Outsourcing to America

Joe Blancato | 25 Oct 2005 08:01
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It's the buzzword on every World Trade Organization flier ever created: Globalization. Globalization is the theory that by removing trade restrictions across the globe, industry reaches a point of perfect competition, which steadies prices and encourages innovation. The mystic solution to all things poverty, globalization is an extension of capitalist visions dreamed long ago by great minds, back before Stagflation and the digital revolution.

In theory, it's actually a pretty good idea. As time goes on, more and more countries will industrialize, get high speed data connections and take a swipe at the G8 for market dominance on any number of fronts. The brief (read: decades or centuries) economic turmoil nations will endure will ultimately be noted as ripples in the bank ledger of the infinite. But as new economic gods rise to topple the Titans of old, what happens to the foot soldiers on the front lines of the coming war?

They lose their jobs.

Which is why the software industry finds itself in a very precarious situation. Workers are already suffering through a supply shock due to more and more advances being made to eliminate "assembly line" work every day, and exporting labor is only making things worse.

One billion in people in India and other Eastern nations are more than willing to do our grunt work if it means they can rake in a buck. They'll do anything for a fee much lower than what it would cost in the States: customer service, email spamming or programming. You name it, they'll hang the shingle from their door.

How can you blame a company for,4814,85642,00.html" title="Computer World" target="_blank">sacrificing just a bit of quality, blurring some nationalistic lines and getting for just pennies on the dollar? Sure, regulations are a bit spotty in other countries, but consumers are saving money on pretty much anything, when it doesn't have "Made in the USA" stamped on the tag. That's a decision we, as a country, decided was A-OK long ago.

We've been struggling with the duality of the American ideal for decades. Is it unpatriotic to buy foreign products, even though our capitalistic nature demands we search out better deals for perpetually growing shopping lists? The communists showed solidarity, and look where it got them!

In a way, these Indian service firms are about as capitalistically American as you can get. We've got money, and they're more than happy to take it. But as in all nations crawling their way out of the "economic basket case bloc," cheap labor isn't going to last forever. In fact, the price of outsourcing to India is already beginning to climb, just as it did in Mexico. And talented IT professionals born in India are making their way to the States in droves, much" title="Economist" target="_blank">like talented Indian doctors.

This diaspora throws an interesting monkey wrench into the outsourcing mix. Sure, companies go to where labor is cheaper, but labor goes to where the money is better. The guys who are good enough to make it into Western firms on Western turf often leave, because while it's quickly improving in India, the standard of living in the USA is still a bit higher. This means the pool of talent over there is quickly depleting. So India isn't the country to worry about. No, to see the real threat to American industry, we need to look across the Himalayas into China.

China's one billion-strong nation is on the grow, and they've caught the industrialization bug something fierce. As factories sprout up in what were once farming fields and gas prices soar to transport goods across a landmass bigger than the continental U.S., children are being educated with a very Eastern approach to Western production. Think of post-war Japan, only with ten times as many people. The Chinese government is quickly warming up to the idea of tipping the scales of commerce in their direction, and within the next century, it's likely they're going to have a shot at doing it.

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