Alan Blinder against Offshoing? What does it mean to Indians and Indian-Americans?

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 the topic.

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 new-homeland.

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.