Salocin

The Outsourcing Debate

I lament of the fact that this stupid discussion still refuses to give up the ghost. The level of naivety and selfishness demonstrated and encouraged by the Presidential Elections is truly staggering.

There's this equation that relates the movement of factors of production to the economic well-being of a country. This functions has short-term and long-term consequences, and benefits and drawbacks. By focusing solely on one part of the equation, and then narrowing down the definitions until every positive aspect is ignored, this debate has been turned into a political point-scoring match that completely ignores the economic realities of the situation.

Offshore outsourcing is the acquisition of factors of production from abroad. It is not the exportation of jobs. It is the importation of a factor of production, labour output, at a cost low enough to compete with over-priced domestic labour. It is a consequence of an imbalance in world prosperity. Before, the cost of doing business this way was high because of transport costs and because information could not move freely - this drag or additional cost made it more expensive to do business abroad. Now that this anomaly is being eroded by the advance of technology, the cost of doing information-based work abroad is dropping, and economies are having to face off against each other in a way that was never possible before.

The detractors of this will say things like, "it's a sweatshop labour effect", implying that we must absolutely force countries like India to pay their workers more, or raise their costs in whatever way possible. This is basically cloaked protectionism: force their prices up by forcing standards upon them that they (as nation states) do not deem necessary, so as to make them less competitive in the export of the products of their information workers to the US.

But backing up from the argument of whether it's right or not to allow this to happen, let's measure the extent of the problem for a moment. In the latest edition of Foreign Affairs, Daniel W. Drezner, an assistant professor of political science at Chicago University writes the following :

Even if the most dire-sounding forecasts come true, the impact on the economy will be negligible. The Forrester prediction of 3.3 million lost jobs, for example, is spread across 15 years. That would mean 220,000 jobs displaced per year by offshore outsourcing - a number that sounds impressive until one considers that total employment in the United States is roughly 130 million, and that about 22 million new jobs are expected to be added between now and 2010. Annually, outsourcing would affect less than 0.2 percent of employed Americans.

So back the hell off your political bandwagons and find some other accusation to throw about.