Our second annual issue on globalization comes at an opportune time: As I write, President George W. Bush has just completed his very first trip to India and is on his way to Pakistan. During his stay in India, Bush touted the benefits of trade with India, including the outsourcing of jobs there, IT and otherwise.
While the reaction in India to his statements was predictably positive, the reaction here in the U.S. was decidedly mixed, judging from press reports. Outsourcing as a hot-button political issue pretty much died with the end of the 2004 presidential election, yet feelings still run high about fears of further job loss (especially as India’s knowledge-based skills continue to move up the value chain), the continued trade imbalance between the U.S. and India, and now the nuclear technology pact signed during Bush’s visit.
Are fears of outsourcing, and the accompanying lost jobs, overblown? The subject of this month’s Expert Voices interview, Jagdish Bhagwati, a professor of economics at Columbia University and a fellow at the Council of Foreign Relations, believes they are. For him, outsourcing is an extension of foreign trade, but in services, rather than in goods such as semiconductors and sweaters.
And trying to stem the tide of trade in services is nothing but protectionism, which, in his view, is a fast train to dire loss of competitiveness. A vibrant economy will have no trouble minting new skilled jobs, says Bhagwati; his concern is finding ways to make sure the effects of globalization do not fall unfairly on the less skilled and the aging.
This month’s research survey on outsourcing points up a number of trends that bear on this issue—for better or worse. First, the percentage of companies choosing India as an outsourcing destination has declined significantly, from 89 percent last year to 75 percent this year. Meanwhile, other destinations, including China, Canada, the Philippines and Singapore, continue to grow in popularity. Clearly, as outsourcing activity increases, U.S. corporations are finding that an increasing variety of countries are suiting their needs. Second, outsourcing activity continues to increase, despite growing dissatisfaction with outsourcing vendors and the disruptive effect it’s having on domestic IT staffs. Obviously, the perceived virtues of outsourcing continue to outweigh the negatives.
The growth of IT outsourcing couldn’t have happened without the vast networks created by the Information Age. As Carlota Perez notes in this month’s Foreword, we are at the mid-point of that age, poised between what she calls installation and deployment. Just imagine what globalization will look like in another 20 years.