Outsourcing – Don't Get Bangalored?
As the world has gotten “smaller” in terms of trade, outsourcing has become a hot topic in much political and economic debate in the United States.
An Associated Press-Ipsos poll in May 2004, found that 69 per cent of Americans thought that outsourcing hurts the US economy while only 17 per cent thought it helped . President Bush’s chief economic advisor Greg Mankiw has stated “outsourcing…is something that we should realize is probably a plus for the economy in the long run” . While John Kerry has emphasized, that he is going to stop the outsourcing of American job . With the presidential election coming up, and the candidates giving mixed signals about the effects of outsourcing, it could turn out to be a decisive issue. A recent poll said 22 per cent considered outsoursing somewhat important while 68 per cent said it was very important . Not to astray, for many years Americans have witnessed the outsourcing of labour-intensive production, such as manufacturing. And the US economy has actully gained from it, in terms of higher productivity. But on the other hand, for many Americans outsourcing posses a real threat. However, in recent years services, which earlier was characterized as non-tradable, are also outsourced. As developed countries, like India and China, are able to offer cheap skilled labour surely there is a great enticement for US firms to move such services abroad, thus shifting jobs abroad. Where will that leave the US and its skilled workers – are they in a sense getting Bangalored?
In this paper, I will present evidence that argues both for and against outsourcing.
I will first point out main points of Jagdish Bhagwati’s paper “The Muddles over Outsourcing” and sup...
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...ing” By Jagdish Bhagwati, Arvind Panagariya and T.N. Srinivasan
To be published in The Journal of Economic Perspectives, Fall 2004
http://www-personal.umich.edu/~alandear/topics/documents/BPS040825.pdf
“Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth” By Catherine L. Mann From Institute For International Economics
hhtp://www.iie.com/research/topics/outsourcing-hot.htm
““Offshoring” Service Jobs: Bane or Boon – and What to Do?” By Lael Brainard and Robert E. Litan From The Brookings Institution – Policy Brief #132 April 2004
“Nagging doubts about the benefits of globalization, and a look at the evidence”
Economic focus – Trade disputes Class handout
“Immiserizing Trade: A Theoretical Note” By P.A. Black From The South African Journal of Economics, June 2002
http://www.essa.org.za/download/abstracts/j200227.pdf
Globalisation is a growing phenomenon that is the result of various developments in the global environment, each of which merits an individual analysis of its social impacts. For the purpose of this analysis, the focus will be placed upon arguably its most controversial aspect, offshore outsourcing. Offshore outsourcing, or offshoring, is becoming an increasingly common business practice as a result of a combination of the recent technological advancements in the areas of transportation and communication, and the increased competitiveness of the business world. From the perspective of firms, tapping into cheap labor from less developed countries is a very logical business decision to reduce costs and maximize profits. This has not only motivated businesses to engage in offshoring, it has sometimes been critical to their survival in fiercely competitive environments. Before making judgments regarding the righteousness of offshoring from different perspectives, its impact on stakeholders must first be evaluated.
In the twenty-first century, schools all over the country teach that Native Americans were here before what are now considered “Americans.” These new Americans arrived by boats, bringing with them disease and manifest destiny, conquering the land that was once called home by thousands of tribes. Nevertheless, through extortionist deals, mass murder and small pox, the land was evetually vacated, leaving the new Americans to take their place and flourish. While schools teach the same basic story of the first thanksgiving and Squanto, what is not remembered is any semblance of the culture. Feather headdresses, bows and arrows, and war calls while playing a game of “Cowboys and Indians” are the images many Americans associate with of what once had dominance over the entirety of the North American continent for centuries (if not millenia). In his collection of short stories The Martian Chronicles, Ray Bradbury expressed unheard of sympathy towards Native American and Communists alike with a radical position that in which he used an fictitious species as an allegory for the struggles of millions. Even though he contradicts himself in the delivery of parts of his core message, Bradbury’s radical viewpoints and pessimistic views of the future serve as both an apology and a warning for the extermination of civilizations. Written and published in the 1950s, the book radically discredited American expansionist tendencies in post war America when such sympathies and opinions were not tolerated. As a warning for the future, Ray Bradbury possessed foresight as conquest of cultures plagues American foreign policy even today.
Recently outsourcing has been in the news, especially during political election years. It seems to be a phenomenon that is causing much concern among the population. But exactly how is outsourcing effecting both workers and businesses? And is it as big of a problem as politicians describe?
Outsourcing is a complicated and a multifaceted subject that involves a “business[’s] purchase of parts or labor from another company rather than maintaining a sufficient enough number of its own employees to do the same work in the country where the company is already based” ("Outsourcing"). The first practice of outsourcing was in medieval times when “nation-states called in soldiers-for-hire to help their own military forces during ongoing conflicts” ("Outsourcing"). Many think of outsourcing as a one way trade of production facilities moving outside of a companies locale but in actuality it is a two way trade that also involves companies from other areas moving their factories to local areas where conditions are beneficial for the specific business. Outsourcing has evolved but the main idea has remained the same. The recent increase in outsourcing “was initiated by Wall Street pressures on corporations . . . . for increased profits . . . in the production of goods and services marketed in the U.S."(Roberts).
Both sides can agree that outsourcing can be desirable for a business do to the potential profit. It allows goods to be made cheaper, management to run smoother, and money to be made faster (Salanţă 270). Both sides can also agree, however, that U.S. jobs are lost as a result of outsourcing (Ahmed 192), as well as environmental damage being cause due to corporations taking advantage of loose environmental regulations (Marquis 39). Upon digging deeper into this debate, one can find that both sides present very convincing arguments.
Since the concept of outsourcing was introduced it has been a subject of debate between politicians and citizens of the United States. Remarkably, it was the United States who supported outsourcing and now it is the United States that feels its economic progress is being threatened by outsourcing. One may argue that the financial situations that existed two decades earlier are not the same as they are today, thus the change of time, business priorities of economies have also changed.
With the United States’ economy in a depression and our unemployment rate skyrocketing to record highs, job-outsourcing has moved to the top of the list of controversial issues. Froma Harrop’s essay New Threat to Skilled U.S. Workers and Thomas Friedman’s essay 30 Little Turtles discuss two different viewpoints of job-outsourcing, and their effects on society. Does our government really want to cut back on job-outsourcing, and what can society do to help the issue? Friedman’s standpoint on job-outsourcing shows how it is emotionally beneficial to other countries and Harrop’s factual standpoint shows job-outsourcing regulation, however, I feel that our citizens are unaware of the opportunities and our government is eager to send the jobs overseas.
This article revealed how outsourcing manufacturing damaged U.S. industries’ competitiveness and innovative abilities. There were several problems that affected the U.S. economy, like the decline of trade, lack of research and development funding, and poor managerial decisions. Several government and businesses’ recommendations were made to restore U.S. industries’ competitiveness and innovative capabilities. Simply by restoring U.S. innovative abilities will the industrial commons bounce back and there will be economic growth.
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