Wednesday, November 23, 2005

Outsourcing is Good for the Global Poor

Tibor Machan, R. C. Hoiles Professor in Business Ethics and free enterprise at Chapman University, Orange, California and co-author of “Libertarianism: for an against” (Rowan and Littlefield) writes brief commentary: “Whether we admit it or not, we all outsource” in Desert Dispatch, Barstow California.

He opens with the news that IBM is shedding 13,000 US jobs and creating 14,000 jobs in India and comments on this news:

“Some lament this, but I, for one, am mystified why anyone would consider it bad news. It is great news, for Indians looking for decent jobs; it's good news, also, for IBM and other firms that can benefit from the skills and education of Indians, where in previous times they couldn't and those in India had to go hungry or take jobs with very low pay. It is also wonderful news to customers of IBM, who now can spend their saved money elsewhere and thereby create more jobs.”

That is spot on and well put. What a change from so-called friends of labour who lambaste jobs moving to India or China (‘where’s your humanitarianism, the noo?, as we say in Scotland). Labour unions and socialists are often strong on international solidarity, but it seems they are ruthless defenders of particular workers interests, mostly those in their own country, and for MPs those in their own constituency. They also preach about the developed world not doing enough for the poorer world, but oppose the one thing that does more for the poor than all the handouts, grants, aid and charity put together, namely the opening up of markets for the flow of products between countries. India and China are cases in point (as were Japan, South Korea, Taiwan and Brazil before them).

Tibor Machan notes the interdependence of people in markets and how they relate to each other, most of whom are unknown to the beneficiaries:

“…people who work for us are almost always strangers, not friends and family, and we interact with them for a limited but mutually beneficial, namely commercial, purpose. That's mostly it; although one can come to befriend one's butcher or hairdresser or even auto mechanic and in time even start to date one of them.
These categories are not rigid or fixed. But in the main, commerce is carried out with personally unknown individuals, and they and we ought all to be fully aware that in such relationships loyalty is very secondary. What counts for most is whether a good deal can be struck.”

Yes, negotiating parties can take a ‘transaction only’ approach, in which the ‘good deal’ is the dominant criterion. They can also take a ‘relationship’ approach in which strong relations produce customer and brand loyalty and, perhaps, higher prices for more personal services. Both approaches are common in markets.

He concludes:

“It isn't all that new a phenomenon in any case and has been supported by intelligent economists for years, one of them being, of course, Adam Smith himself. His "The Wealth of Nations" could use a bit of study by the likes of those whom [we are] trying to educate about the elementary economics of the situation. It might make them happier about this global development.”

Now, I cannot disagree with that assertion.


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