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Opinion Piece: The Outsourcing Question

  • June 4, 2004
  • By Paul Kimmel
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There is an undercurrent of panic out here in the trenches. Many employees are worried that their jobs are being shipped overseas; with good reason, they are. In this article, I would like to offer some straightforward discussion and insights on this current trend, including some historical perspective, where we are now, possible outcomes, ways to protect yourself, and how international outsourcing might unfold.

Adam Smith and Clarence Darrow

No kidding. Have lunch with a bunch of Indians and bring up the subject of outsourcing. Their giddiness is palpable. Clearly, I haven't met every H1B Visa holder, but I have traveled backed and forth across the US working for a wide variety of customers and have seen and experienced firsthand an overwhelming aspect that can only be described as giddiness. I say: more power to them.

When asked my bill rate, a middleman once said, "You seemed to be real concerned about your bill rate." Well, duh! Then, he said you had better read Adam Smith's The Wealth of Nations. Having two copies that I hadn't gotten around to reading, I fudged a bit and said that I had. Having spun the small fabrication, I decided that day to pull it off the shelf and read it. In the opening sections, Smith talks about pin makers and compares the productivity of generalists to specialists. (I began to suspect that Henry Ford read this very book too.) Smith further went on to talk about supply and demand and the constant downward pressure on labor. Businesses incur huge costs in labor and are always motivated to reduce these costs. This makes senses, and things haven't changed that much since Smith's time (19th century).

Contrariwise, I was born in Flint and raised in blue collar Lansing. Smith represents business and many years earlier I had read much about Clarence Darrow—famous labor lawyer before such things as labor lawyers existed—for labor's side. Maybe you remember Clarence Darrow. Darrow is associated with defending labor, protecting employees against 'company stores' and 'company housing,' zero rights and zero benefits, and promoting the right to collectively bargain rather than getting your head bashed in by a Pinkerton agent, limits on child labor, and a reduction in the number of hours worked per week. (Perhaps I give Darrow more than his due, but these things he personifies.) What do these two men who lived and affected thinking and practice a century or more ago have to do with the 21st century? The answer is that these same: Battles are still being fought; Smith and Darrow just defined the war.

For more than 50 years, manufacturing jobs have been being shipped overseas. As fast as competitive, non-US, manufactories can be found, jobs have been shipped out of the US. In Michigan, this has been happening for as long as I can remember (almost 40 years now), and I know it has been happening for decades in the rest of the country. (Just drive across the US coast to coast and look at all of the burned-out, broken-windowed factory buildings and talk to people. I have.) That's right, fellow digerati, your parents and grandparents—and mine—have had to cope with lost jobs in the industrial age, and now you and I and our children have to cope with lost jobs in the information age.

This trend of outsourcing can be devastating to communities and individuals, but I am going to tell you why it is both absolutely essential and in the present context will fail in the foreseeable future.

World Calamity or Global Prosperity?

Keep in mind that I am an amateur historian and economist at best, but you are welcome to check individual facts and tell me if I got any particular one wrong.

After World War I, Germany was devastated economically and spiritually but most importantly, economically. (Remember the Clinton-Gore slogan of 1992: "It's the economy, stupid." Well, James Carville stole it from the 1936 National Socialist party.) Western sanctions and penalties from the Allies created an environment whereby a proud people lived in want and desperation. Only in such an environment can a nutter like Adolf Hitler—or Saddam Hussein in our time—rise to power. Why did Hitler rise to power? Jobs. The German economy. Hitler put people to work, period, and that is what many people out of necessity care about. Even though Hitler did it building tanks, bombs, and rockets, he did it, and people have got to work. Maybe Adolf understood the exigency of the paycheck or maybe he got lucky in a dangerously perverse way, but we do know that building the Wermacht employed so many people that émigrés from Czechslovakia, Hungary, and Austria came to Germany for jobs. Unfortunately, Hitler used this tremendous power to almost disastrous effect. The lesson the world should have learned, though, is that great disparity can lead to great calamity.

Great disparity is the environment we have now. The west and, significantly the US, hold most of the world's wealth. There is a greater chasm between rich and poor than ever before. The world is ripe for a global meltdown. Possibly the poorest choice left is to find an alternative for crude oil, plunging oil countries into complete financial ruin and all of us into World War III.

When I read what I have written, it sounds like a rallying call for socialism, but I am not a socialist, although I do understand where socialists might come from. Our current paradox is where capitalism and a global economy come into play.

A Global Economy and Prosperity Are Essential

Many of you have homes. Almost everyone has TVs, VCRs, more than one car, and the list goes on. The US consumer is saturated with goods, services, and general prosperity. (If you don't think so, visit Chad in Africa or Gaza in Israel.) US businesses need fuel—that is, consumers—to continue to grow, but US-only citizens cannot sustain-through-consumption our current level of prosperity and growth. We have to sell cars, computers, and whatever else to much huger markets, like China and India, to continue to grow. To do that, these regions must prosper also. To prosper, they need jobs; unfortunately, sometimes the job they get can be yours.

To put it bluntly, you and I can't live in the lap of luxury while the rest of the world lives in a festering stink hole of tyranny, poverty, and desperation. The world needs consumers for those at the top to prosper to ever-greater degrees. This means poorer countries need to become less poor for us to become richer. There is no present, viable alternative to increasing prosperity. (The world is dangerous now; imagine what it would be like if the US were to lose its financial footing.) An added dividend to global prosperity is that people with good jobs, healthy children, engaging pursuits and nice shiny Beamers or Hummers (without the .50 caliber machine gun) are highly unlikely to strap bombs to themselves.

The question really isn't whether a global economy is good. It is imperative that we have a global economy. The question that affects you and I is whether your job will go global or not.





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