Still going on the the outsourcing thread…

Re: Outsourcing by soulhuntre on 3/6/04 11:39

“Unfortunately, in spite of what you would like to believe, for most of the big companies price IS the dominant factor.”

Within quality limits of course it it. But companies also need their suppliers to maintain minimum quality standards or the lowest price on the planet is still too much to pay. Now, are those standards always challenging? not at all, many products can handle wide tolerances and as such the benefit of dramatically lowered costs to the firm are obvious.

You keep saying “what you would like to believe” and then saying things I haven’t seen anyone believe 🙂

“Yeah, but after dirt-cheap labor in India gets more expensive, the corporations will go to dirt-cheap labor in africa or the middle east.”

Good. A source of inexpensive labor is a good thing. There isn’t a whole lot of benefit to the economy of all labor everywhere in the world costing as much as the US worker does. Hell, most of the products we see today could not even begin to exist at the prices the do now if all labor cost what the US does.

“Just what are American workers supposed to do for the next 30-50 years before that happens?”

We have been through all this before, I know people tend to forget history but really:

• When the advent of rail transport opened the labor markets in other states people complained that inexpensive workers in the western states would ruin the labor market in the East.
• When we began a very liberal immigration policy the belief was that the inexpensive immigrant worker would ruin the US economy for the “native” worker and bring all our standards of living down.
• When steam power allowed for the automation of many heavy manufacturing tasks, it was predicted that the numbers of unemployed people would reach epidemic proportions forever. it was “the end of the worker”.
• When computers and word processing displaced huge numbers of fairly low skilled office workers dire consequences were predicted.
• When we began importing labor intensive textiles from overseas, unions warned that it would have dire consequences for the US economy and massive disruptions.
• When Honda and other Japanese firms began bringing inexpensive cars to the US market (in effect ‘outsourcing’ auto production away from Detroit to Japan) we were urged to “buy American!” to avoid what was feared would be the end of the US economy.

Let’s take an example. The US invented the modern computer. We had thre manufacturing here… but then we outsourced it to other countries and there was fear and horror. What ever would happen to the US now that we weren’t building computers any more?

The answer was that with the flood of inexpensive computers we created the Internet:

• something that would never have been possible without a high saturation of home computers
• something that couldn’t have happened if they weren’t inexpensive
• something that couldn’t have happened without cheap overseas manufacturing.

“Outsourcing” is a trendy word for something that has been happening all along, and will always happen. US companies have always searched the world for the least expensive source for its components – and made excellent use of those items to add value or comparativeness to it’s products.

• Every time a US company purchased an inexpensive computer component from Taiwan it “outsourced” the manufacturing labor that built and maintained and ran that factory.
• Every time a US firm bought an inexpensive bolt of cloth that was woven overseas it “outsourced” the jobs of all those it would have taken to manufacture that fabric.
• Every time a US citizen buys a consumer product made overseas you have “outsourced” all the jobs involved in building that TV/Blender/Hair Dryer/Whatever.

The list goes on and on. Purchasing items and production good from overseas is outsourcing.  The only difference now is that the computer age allows us to outsource “knowledge” work directly, without having to embody it in a physical product.

• Like every time before, there is fear and there is panic.
• Like every time before the battle cry to “Buy American!” goes up.
• Like every time before dire consequences are predicted.
• Like every time before “those damn foreigners” and “those bastard fat cats at the top!” are seen to conspire to hurt the poor defenseless US worker.
• Like every time before the simultaneous claims are made that the US worker can’t compete and that the SU worker is the best in the world (we do it better! It’s not fair!)

And just like every time before we will adapt, we will use the cheap components, the cheap fabrics, the cheap labor and use it to build the next big thing. We will create a new industry or technology and we will thrive. Just like we always do.

But it won’t happen while we are blinded by fear, Xenophobic and if we pull ourselves into a shell and pretend the global market isn’t out there. You want to ruin the US economy in a hurry? Make it illegal to outsource… destroy the ability of US companies to take advantage of inexpensive labor and watch us lose relevance in world trade.

“despite what you WISH to believe, cost and PROFIT are the primary motivators for business execs, that “race to the bottom” is definitely ON and rapidly expanding.”

See, there you go again. I don’t believe I ever denied that profit was not the primary motivator for companies and execs. In fact, I think I have mentioned exactly that repeatedly on this forum.

I simply don’t believe that is a bad thing, or anything new.

“All that you have said about web design and the hire of American firms is somewhat true – to a point, and for the time being, and exactly how, when hiring an “American” firm to build a website, or whatever, do you know for a fact that their workers are in America and not in India.”

For years now the trend has been to small design firms, 2-10 people. Clients are usually in contact with the principles and have a high degree of awareness of the structure of the firm.

For larger subcontracting firms I don’t know and don’t care. If 3 US citizens are running a company that outsourced work to 40 Indians I am happy to support those three US citizens. If they had to pay a US workforce they would be out of business because if they couldn’t outsource they would not have hired 40 Americans.

“To go along with those that say “outsourcing is great” and be content to see HUGE numbers of jobs gone with nothing to replace them anywhere in the foreseeable future, will only secure our downfall. “

You do know that the numbers aren’t huge right? The best numbers I could find on the web so far put the total number of outsourced “knowledge worker” jobs at 400,000 max since the early 1990’s. If you have better numbers, feel free to post them.

Not all the job loss, not even a large fraction fo the job loss in the US int he current downturn was due to outsourcing of knowledge work. Manufacturing jobs account for another large chunk, but again not every US worker you see out of work lost a job to some other country.

“You can say outsourcing is good. But you can bet your ass you will NOT see the purchase price of a single product drop by even a penny despite drastically reduced manufacturing costs.”

Maybe not, but then again the prices are already very low for consumer good all things considered, and imported components and offshore labor is a large part of that. Me? I’ll be happy that outsourcing labor and offshore components allow the US companies that do it to stay competitive and alive in a world market.