOURCING. Here are a couple of cases:
Now the Conseco subsidiary provides inbound and outbound voice support services, transaction processing, and e-mail management out of two centers in Noida, a suburb of New Delhi. The first center opened in October 2000, and a third will open in February in Bombay, bringing exlService’s employee count to 1,500.
Citicorp Electronic Financial Services has cut its call center labor costs by half since it began outsourcing its call center operations to Santa Monica, Calif.-based MphasiS, a software integration company that operates two call centers in India.
IBM, Microsoft, Ford, P&G are among the many US companies that make goods and services in India, using Indian human and other resources, but repatriate the profits back to the US to benefit their American stockholders, which includes common, middle-class Americans.
What I am driving at is that the US OWNS MANY INDIAN BPO OPERATIONS, not to mention manufacturing and non-BPO companies in India.
I am reminded of that great Ned Beatty/Peter Finch encounter in the movie, “Network,” when Ned Beatty, the head of the conglomerate that owns the TV network, proceeds to lecture the deranged anchorman played by Finch about global economy. I don’t remember Paddy Chayefsky’s deftly farcical, extremely sizzling dialogs to the letter, but it went something like this,”There are no countries, there are no nations. There are only dollars, shekels and pounds. These are the nations of today, Mr. Beale.”
For movie buffs: Peter Finch won an Oscar posthumously for his role as “the mad prophet of the airwaves articulating a public rage.” Faye Dunaway won an Oscar, too. So did Paddy Chayefsky.
For economics buffs: it’s time to bone up on the The Law of Comparative Advantages, and in the light of how the 21st century global economy really works, I will paraphrase a line of Mark Twain’s, “The reports of the US economy’s demise are wildly exaggerated.”
only economists are so presumptuous that a two country, static model, with a backbone of otherworld assumptions can become a “Law”. protectionists are frequently derided for being simplistic and wishful. the same charge can just as easily be levied upon free traders.
Floridian, those were nicely put examples.
Chachaji – of course, outsourcing(and for that matter, an infinite other features of modern society) wouldn’t exist without all the technology advances(ICT?). And what does public funding have to do with any of this? Even if ICT (I am guessing u mean Information and Communication Technology??) was a breakthrough that arose from say, some private philanthropic funding, that seems pretty irrelevant to me here considering that its effect on something like outsourcing is ridiculously miniscule in comparison to its overall effects on the society and human lives… to “blame” outsourcing on ICT is rather wild, imho.
Also, do you have any particular reason for why specifically, south asian americans will lose many jobs because of outsourcing?
You need solid primary and secondary education first.
You also need a solid economy to absorb all the graduates.
Random, I brought up the public funding of R&D into ICT (information & communication technologies) only to address the issue of what effects public policy has, has had, or could have had on outsourcing. I am not saying that the said public investment in R&D has had no other beneficial impacts, or that outsourcing is its only consequence. However, merely saying that technology enables outsourcing is not enough, one must also identify the reasons why that technology developed in that particular way, and how the public funding of that technology was represented when it occured. To the extent that some technologies are developed by industrial capitalism following its own ‘laws’, I pointed out the basic motivating impetus there as well.
NvM, well put @42, and Amitabh, good points @43, 44.
Envy and Jealousy results into Naxalism. What nonsense! If only the world was as black and white…
There are a couple of commonly proposed responses to the outsourcing/globalization dilemma:
Americans should focus on entrepreneurial, professional and creative jobs. The problem is that, even if all workers had the ability and inclination to pursue them, these sectors only account for a small fraction of the total workforce. A common retort to unhappy blue collar workers is, “if you’re not happy you should get a real job,” but the supply of “real” jobs is limited.
Americans should focus on service jobs. Most of these jobs are already low-paying. Increased competition in this sector will only make things worse. Even skilled trades and crafts that currently offer higher salaries may be pressured as more workers turn to them as a solution.
It’s also been suggested here that American workers will profit by serving growing markets abroad. That will be true until Boeing or whoever decides to move the mountain to Mohammed by building their planes and other widgets in India or wherever else the demand is. In a fully globalized economy American companies can thrive with limited participation by actual Americans. This may also prove true of the American economy as a whole… but there might no longer be a correlation between economic indicators and the well-being of the average American…
within the space of one line, you’ve managed to reference not just one but two Asian Dub Foundation songs! Bravo, Ardy! I salute you, saarey!
@ 37,
This argument is very similar to argument that renowned economist Prof. Bhagwati makes in support of globalization in his essays/books. For e.g. from the above essay -“…And to counter charges that globalization leads to cultural hegemony, to a bland McWorld, Bhagwati points to several examples, from literature to movies, in which globalization has led to a spicy hybrid of cultures….”
But what about the losers of globalization/outsourcing like the middle class in America or say the poor in developing countries who can’t compete ?