Outsourcing one way to inevitable globalization

As the father of three small children, I have occasion to spend more time than I would like toy shopping at Target and Toys R Us. In wandering those aisles, I have been struck by something in the past few years.

It is almost impossible to find a product on those shelves that is not made in China. Even that quintessential product of American creativity – the Apple iPod – is made in China.

While we have gotten used to foreign-made goods on the store shelves, a more recent development has ruffled some domestic feathers. From time to time, a chorus of complaints over so-called globalization arises.

In the latest round of hand-wringing, critics decry the practice of domestic companies hiring foreign workers. The practice has been dubbed “outsourcing.”

United States companies are hiring workers in other countries to serve domestic customer needs. I recently called an 800 number to get some help with my computer network equipment. A very polite and helpful woman took the time to solve the problem I was having. On a hunch, I asked her where she was. She deflected the question a few times and finally said that, yes, she was in India.

Imagine that. A woman sitting at a desk in India was talking me through the complex procedures of setting up a computer network here in San Diego.

Of course, some service jobs like painting a house or pouring coffee need to be done right here. But many jobs – mine included – can be performed quite nicely from overseas. I have a little daydream once in a while of sitting in my office on some South Pacific island, talking to my clients via video link.

Detractors of outsourcing decry the “globalization” of trade, and make the case that globalization is a new and dangerous phenomenon. As more and more of our domestic economic production takes the form of services, we will find that some of those services can be performed quite effectively and more cheaply by workers living in other countries.

I find it ironic that many of the loudest critics are driving foreign-made cars and listening to foreign-made iPods. Stripped to its essentials, the practice of hiring foreign workers to do jobs formerly performed by American workers is identical to the import of foreign-made manufactured goods. It is the importation of services.

In the postwar era, we saw an increasing amount of foreign manufactured imports. In this and future decades we will see an increasing amount of service imports. Despite what detractors will claim, globalization is nothing new.

World trade was, for all practical purposes, completely globalized as early as the late 18th century. By the start of the Napoleonic wars, trade routes were established among and between all parts of the world, linking all cultures. Any good that was of any value was traded on a global basis.

Whether it was coffee or silver or cotton or steel, it was packed on ships or trains or beasts of burden and traded throughout the globe. If some region made or had something of value to another region, it was traded.

When we see recent additions to that trade, we are sometimes tempted to think that globalization is something new and frightening. But, world trade has been fully globablized for more than 200 years. The only thing that changes is the nature of the specific goods that are traded. China wasn’t making children’s toys 50 years ago. Today they are, and the trade exists.

Early on, trade was in goods that had a high value per unit of weight. This era started with the classical examples of silk and spices, and evolved to include manufactured goods such as textiles and wine. Shipping and transport technology improved, and goods that are bulky and cheap, such as ore and lumber, began to trade.

Throughout this constant change, globalization itself wasn’t changing. Only the contents of the trade ships were changing. In the current era, we find that labor itself can be traded across borders. No ships are needed, only a high-speed data link.

In past eras, affected industries complained loudly about the loss of jobs to imports. I am sure the workers in the domestic toy factories were not happy about losing their jobs to the Chinese. But, over the fullness of time, we understand that such changes benefit our economy and our standard of living.

The latest trend of hiring foreign workers is just one more step in the thousand-year progress of global trade. It is nothing new, and has been inevitable for at least 200 years.

Write to Rick Ashburn at rick@richardashburn.com or 1250 Prospect St., Suite 200, La Jolla, 92037.

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Posted by Staff on Sep 30, 2004. Filed under Archives. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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