Thursday, February 26, 2004
The great outsourcing debate
In the time I have been away from this blog, I have been quite amused by how much the outsourcing story has hogged the headlines. Business Week put it on the cover, Time put it on its cover, The Economist put it on the cover (and included an excellent survey of India) and Wired did an excellent cover on the phenomenon, though the same can barely be said about the content. Of course, these are just the cover stories in the past few weeks or so. This issue has been brewing for sometime now.
I would presume that part of the reason for all this interest is John Edwards's presence in the fight for the Democratic nomination for president. His presence and his seemingly single-point agenda (bash free-trade) seems to have dragged John Kerry to the left on the issue as well (and you thought Howard Dean was the problem). Given all the coverage the Democratic nomination battle got, it's hardly surprising that an issue that dominated their campaign also dominated the media space.
In between all of that, there were some voices of reason too. Prominent among them was the excellent, excellent op-ed written by Jagdish Bhagwati in the New York Times. He argued that your job really wasn't moving to Bangalore.
Unfortunately, the issue is further confused by claims that American jobs are being "transferred" abroad. This is usually not the case. When I came to my university 25 years ago, I got a secretary. Today, the new hires get a computer instead. In India, where a secretary costs a small fraction of what one would in New York City but a computer costs more, any Indian professor who asked for a new laptop would probably get a secretary instead. It is simply a matter of economic reality in both places. The hiring of the secretary in India should not be seen as "transferring" a job out of New York.
The fact is, when jobs disappear in America it is usually because technical change has destroyed them, not because they have gone anywhere. In the end, Americans' increasing dependence on an ever-widening array of technology will create a flood of high-paying jobs requiring hands-on technicians, not disembodied voices from the other side of the world.
Bhagwati wrote this column, I presume, to coincide with the release of his upcoming book In Defense of Globalization. If the reviews are anything to go by ("This is the book that everyone has been waiting for. Bhagwati thoughtfully considers the arguments of the anti-Globalization movement and shows the peril they pose to world development." George Akerlof, Nobel laureate in Economics), this book is a must-read.
Then there was an op-ed written by Tom Friedman in the NYT today. For once, he even made sense and didnt sound like an imbecile.
"How can it be good for America to have all these Indians doing our white-collar jobs?" I asked 24/7's founder, S. Nagarajan. Well, he answered patiently, "look around this office." All the computers are from Compaq. The basic software is from Microsoft. The phones are from Lucent. The air-conditioning is by Carrier, and even the bottled water is by Coke, because when it comes to drinking water in India, people want a trusted brand. On top of all this, says Mr. Nagarajan, 90 percent of the shares in 24/7 are owned by U.S. investors. This explains why, although the U.S. has lost some service jobs to India, total exports from U.S. companies to India have grown from $2.5 billion in 1990 to $4.1 billion in 2002. What goes around comes around, and also benefits Americans.
Talking of the NYT op-eds, I was wondering.....has Paul Krugman written anything about this issue at all? I haven't really been reading the NYT regularly, so I wonder if I have missed something by Krugman.
I would presume that part of the reason for all this interest is John Edwards's presence in the fight for the Democratic nomination for president. His presence and his seemingly single-point agenda (bash free-trade) seems to have dragged John Kerry to the left on the issue as well (and you thought Howard Dean was the problem). Given all the coverage the Democratic nomination battle got, it's hardly surprising that an issue that dominated their campaign also dominated the media space.
In between all of that, there were some voices of reason too. Prominent among them was the excellent, excellent op-ed written by Jagdish Bhagwati in the New York Times. He argued that your job really wasn't moving to Bangalore.
Unfortunately, the issue is further confused by claims that American jobs are being "transferred" abroad. This is usually not the case. When I came to my university 25 years ago, I got a secretary. Today, the new hires get a computer instead. In India, where a secretary costs a small fraction of what one would in New York City but a computer costs more, any Indian professor who asked for a new laptop would probably get a secretary instead. It is simply a matter of economic reality in both places. The hiring of the secretary in India should not be seen as "transferring" a job out of New York.
The fact is, when jobs disappear in America it is usually because technical change has destroyed them, not because they have gone anywhere. In the end, Americans' increasing dependence on an ever-widening array of technology will create a flood of high-paying jobs requiring hands-on technicians, not disembodied voices from the other side of the world.
Bhagwati wrote this column, I presume, to coincide with the release of his upcoming book In Defense of Globalization. If the reviews are anything to go by ("This is the book that everyone has been waiting for. Bhagwati thoughtfully considers the arguments of the anti-Globalization movement and shows the peril they pose to world development." George Akerlof, Nobel laureate in Economics), this book is a must-read.
Then there was an op-ed written by Tom Friedman in the NYT today. For once, he even made sense and didnt sound like an imbecile.
"How can it be good for America to have all these Indians doing our white-collar jobs?" I asked 24/7's founder, S. Nagarajan. Well, he answered patiently, "look around this office." All the computers are from Compaq. The basic software is from Microsoft. The phones are from Lucent. The air-conditioning is by Carrier, and even the bottled water is by Coke, because when it comes to drinking water in India, people want a trusted brand. On top of all this, says Mr. Nagarajan, 90 percent of the shares in 24/7 are owned by U.S. investors. This explains why, although the U.S. has lost some service jobs to India, total exports from U.S. companies to India have grown from $2.5 billion in 1990 to $4.1 billion in 2002. What goes around comes around, and also benefits Americans.
Talking of the NYT op-eds, I was wondering.....has Paul Krugman written anything about this issue at all? I haven't really been reading the NYT regularly, so I wonder if I have missed something by Krugman.
