Outsourcing

Is outsourcing (and “offshoring”) a positive phenomenon?

Outsourcing
Yes because...

Offshoring lowers the cost of goods and services. Not all goods and services which are consumed in ...

Offshoring lowers the cost of goods and services. Not all goods and services which are consumed in a high-cost economy need to be produced in that economy. There is long-standing tacit recognition of this domestically within most countries – for example, only certain activities tend to be carried out in central urban areas where land and operating costs may be higher than elsewhere. Offshoring simply applies this logic on a larger scale, by allowing the comparative benefit of a lower cost of production to be passed on worldwide.

No because...

Offshoring is simply a way of unfairly exploiting cheap foreign labour. By shifting production to low-wage economies, companies are able to profit from paying substandard wages and sometimes offering appalling working conditions. The fact that there are so many poor, underdeveloped countries with substantial unemployment means that countries will “race to the bottom” in a desperate attempt to undercut each other and so make themselves more attractive for offshoring investment.

Outsourcing
Yes because...

Offshoring encourages efficiency. Offshoring increases transparency between companies and countries...

Offshoring encourages efficiency. Offshoring increases transparency between companies and countries through a more ruthless display of pricing competitiveness. This means that there is a freer market between companies and those who are not efficient are less likely to succeed. This is good for consumers and the economy more generally, because goods and services will be produced more cheaply and efficiently. This does not necessarily mean that corners will be cut or jobs lost – the threat of overseas competition may serve to sharpen a company’s own focus on efficiency, or else to innovate in ways which set it apart from offshoring companies.

No because...

Offshoring leads to ruthless competition. Those who favour offshoring peddle an “efficiency myth” which ignores the human cost of some market forces. Efficiencies are not necessarily passed on to end consumers. Instead, the most vulnerable people in the supply chain (typically workers but also small businesses) are forced into a viciously competitive, no-win situation. Meanwhile, consumers pay much the same price as before, perhaps for a worse product or service, while the company involved inflates its profits at their expense.

Outsourcing
Yes because...

Offshoring helps development of underdeveloped countries. Offshoring relies on a basic industrial ba...

Offshoring helps development of underdeveloped countries. Offshoring relies on a basic industrial base and the necessary supporting infrastructure, including some sort of education system. This will be present in most developed countries but may be partially or wholly absent in underdeveloped countries. The prospect of profiting from outsourcing contracts will encourage both public and private investment in infrastructure, both physical and social. In addition, offshoring provides bigger markets than would ever be possible domestically for an underdeveloped country, which allows it to benefit from economies of scale and capital inflow to develop more rapidly. And over time, the demands of companies for accountable, non-arbitrary government will encourage the rule of law and democracy, as will rising education levels and a growing middle class.

No because...

Offshoring undermines liberal democratic values. Offshoring involves a focus on cost at the expense of all else. It favours regimes where cheap, consistent labour is available even where this is because of poverty or government authoritarianism (e.g. the banning of trade unions). Therefore, the sorts of social systems seen in developed countries are seen as costly and lose out in comparison to low-wage economies which also support far less social infrastructure. This is doubly damaging, as it leads to a spiral effect in developed economies whereby a diminishing number of workers thus must support an increasing number of social claims, which accelerates the economy’s competitive decline.

Outsourcing
Yes because...

Offshoring can grow the total production of the developed world. Offshoring allows more developed c...

Offshoring can grow the total production of the developed world. Offshoring allows more developed countries to focus their economic activity on more highly skilled, value-adding processes which may be more financially profitable than, for example, low-end manufacturing. Additionally, they create large numbers of newly affluent middle class consumers in underdeveloped countries which can provide substantial new export markets.

No because...

Many countries do not gain from offshoring. It is fallacious to suggest that everybody wins – many developed countries suffer increased unemployment and/or lower quality as a result of offshoring. Nor do developing countries necessarily all gain at their expense, as multinational corporations are footloose, frequently withdrawing investment and switching contracts in a restless search for the next dirt-cheap source of labour.

Outsourcing
Yes because...

Offshoring reflects the positive elements of globalisation. Some critics talk of “globalisation” as...

Offshoring reflects the positive elements of globalisation. Some critics talk of “globalisation” as automatically part of the excesses of global capitalism. However, globalisation includes such things as more rapid, cheaper and stable cross-border interaction. These elements both encourage and are further encouraged by offshoring. This helps to cement globalisation and its attendant benefits.

No because...

Offshoring is a form of economic and cultural imperialism. Offshoring portrays underdeveloped countries as being cheap sources of support for the developed economies. The focus is not on helping the poorer countries to develop strong economies, but to exploit their weaknesses to satisfy the consumer culture of richer countries. In doing this, the mass export of roles which depend on cultural knowledge (for example, call centre jobs) imposes an alien and patronising cultural framework onto local workers.



Outsourcing

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