Globalization is not a one-way street. It’s really a multi-lane superhighway with multiple entry and exit ramps. Contrary to the view that globalization means the loss of US jobs, we see that trade and immigration that involves Indians and Americans means jobs in both India and America and an increased variety of products and services for consumers.
The Anti-Outsourcing Hysteria of 2004
During the 2004 election campaign Democratic presidential candidate Sen. John Kerry famously declared that U.S. executives who set up operations in India were, in essence, committing treason. He labeled such executives “Benedict Arnold,” after the colonial officer who switched sides and joined the British during the American Revolution. Kerry said, “When I am President, and with your help, I’m going to repeal every benefit, every loophole, every reward that entices any Benedict Arnold company or CEO to take the money and the jobs overseas and stick the American people with the bill.”
It wasn’t just rhetoric. Local lawmakers began introducing anti-outsourcing legislation at a furious pace. In 2003 state legislators introduced fewer than 10 bills to restrict work from being performed overseas. By 2004, that number increased to over 100 such bills. State lawmakers who would never otherwise receive national attention suddenly found that by introducing a bill they could garner appearances on national television with Lou Dobbs on CNN.
The vast majority of the bills did not pass and the pace of such legislation eventually diminished. However, New Jersey passed legislation that forbids work to be performed outside the United States on contracts with the New Jersey government. A legal analysis by the National Foundation for American Policy found such state bills, including New Jersey’s, were likely unconstitutional because only the federal government, not individual state governments, possesses the authority to regulate international trade. (That study can be found here.) However New Jersey’s law was never challenged in court, in part, because the state provided a generous “grandfather” policy that allowed existing contract arrangements with the state to continue.
What’s Happened Since 2004?
The past 7 years have seen changes to globalization. Indian companies have continued to thrive with US-based customers but have adopted an approach that seeks to maintain a U.S. presence with more US workers, according to recent news reports. The goal is not to mollify critics, although that might be a side effect, but rather to be close to customers and supply better service at a reasonable cost.
A lengthy Washington Post article recently detailed the efforts of India call center operations to place more employees in the United States. The key part of the article explains: “India’s outsourcing giants — faced with rising wages at home — have looked for growth opportunities in the United States. But with Washington crimping visas for visiting Indian workers, some companies such as Aegis are slowly hiring workers in North America, where their largest corporate customers are based. In this evolution, outsourcing has come home.”
The bottom line is important. To remain profitable employers, including Indian companies, most compete both on price and the quality of service. The idea that employers hire only employees who will work the cheapest is belied by experience. A company will soon lose customers and profitability if it hires people whose only virtue is to work for little money. Such employees are unreliable and result in labeling a company as unreliable as well. Most importantly, companies will place employees where customers can be served most effectively.
The marketplace is addressing concerns about jobs going to India and U.S. workers “losing” in the process. Globalization is a boon to Americans, who enjoy great products and services made possible by globalization, such as iPods, iPhones, Androids, flat screen television sets, gaming devices and computers that be serviced with a phone call. New restrictions on either trade or immigration that inhibit the growth of such products and services will only make Americans poorer.