Free Trade, Tom Peters And Offshoring

28 February 2004

A hearty thanks to Robert Scoble for linking to Tom Peters’s views about ”offshoring.” From major surgery in Bangkok to call centers in Bangalore, jobs are being done overseas.

Add to that a comment by a Presidential adviser and economist and you get a firestorm of debate and misinformation. Notice how many times Peters uses the phrase ”long haul.” Offshoring isn’t comfortable in the short haul. It – like most change – introduces some pain into the system. Few could dispute that – in a global economy – a more cost-effective American company is a good thing. Unfortunately, we get passionate about how cost-effectiveness is gained. If it involves offshoring, we become ambivalent about the notion of return on investment.

Free markets, and particularly global free markets, will always seek out the low-cost producers for any and everything. If a Chinese programmer can do your job for one fifth the wage, that’s where programming will go. If a call center employee in India will do your job for one sixth of your annual income, that’s where those jobs will go.

Some better questions to ask are these:

  • Will we do anything about our highly ”regulated” environment that prevents us from being able to live on less? I’m not suggesting lowering our standard of living, but is there financial friction in our system? Are we forcing higher wages because we have costly, over-regulated health-care? Are wages too high because of exorbitant litigation costs that are now ”built into our system?” Will those in other countries have an ”unfair” advantage because they don’t yet pay the tax rates that Americans pay?
  • Can we quickly learn our role when half of the world’s population (China and India) begin to pursue the lifestyles of Americans? When those two global population centers become consumer economies, what will Americans have to offer? Will each of those places be able to produce 100% of the desired goods and services ”in country?” If not, how will we meet the demand?
  • Are those in the centers for offshoring content with less? Will market economies drive them and us toward some middle ground of ”standardized” annual income? Will friction in their economic system put them at ”unfair disadvantage” as the pendulum swings back in a few years? Can we endure the short term problem of job shifts and realignment?
  • What will Americans learn to do that no amount of offshoring can replace?

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  1. Cranial    28 February 2004, 07:54    #