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COMPANY PROFILE

FAUJI FERTILIZER COMPANY

COLUMN FOR THE RECORD
INFORMATION TECHNOLOGY THE READINESS OF PAKISTAN IT INDUSTRY POST SEPTEMBER 
POLITICS & POLICY 1- OUTSOURCING: IS IT GOOD OR BAD FOR THE ECONOMY
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BETTER EXECUTION OF PSDP PROJECTS
 
OUTSOURCING: IS IT GOOD OR BAD FOR THE ECONOMY?
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From ABDUL QUAYYUM KHAN KUNDI, USA
Apr 05 - 11, 2004
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There is a lot of debate going on these days about the harm outsourcing imposes on society by increasing the number of unemployed. It has also become a point of contention between Mr. Bush and Mr. John Kerry in their race for White House in the elections of 2004. In this column we are going to discuss this issue from various angles to understand it better.

CAPITALISM AT PRACTICE: US policy makers conform to the capitalist point of view where all activity is done to achieve higher economic benefit. Policy makers adopt the lezzie's fare approach that is to have minimum interference with market forces. The regulators ensure level playing field for stakeholders who strive to increase their return. Sellers want to maximize their profit by increasing their margin. Buyers want to pay a minimum price for the maximum benefit. Shareholders want higher return on their investment. Management of a corporation is continuously struggling to increase productivity or reduce cost to increase their profits thereby make their shareholders happy. One of the resources purchased by managers is manpower. In a capitalist philosophy the manager should purchase it from the cheapest source possible keeping the same quality. US managers have always adopted this view and outsourced manufacturing and service jobs throughout their history. They have imported cheap labor, from Africa, during the early stages of their history. It has become a major issue, these days, because of the longest running recession in US history. The recession has made people worried about the long term viability of their careers. This has created widespread unrest among all labor classes because of the wide media attention this issue has gathered.

CONFLICTING IDEOLOGIES: The spread of globalization has started a struggle between conflicting ideologies like socialism in Europe, protectionism in Japan and India, and Communism in China. US being the largest consumers of resources in the world have tried to influence these ideologies to conform to its principles of capitalism. It has become a regular item of discussion between the trade representatives of different countries to remove discrepancies between different philosophies. The argument, put forward by the proponent of preventing job migration, to India and China, is that these countries are able to supply labor at cheaper costs because they do not have to work under the same working conditions as imposed by US labor laws on US employers. These laws pertain to requirements of maintaining minimum safety standards, provision of health insurance and minimum wage rule, minimum age, equal opportunity employment specially wage discrimination based on sex and age etc. If these countries impose strict work regulations they would not be as cheap as they are now. One idea put forward by policy makers is to make it liable on the corporations to ensure that the foreign contractor conform to code of ethics as outlined in the US labor laws and provide a similar work environment for the labor. A lot of US trade partners, like India and China, are controlled economies whereby they are able to sell to the US customers but are not willing to buy from the US providers. These create imbalances between the countries. In this scenario one of the condition laid down by US for countries to join WTO is to open their economies and reduce their tariffs. Labor policies have become a part of this agenda. Sanctions imposed against carpet import from Pakistan because of child labor are indicative of this approach.

 

 

OBSOLESCENCE DUE TO EVOLUTION: As the wealth of the economies grow and the income discrepancies rise between nations, it is cheaper for a nation to buy certain goods, and services, at a price level where some jobs become redundant. For instance, the cost of shoes, in USA, has gone down in terms of real dollars that has made the profession of shoe repair outdated. Home appliance repair guys met similar fate. This evolution was achieved through improved production processes, introduction of cheaper raw material alternatives, higher product quality and movement of production to low cost countries. As the US economy evolves around technology and higher productivity there will be more job losses in low wage services like medical transcription. Throughout its history, US has been able to re-deploy and retool its labor resource depending on its stage of development. In early 20th century, when cities like New York and Los Angeles were building sky scrapers and underground railway, construction was the most sought after profession. When this slowed down same labor was sought for farms to produce more food for the rising population. As the society evolved, the labor was moved to high-end areas like research and development. It is not in the US interest to engage its labor capital in low wage sectors and in return import people for high-end jobs. Its best alternative is to retool laid-off people in new skill levels to be employed in new types of jobs created by the introduction of technology in our daily lives.

REMEDIES: some of the remedies put forward by the policy makers include imposition of a re-tooling tax on corporation exporting jobs, change in labor laws to inform the laid off work three months in advance so that they can re-train for different jobs and disclosing the location of the customer service agent to the calling customer. Allowing the customer to request his call being transferred to an agent in USA.

Whatever remedy US policy maker choose to adopt, whether anyone of these or a combination, should conform to US philosophy of open markets and free flow of goods and services across its borders. If US decide to retrace its step from this philosophy at this junction of increasing globalization it would discourage a large number of developing nations who are getting ready to plunge into free and open market philosophy.