The Benefits Of Outsourcing
By Samuel Blumenfeld (03/26/04)
Last February, Thomas Friedman, the New York Times reporter-columnist, went to India to check out the outsourcing business. He wrote (Feb. 28, 2004):
"So when I came to the 24/7 customer call center in Bangalore to observe hundreds of Indian young people doing service jobs via long distance – answering the phones for U.S. firms, providing technical support for U.S. computer giants or selling credit cards for global banks – I was prepared to denounce the whole thing."
But then he interviewed 24/7's founder, S. Nagarajan, who provided him with a completely different perspective on this outsourcing business. He was told that Mr. Nagarajan had bought all of his computers from Compaq, his software from Microsoft, his phones from Lucent. He was using air-conditioning from Carrier and bottled water from Coke. In other words, while Indians were benefiting from this outsourcing business, Americans were benefiting even more.
Most revealing was the surprising fact that 90 percent of the shares in 24/7 were owned by American investors. The result is that U.S. exports to India have grown from $2.5 billion in 1990 to $4.1 billion in 2002.
Meanwhile, Sen. John Kerry has been going up and down America telling people that outsourcing is an unmitigated disaster for American labor. What he ignores is the fact that it is American technological superiority that has made outsourcing possible. The communications revolution has made global telephoning as cheap as local calls.
Our unemployment level is much lower than in socialist Western Europe. Why? Because these socialist governments have conditioned their people to depend on government for just about everything, and there is little incentive to do anything outside the plans of government. The inefficiencies of socialism were dramatized last summer when a heat wave in France killed 30,000 elderly people on socialized medicine, while not one Iraqi died in Baghdad of the heat, which is greater there all summer than in France.
The reason why Americans are able to do so well economically is because of our capitalist reliance on self for economic improvement. It is the thousands of small businesses created every year in this country that provide Americans with jobs and wealth that keeps this country in a dynamic economic mode.
Look at ebay alone – a tremendous success story. Who would have thought that you could buy and sell just about anything in the world via an Internet auction system, involving the most complex computerized data transactions ever devised? Someone did, and today he's a billionaire.
A friend of mine has been selling antiquarian books on ebay for three years. He gets bidders from England, France, Italy, Germany, Belgium, Holland, Australia, Singapore, as well as from every state in the Union. And he is in instant contact with his customers via e-mail. This is a way of selling that didn't even exist 10 years ago.
Mr. Kerry speaks of an American economy frozen in the verbiage of the 1950s: jobs, jobs, jobs. America, and the world, is in an economic revolution brought about by the computer and satellite communications. The country has been growing entrepreneurs like mushrooms. Entrepreneurs look beyond jobs. They want to create enterprises. And when the enterprise becomes big enough, they go public. They become millionaires in the process.
All of this created the biggest stock-market bubble in history. Many young brokers began to believe that such things as a stock-market crash could never happen again. But when the bubble burst, we didn't go into a depression. We went into a recession. And now we are slowly coming out of that recession, with companies leaner and more efficient. That is why job creation has been slow. But as economic activity increases, there will be more jobs.
The dynamism of the American economy cannot be explained or understood merely by the statistics coming out of Washington. The economy is far more complex. Take for example the economic activity now generated by the homeschool movement. There are about 50 full-scale homeschool conventions each year, with thousands of moms and dads buying books and curricula from such vendor powerhouses as Bob Jones University and Pensacola Christian College. Many home businesses have been created by enterprising homeschoolers, who no longer depend on government for their way of life.
Perhaps no city in the United States has undergone as dramatic an economic revolution as Boston. It used to be a manufacturing town, but after World War II the manufacturers began heading south. Today Boston is bustling with high-tech hospitals, labs, universities, conventions, restaurants, high-fashion malls, publishing houses, art galleries, insurance and finance companies, and tourist attractions – all greatly aided by the computer revolution. But the hotels need maids, cooks, bellhops, cleaning personnel not only for the hotels, but the gleaming new skyscrapers. And that is why Boston now has a large Latino population. The Irish no longer do the cleaning. They run the political arena.
Wherever you go, there is construction. Logan International Airport is in the process of major expansion. A new mammoth convention center is being built, financed by the city. The big-dig underground highway is virtually completed at a cost of 13 billion federal dollars. Yet, one must not forget that the greatest buildings in New York – Rockefeller Center, the Empire State Building and the Chrysler Building – were all built during the Depression with private money. Please explain that.
The American economy is too big, too complex, too dynamic to be reduced to John Kerry's shrill, phony, outdated rhetoric. He has all the vision of a 1950's labor union.
(Printer friendly version) Email: Samuel Blumenfeld
