History Repeating Itself With Offshoring

from the not-so-bad dept

The whole offshoring debate is clearly a hot topic as you can’t go far without stumbling on yet another article about the topic. Not trying to overwhelm Techdirt with such stories, but it is an important topic, and much of the backlash against offshoring seems so misguided that it’s important to discuss this topic. There are legitimate reasons to believe (as I do) that offshoring is being overhyped to companies who are making bad long term decisions in sending certain jobs overseas. That said, there are plenty of jobs where it makes sense for them to be offshored. The NY Times is now running an article that compares the situation today with the situation fifteen years ago in the hardware business. Then, like now, the technology business was moving overseas to Asia, and there were all sorts of doom and gloom reports. So-called experts predicted the death of the American tech industry. Instead, what happened was that the American tech industry moved on and innovated their way into bigger and better businesses. Meanwhile, thanks to the offshoring, computer companies could buy cheaper equipment and it led to a huge productivity boom that brought real value to many Americans. The quotes and the attitudes from then certainly sound very similar to what people are saying today. This article also predicts that the next area of growing productivity will be in offering technology and services to small and mid-sized businesses who haven’t been able to take full advantage of what technology can offer. There’s plenty of opportunity that can help continue to push our economy forward.

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Comments on “History Repeating Itself With Offshoring”

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John O'Sullivan (user link) says:

Offshore Value

I remember an even earlier offshoring crisis. In the 1970’s, North American manufacturing jobs started moving overseas at high speed. There were few truely global organizations at that time. That’s an important difference because it wasn’t a question of simply moving jobs around. Instead, the trend created huge new global players like Honda and Sony. Neither was a leader in the Japanese domestic market in the 1970’s. The trend also led to the growth of North American businesses that successfully outsourced production to the Far East. Nike was probably the most successful of these. Its also worth noting that the companies who successfully rode this trend became global brand names.

The evaporation of jobs in North America, particularly in the auto business, looked at the time like the end of the world. Many expected that North American would be reduced to a McJobs economy buying the output of sweatshops located in Far-East dictatorships. That was not crazed left-wing thinking, it was a fairly mainstream assessment. Nobody knew what a global economy would look like, and the Cold War was still on. Fortunately, things didn’t turn out like that. The most interesting unexpected development of that wave of offshoring was the transformation of the “client” countries. Taiwan, Korea, Japan, Malaysia and Thailand became democratic, respectable and full-fledged members of the global community. All are better places to live than they were 25 years ago. All are more democratic, more open, more prosperous, better educated and healthier. All have become excellent markets for North American companies.

I see the present offshoring trend as more of the same. Its delightful to see India, The Phillipines, Indonesia and (to a much lesser extent) China benefitting from the same kind of transformations experienced in Korea 20 years ago. They will be better off, we will be better off. And not just in economic terms.

All of this good news doesn’t disagree with Mike’s assessment that there are a lot of mistakes being made. Executives are no less slaves of fashion than the average teenager. Lots of bad offshoring decisions will be made. Lots of people will suffer as a result.
The 70’s offshoring wave created a lot of good things. It also ruined the lives of millions of North American plant workers that never again found a meaningful job. Nothing was done for these people and the experience created a resentment that has never gone away. Individuals make the decisions, but stakeholders pay the price of bad decisions. That should, but probably won’t, caution the decision makers at the big companies who really drive the trend.

Margherite says:

Re: Offshore Value

“Slaves of fashion” is right! H-1Bs and green cards are nothing new, either. Remember when (late 60’s & early 70’s) the stylish corporate types had to have a British secretary? According to the justifications at the time, they were smarter than the U.S.-grown variety. The place where I worked had this Cockney dame who nipped Scotch and watched soaps in the conference room all afternoon, but whew did she have the accent.

In reference to the resentment of displaced workers, I have wondered for a while why there hasn’t been a class-action suit that made its way to the Supreme Court. The labor unions missed the opportunity, but maybe the Computer Guild?

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