Blinder against Offshoing? What does it mean to Indians and
Offshore outsourcing (offshoring) industry
leaders are observing the emerging debate on globalization
in the U.S. very closely, and the reasons are obvious.
America still remains the largest country offshoring
IT and other services. The anti-globalization and
offshoring lobby is getting an influential spokesperson
in Alan S. Blinder, a professor of economics at Princeton
University, who has begun to write extensively on
Wikipedia says “He has recently changed
his stance on his Pro-trade view, saying that it may
be more harmful to middle-class America than originally
expected but still ultimately justified for the good
of the larger global economy.”
The recent article in Wall Street Journal [“Pain
From Free Trade Spurs Second Thoughts”]
generated a lot of buzz. Similarly, the article
in Washington Post is bound to be widely read and debated.
Prof Blinder, begins his Washington Post article by
stating “I'm a free trader down to my toes” but the
title of his article - “Free
Trade's Great, but Offshoring Rattles Me” [Washington
Post, May 6, 2007] - suggests otherwise.
What’s new here, and why does offshoring rattle Prof Blinder?
There is very little that is new in the argument Prof Blinder
is making in his articles. Tom Friedman made a similar argument
about the flattening world a couple of years ago, selling millions
of copies of his bestseller book. Friedman’s arguments were
analytical, reporting the facts with some interesting anecdotes
(I guess it was to be expected, given that he is a journalist).
Of course, Friedman’s peer Lou Dobbs has been screaming his
voice off on anti-free-trade and globalization for a few years.
However, policy makers and the media will find it hard to dismiss
Prof Blinder easily: he is a recognized and respected thought
leader from an ivy league, and a self-proclaimed free-trade
advocate who writes
“We economists assure folks that things will be all right
in the end. Both Americans and Indians will be better off. I
think that's right. The basic principles of free trade that
Adam Smith and David Ricardo taught us two centuries ago remain
valid today: Just like people, nations benefit by specializing
in the tasks they do best and trading with other nations for
the rest. There's nothing new here theoretically.
But I would argue that there's something new about the
coming transition to service offshoring. Those two powerful
forces mentioned earlier -- technological advancement and the
rise of China and India -- suggest that this particular transition
will be large, lengthy and painful.”
Offshoring, Free Trade and Globalization is irreversible
I had made a similar argument in my book [Offshoring IT Services]
that the trends in Offshoring we have been observing in the
IT industry are irreversible. Prof Blinder argues that the trends
in offshoring and globalization are irreversible, if anything
they are going to continue to gain momentum. He says “It's going
to be painful because our country offers such a poor social
safety net to cushion the blow for displaced workers. Our unemployment
insurance program is stingy by first-world standards. American
workers who lose their jobs often lose their health insurance
and pension rights as well. And even though many displaced workers
will have to change occupations -- a difficult task for anyone
-- only a fortunate few will be offered opportunities for retraining.
All this needs to change.”
This is intended to be a wake-up call for American policy
makers and Blinder offers a few suggestions when he asks rhetorically
“What else is to be done?” He says
“Trade protection won't work. You can't block electrons
from crossing national borders. Because U.S. labor cannot compete
on price, we must reemphasize the things that have kept us on
top of the economic food chain for so long: technology, innovation,
entrepreneurship, adaptability and the like. That means more
science and engineering, more spending on R&D, keeping our
capital markets big and vibrant, and not letting ourselves get
locked into "sunset" industries.
In addition, we need to rethink our education system so
that it turns out more people who are trained for the jobs that
will remain in the United States and fewer for the jobs that
will migrate overseas.”
Blinder Speaks for America?
Blinder concludes his essay with a passionate appeal to policy
makers and the American junta:
American workers will still face a troublesome transition
as tens of millions of old jobs are replaced by new ones. There
will also be great political strains on the open trading system
as millions of white-collar workers who thought their jobs were
immune to foreign competition suddenly find that the game has
changed -- and not to their liking.
That is why I am going public with my concerns now. If we
economists stubbornly insist on chanting "Free trade is
good for you" to people who know that it is not, we will
quickly become irrelevant to the public debate. Compared with
that, a little apostasy should be welcome.
My two cents: What Blinder’s view means to my Non-Resident
Indian and Indian-American?
Blinder's viewpoints and the debate it will generate in the
run-up towards US Presidential elections could impact Indians
if there is a continued anti-offshoring rhetoric. This said,
a slowdown in globalization and offshoring is a long shot.
What it means to my Non-Resident Indian and Indian-American
friends and colleagues is going to be an intriguing trend to
watch. Many of my friends and peers who moved to the US – on
H1 and student visas - during the mid to late nineties, during
the hi-tech boom years are now either Green Card holders (permanent
residents) or Naturalized American Citizen. These economic migrants
benefited from the early part of globalization, but mostly missed
out on the offshoring ‘boom.’ After moving to the states on
H1, many joined traditional American employers in IT departments
as programmers, analysts etc. They began to watch in horror
as their Indian cousins and peers from offshoring firms came
in to gain knowledge of systems they were ‘maintaining’ and
continued to offshore tech, programming jobs.
Now, these New-Americans are caught between the devil and
deep blue sea. They are not American enough since they look
Indian and most of them still carry a distinctly Indian accent,
with a tinge of the American Drawl. Their American colleagues
and friends see them as “Indians.” On the flip side, they cannot
relate to the techies and programmers from India and from Indian
offshoring companies who are out to offshore jobs from their
The predicament of new-Americans and Indian-Americans, especially
those in hi-tech fields is going to be interesting as the debate
on offshoring heats up. And no, neither Mr. Blinder, nor American
public are going to care about this slice of Americana.
About the Author: Mohan
Babu is the author of "Offshoring
IT Services" and an IT executive.