A Greater Threat Than Terrorism
Outsourcing the American Economy
By Paul Craig Roberts
http://www.informationclearinghouse.info/article25250.htm
April 18, 2010 -- Is offshore outsourcing good or harmful for America? To
convince Americans of outsourcing's benefits, corporate outsourcers sponsor
misleading one-sided "studies."
Only a small handful of people have looked objectively at the issue. These few
and the large number of Americans whose careers have been destroyed by
outsourcing have a different view of outsourcing's impact. But so far there has
been no debate, just a shouting down of skeptics as "protectionists."
Now comes an important new book, Outsourcing America,
published by the American Management Association. The authors, two brothers, Ron
and Anil Hira, are experts on the subject. One is a professor at the Rochester
Institute of Technology, and the other is professor at Simon Fraser University.
The authors note that despite the enormity of the stakes for all Americans, a
state of denial exists among policymakers and outsourcing's corporate champions
about the adverse effects on the US. The Hira brothers succeed in their task of
interjecting harsh reality where delusion has ruled.
In what might be an underestimate, a University of California study concludes
that 14 million white-collar jobs are vulnerable to being outsourced offshore.
These are not only call-center operators, customer service and back-office jobs,
but also information technology, accounting, architecture, advanced engineering
design, news reporting, stock analysis, and medical and legal services. The
authors note that these are the jobs of the American Dream, the jobs of upward
mobility that generate the bulk of the tax revenues that fund our education,
health, infrastructure, and social security systems.
The loss of these jobs "is fool's gold for companies." Corporate America's
short-term mentality, stemming from bonuses tied to quarterly results, is
causing US companies to lose not only their best employees-their human
capital-but also the consumers who buy their products. Employees displaced by
foreigners and left unemployed or in lower paid work have a reduced presence in
the consumer market. They provide fewer retirement savings for new investment.
Nothink economists assume that new, better jobs are on the way for displaced
Americans, but no economists can identify these jobs. The authors point out that
"the track record for the re-employment of displaced US workers is abysmal: "The
Department of Labor reports that more than one in three workers who are
displaced remains unemployed, and many of those who are lucky enough to find
jobs take major pay cuts. Many former manufacturing workers who were displaced a
decade ago because of manufacturing that went offshore took training courses and
found jobs in the information technology sector. They are now facing the
unenviable situation of having their second career disappear overseas."
American economists are so inattentive to outsourcing's perils that they fail to
realize that the same incentive that leads to the outsourcing of one tradable
good or service holds for all tradable goods and services. In the 21st century
the US economy has only been able to create jobs in nontradable domestic
services-the hallmark of a third world labor force.
Prior to the advent of offshore outsourcing, US employees were shielded against
low wage foreign labor. Americans worked with more capital and better
technology, and their higher productivity protected their higher wages.
Outsourcing forces Americans to "compete head-to-head with foreign workers" by
"undermining US workers' primary competitive advantage over foreign workers:
their physical presence in the US" and "by providing those overseas workers with
the same technologies."
The result is a lose-lose situation for American employees, American businesses,
and the American government. Outsourcing has brought about record unemployment
in engineering fields and a major drop in university enrollments in technical
and scientific disciplines. Even many of the remaining jobs are being filled by
lower paid foreigners brought in on H-1b and L-1 visas. American employees are
discharged after being forced to train their foreign replacements.
US corporations justify their offshore operations as essential to gain a
foothold in emerging Asian markets. The Hira brothers believe this is
self-delusion. "There is no evidence that they will be able to outcompete local
Chinese and Indian companies, who are very rapidly assimilating the technology
and know-how from the local US plants. In fact, studies show that Indian IT
companies have been consistently outcompeting their US counterparts, even in US
markets. Thus, it is time for CEOs to start thinking about whether they are fine
with their own jobs being outsourced as well."
The authors note that the national security implications of outsourcing "have
been largely ignored."
Outsourcing is rapidly eroding America's superpower status. Beginning in 2002
the US began running trade deficits in advanced technology products with Asia,
Mexico and Ireland. As these countries are not leaders in advanced technology,
the deficits obviously stem from US offshore manufacturing. In effect, the US is
giving away its technology, which is rapidly being captured, while US firms
reduce themselves to a brand name with a sales force.
In an appendix, the authors provide a devastating expose of the three "studies"
that have been used to silence doubts about offshore outsourcing-the Global
Insight study (March 2004) for the Information Technology Association of
America, the Catherine Mann study (December 2003) for the Institute for
International Economics, and the McKinsey Global Institute study (August 2003).
The ITAA is a lobbying group for outsourcing. The ITAA spun the results of the
study by releasing only the executive summary to reporters who agreed not to
seek outside opinion prior to writing their stories.
Mann's study is "an unreasonably optimistic forecast based on faulty logic and a
poor understanding of technology and strategy."
The McKinsey report "should be viewed as a self-interested lobbying document
that presents an unrealistically optimistic estimate of the impact of offshore
outsourcing and an undeveloped and politically unviable solution to the problems
they identify."
Outsourcing America is a powerful work. Only fools will continue clinging to the
premise that outsourcing is good for America.
Dr. Roberts was Assistant Secretary of the Treasury in the Reagan
administration. His latest book, "How The Economy Was Lost," has just been
published by CounterPunch/AK Press.
To find out more about Paul Craig Roberts, and read features by other Creators
Syndicate writers and cartoonists, visit the Creators Syndicate web page at
www.creators.com .
COPYRIGHT 2009 CREATORS.COM
More References:
http://www.informationclearinghouse.info/article22087.htm
http://www.finalcall.com/artman/publish/article_1137.shtml
http://www.cnn.com/CNN/Programs/lou.dobbs.tonight/popups/exporting.america/content.html, a list of companies we've confirmed are "Exporting America."
Future of American jobs won't look like past
Microsoft's IT Outsourcing Deal
Cummins Employees Feel Sting of Outsourcing
Speak Out 4/16/10, WHEN are our federal legislators going to put a stop to outsourcing? Keep this up, and in 10 years there will be no factory jobs in America at all. ...
Reinforcing Egypt as a Leading CRM Outsourcing Destination
It is really Madness Now in USA,
you call your bank, you get an answer from Philippine
you call your computer support, you get an answer from Philippine
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