The Hue and Cry over Outsourcing and BPO: Is it Justified ?

In previous articles, we looked at the compulsions of domestic politics in the US and Europe on the outsourcing and BPO debate. We have also looked at how the current recession is renewing calls for jobs being retained in the US as opposed to jobs being shipped overseas. This article looks at the outcry over outsourcing and debates the issue from different perspectives to arrive at an understanding of the dynamics driving the protests.

For starters, many commentators in the US actively push for more outsourcing because of the humungous cost savings that corporations get when they outsource which can then be deployed for more productive and higher value adding work. For instance, the noted economist Jagdish Bhagwati has shown in his research that outsourcing is a win-win situation for both parties to the exchange and in fact, the US stands to gain rather than lose from the transaction.

The crux of the argument is that outsourcing creates opportunities for corporations and workers to move up the curve and these results in net job creation rather than job losses. However, the vociferous protests from the other side point to the dismal rate of job creation and the loss of American competitiveness. They point to the fact that outsourcing results in gains for CEO’s and elites but not for the average worker. When this issue is framed in the backdrop of the recession where jobs are hard to come by, it is hard for any politician to justify the outsourcing of work. The prominent commentators on this side are Lou Dobbs and more recently President Obama himself. Their contention is that instead of shipping American jobs overseas, the US corporations can invest in creating more opportunities for win-win exchange abroad.

The point here is that the creation of opportunities and the subsequent gains or profits should give the CEO’s and the elites’ reason to not take away jobs from Americans.

This is the same agenda that drove President Obama in his visit to India to push for investment by corporations like GE to invest in India and in turn get the investment from India so that jobs are created at both places. What these two sides of the debate reflect is a desire to create and keep jobs in the respective countries as opposed to outsourcing being a zero sum game. What the two sides do not seem to agree on is the exact mechanism by which this exchange has to be played out. This is the thorny aspect of the debate and something which requires intellectual and moral leadership to resolve.

Globalization and outsourcing need not be zero sum games but instead can be a win-win situation for both parties. This is the base level to which everyone must aspire without falling prey to rhetoric and posturing. In conclusion, the rights of the workers are paramount whether they are in the US or in Asia and hence, no politician or business leader can ignore this fundamental reality.

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