Offshoring, A Worldwide Dilemma

According to CNN anchor Lou Dobbs, 200 American companies are "either sending American jobs overseas, or choosing to employ cheap labor, instead of American workers." Dobbs, usually a stalwart advocate of free enterprise, discovered some worrisome facts about outsourcing but he has yet to articulate the complexity of the problem.

It is the objective of capitalism to produce as much value as possible with as little effort as possible in as short a time as possible. Hence, manufacturers have long sought to simplify, move, and subcontract production to improve product quality and cut costs. Such outsourcing domestically, as well as internationally, i.e., offshoring, has been practiced for decades by highly competitive businesses, particularly in the economically most advanced societies of Western Europe and North America.

Less expensive and faster modes of transportation made the movement of raw materials, semi-finished products, and workers more productive and profitable. The less government restrained free enterprise, the more the number of workers in manufacturing has been decreasing while productivity increased.

Some manufacturers absorbed higher costs by raising standards of quality, a response that, for example, has kept Germany's and Japan's car manufacturers competitive. Nevertheless, both German and Japanese companies found it necessary to relocate plants to less expensive locales in other countries, including the United States.

Advanced industrial societies have also been trying to provide laid-off employees with retraining opportunities that led to redeployment, potentially even to value-added jobs. The Wall Street Journal reported that in industries hurt by cheap imports some 69 percent of laid-off workers did find employment that paid an average of 96 percent of their previous wage.

With the onset of broad-scale computerization in the 1980s, communications underwent even more revolutionary changes than transportation. Nowadays within seconds data can be exchanged worldwide. That kind of globalization has become an irreversible feature of business in the 21st century.

For those who lost their livelihood in manufacturing, service industries used to offer substitute employment. Now, however, service industries also are outsourcing thousands of jobs. Fiber-optic innovations drastically reduced the cost of telecommunications and allowed the offshoring of entire business operations to less expensive labor markets anywhere in the world. India, for example, employs today over 160,000 workers in outsourced call centers.

The drifting of jobs from high-wage to low-wage countries, most often from North America and Western Europe to Asia and Latin America, has turned into a virtual stampede. In the most industrialized countries, offshoring is causing more structural unemployment, even though the cost of goods and services remains low and producer and investor profits have stayed reasonably stable.

The work forces of the low-wage economies of Asia and Latin America that covet offshored Western business are expanding and improving living standards. Americans (and other developed societies), however, are facing painful options in response to growing unemployment.

The most radical reaction would be the outlawing of offshoring to prevent further job losses but absorbing higher production costs, lower profits, and even lower wages in the affected industries. If jobs no longer go to the low-wage countries, the workers then tend to move to the jobs they want. That means more pressure for immigration, legal or illegal, from less developed countries, particularly to North America and Western Europe.

While transportation, communication, and democratization are bringing the peoples of the world closer together, would it be wise for the United States to curtail the movement of labor to or from low-wage countries? Burdened with the world's largest trade deficit, the U.S. badly needs foreigners to buy more American goods and services.

Regrettably, however, the majority of the world's people cannot afford much of what we would like to sell them. And they will remain unable to buy our products unless we help them to earn the money to do so.

Wolf D. Fuhrig	Home	03-07-04
Offshoring, A Worldwide Dilemma
According to CNN anchor Lou Dobbs, 200 American companies are "either sending American jobs overseas, or choosing to employ cheap labor, instead of American workers." Dobbs, usually a stalwart advocate of free enterprise, discovered some worrisome facts about outsourcing but he has yet to articulate the complexity of the problem. It is the objective of capitalism to produce as much value as possible with as little effort as possible in as short a time as possible. Hence, manufacturers have long sought to simplify, move, and subcontract production to improve product quality and cut costs. Such outsourcing domestically, as well as internationally, i.e., offshoring, has been practiced for decades by highly competitive businesses, particularly in the economically most advanced societies of Western Europe and North America. Less expensive and faster modes of transportation made the movement of raw materials, semi-finished products, and workers more productive and profitable. The less government restrained free enterprise, the more the number of workers in manufacturing has been decreasing while productivity increased. Some manufacturers absorbed higher costs by raising standards of quality, a response that, for example, has kept Germany's and Japan's car manufacturers competitive. Nevertheless, both German and Japanese companies found it necessary to relocate plants to less expensive locales in other countries, including the United States. Advanced industrial societies have also been trying to provide laid-off employees with retraining opportunities that led to redeployment, potentially even to value-added jobs. The Wall Street Journal reported that in industries hurt by cheap imports some 69 percent of laid-off workers did find employment that paid an average of 96 percent of their previous wage. With the onset of broad-scale computerization in the 1980s, communications underwent even more revolutionary changes than transportation. Nowadays within seconds data can be exchanged worldwide. That kind of globalization has become an irreversible feature of business in the 21st century. For those who lost their livelihood in manufacturing, service industries used to offer substitute employment. Now, however, service industries also are outsourcing thousands of jobs. Fiber-optic innovations drastically reduced the cost of telecommunications and allowed the offshoring of entire business operations to less expensive labor markets anywhere in the world. India, for example, employs today over 160,000 workers in outsourced call centers. The drifting of jobs from high-wage to low-wage countries, most often from North America and Western Europe to Asia and Latin America, has turned into a virtual stampede. In the most industrialized countries, offshoring is causing more structural unemployment, even though the cost of goods and services remains low and producer and investor profits have stayed reasonably stable. The work forces of the low-wage economies of Asia and Latin America that covet offshored Western business are expanding and improving living standards. Americans (and other developed societies), however, are facing painful options in response to growing unemployment. The most radical reaction would be the outlawing of offshoring to prevent further job losses but absorbing higher production costs, lower profits, and even lower wages in the affected industries. If jobs no longer go to the low-wage countries, the workers then tend to move to the jobs they want. That means more pressure for immigration, legal or illegal, from less developed countries, particularly to North America and Western Europe. While transportation, communication, and democratization are bringing the peoples of the world closer together, would it be wise for the United States to curtail the movement of labor to or from low-wage countries? Burdened with the world's largest trade deficit, the U.S. badly needs foreigners to buy more American goods and services. Regrettably, however, the majority of the world's people cannot afford much of what we would like to sell them. And they will remain unable to buy our products unless we help them to earn the money to do so.

Wolf D. Fuhrig

Home

03-07-04

Offshoring, A Worldwide Dilemma