Outsourcing, Obama’s Folly

There’s a lot of American outsourcing going on. And not just to Mexico. In addition to Sri Lanka, there’s Vietnam, The Philippines, Malaysia, I’m not too sure about Pakistan but there’s definitely India. Gazillions of Indians work in call centers, and there are more queuing up. Lots of labor availability means lower wages (by US standards), meaning lower costs, translating into higher profits/lower prices. Mostly the latter due to high competition in developed markets.

Hell man, they’re even outsourcing war right now. And not just to American firms it seems.

And now Barrack Obama wants to stop all that. He wants to provide Americans with jobs he says, but is outsourcing really the demon of unemployment to developed nations like they seem to think?

I would say no. Outsourcing is great for the economy, its ‘spreads the wealth around’ (one of Obama’s axioms as a matter of fact, but I think he was talking in a more local sense as opposed to a global one). But then you’d argue that it may be okay for the global economy, but is it alright for countries taken individually? More importantly, is it good for America? Cos people in the US are losing their jobs to Pakis, curries and brownies faster than you can say ‘Joe the Plumber’.

I would say yes it is. Here’s why.

• Importing labor means outflow of foreign exchange translating into more demand for American exports. Cos the dollars that go out have to eventually end up back in the US right? So this will fuel American industry and actually increase employment there.

• Regular American consumers pay less for services due to reduced prices of goods and serviced whose functions have been outsourced to other countries, leaving them with more disposable income which they will in turn channel towards other industries making them more prosperous increasing employment there as well.

So Americans can only get more prosperous. Sure we’re looking at a group of immediately affected former white collar workers without jobs, but in the longer term, the US and everybody else, would be far better as a result of outsourcing, which after all is probably one of the most visible affects of globalization on the planet.

America, to prosper again will need to focus its energies on those industries I which it is strongest in. The credit collapse seems to have blinded everyone onto thinking there’s something wrong with everything in the damn economy. That’s not the case here. It’s funny; they forgot the one thing that the great guru of modern American free market economic policy, Milton Friedman, advocated when he preached a free market policy approach; ‘Regulate the Banks!’ and look where they are now. Friedman never really offered a concrete explanation as to why, of all industries, only banks needed to be regulated, but I’m pretty sure we can all see firsthand what can happen when the heavily intertwined and confused financial industry, like a Gulliver after a bit too many drinks, hurls on the Lilliputian economy of the world. (for a simple and informative look at at how the subprime crisis happened click here).

I sure hope Obama is just saying that to get the votes in man, cos if he wins and really does do away with outsourcing, all that’s gonna do is cripple the American, and the global, economy a little bit more.


Anonymous said...

Start of the outsourcing of business and work never created recession and rather always had a positive effect on the American economy by makiing their products and services cheaper by the day. there was hence more consumption. The economic donwturn happened because of reasons otherwise. If the Obama administration seeks to find plus points in stopping outsourcing then that means they certainly are being shortsighted in their approach to fight this issue. The gains, if any, will only be for just a moment and meagre.

Anonymous said...

That's right America always had profits by outsourcing theit work to INDIA.

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