(Previous posts on outsourcing.)
Robert X. Cringely writes a somewhat convoluted criticism of outsourcing. I say "convoluted" because its structure defies easy excerption; I'll try to convey the gist of his position.
Mr. Cringely responds to those who say outsourcing is good for everyone by saying that it's not good for the people who lose their jobs, and this is partially true. His thesis rests on three main points:
1. There's no guarantee that the jobs we're losing to "India" (or wherever) are going to be replaced.
2. Institutional investors (such as mutual funds) use our money to screw us over by voting in favor of outsourcing even though we wouldn't want it ourselves.
3. Politicians won't protect us and neither will the invisible hand of capitalism -- although near the beginning of the piece he does acknowledge that, "Entropy in the business world works in reverse, with the better organized operations (the ones that better serve their customers) growing in strength, not declining."
With regards to (1), he's certainly correct. Nothing is guaranteed in life. He says that:
Pretty much everyone sees biotech and nanotech as the new growth industries, but neither industry is very good at job creation. Find me a biotech company that's a comparable employer to Hewlett Packard or Sun Microsystems. Find me a nanotech company that has more than 100 engineers, total. Maybe these are the future, but what if they aren't? Why allow our current bread and butter to slip away if the benefits are doubtful at best and customer service suffers?No one can predict the future, but similar arguements have been made all throughout history as we've continually moved jobs offshore. Somehow there's always something new to fill the void, because people can't consume if they don't have jobs.
The bit about customer service is pointless, and not something for a high-level economic discussion to deal with. That, at least, will certainly be taken care of by market forces.
As for (2), he quotes a reader who complains that:
Two insane examples of this are state of California bus drivers who bought into CALPERS investments, which included stakes in the company the state outsourced bus contracts to when the state eliminated its own positions; and schoolteachers in Florida, who now own through the state pension program the majority shareholder of Edison Schools (a for-profit operator of public schools).I fail to see how either of these examples shows insanity; in fact, they both seem like net gains for the shareholders. If the bus drivers and teachers didn't own shares of those companies someone else would have, and someone else would have reaped the benefits of the changing market. Either way the drivers and teachers would have been out of jobs, but because of their investments they were able to hedge their financial future against potential job loss.
For (3), this is yet another argument in favor of personal investment in the concentration of capital.
Think of the term "political capital," which is generally accepted to be the grease that keeps the wheels of government turning. Now do a Google search of "political capital" and see what verbs are associated with this noun. There is only one -- "spend." We don't invest political capital, we don't redeem it, we don't save it, we don't borrow it, we only spend it. This means that progress in government is made possible by giving things up, with those things being ideals, constituents, even logic itself.That's just rhetorical nonsense.
The article is interesting, even if it's largely sophistry; there's a core a rationality, but it's hard to find. In essence, I think Mr. Cringely is right in doubting the economic benefits of oursourcing. I've heard too many horror stories. Then again, it may just take time to smooth out the wrinkles in the system.
There's nothing to do but wait and see. Capitalism will work to increase shareholder value, and the way to maximize your chances of successfully riding the economic waves is to invest your money and become a shareholder yourself.
