December 22, 2003	Monday	Shawwal 27, 1424

The wage of a blue-collar worker in the US is about $10 per hour or $80 per day in comparison to $2 per day in a developing country. The American companies have to pay higher wages if they employ American labour. Their products become costly in the world market.

American companies are making profits only because they have a monopoly over certain technologies. The Glaxo may not be producing a drug at a higher cost than a pharmaceutical company in a developing country. It can yet pay $200 per day to its workers because it can sell the drug at a high price due to its exclusive patents.

It has become necessary for the Western multinationals like the Glaxo to pay less to their workers in order to compete with the developing countries in non-patented products. A small reduction in the wages of American workers will not make much difference. Thus, American companies are transferring many activities to contractors in developing countries like China, India and Philippines.

The General Motors has to reply to thousands of queries of its customer’s everyday. These calls are transferred to centres located in India and replied to by English speaking operators from there. American patients can consult doctors and psychiatrists through e-mail. Credit cards can be used to pay the fees of the doctors. Officers located in the developing countries can process insurance claims. Thousands of Americans and Europeans who were previously doing these jobs are becoming unemployed.

No wonder the American people are disturbed. One software programmer Kevin Flanagan committed suicide. He had seen that his fellow workers had lost their jobs one after the other as the projects went to India. One day he too was terminated. He went out and shot himself dead in the parking lot of his employer, the Bank of America.

Eighty thousand jobs have been lost in the King and Snohomish counties of the Washington state in the last few years where the headquarters of Boeing and Microsoft are located. Dozens of people who had lost their jobs to outsourcing demonstrated before the Aldorf Astoria Hotel in June 2002 where a business conference on outsourcing was taking place. A few states like New Jersey are in the process of enacting laws that will prohibit outsourcing of the government contracts.

The replies to customers of a municipal administration would not be allowed from any offshore location. Many specialists believe that things will get only worse. Dayan Wiggins explains on the internet how America may be losing its technological advantage forever.

The foreign software experts from developing countries were allowed to work in the US for only six years under the H1B visas. This policy has backfired upon the United States.

The experts acquired knowledge of the frontline technologies as well as the requirements of the American customers during their stay. They took this knowledge with them and started supplying the same services to their earlier clients directly at a fraction of the American price. America has inadvertedly transferred the frontline technologies to foreign experts in her anxiety to prevent them from immigrating.

The American companies are transferring their frontline knowledge in areas such as biotech to their research outfits located offshore. In the process, the scientists of developing nations are gaining frontline knowledge. They can use this knowledge to develop the next generation technologies themselves. America may soon lose its present lead in these emerging sectors.

Outsourcing is not new: The US companies like the General Motors have been getting parts made in the Asian countries for many years. Glass components of the TV tubes have long been made in India, China or Korea. America has been outsourcing nearly all of its requirements of shoes, clothes and toys. However, this did not have a severe negative impact on the American people.

Such products have to be packed and transported which takes both time and money. Therefore, certain manufacturing jobs were retained in the US. Second, new and better-paid jobs were being created in new areas like computers, biotech and internet.

The American people were losing low-paid blue-collar jobs but getting better-paid jobs in emerging sectors. This strategy had been successful in the last thirty years because America was continuously creating new technologies. This lead of the rich countries is now being eroded. The high-skill jobs may no longer be created in the rich countries in future.

America does not have a solution to this problem: The products of the American companies will be more expensive if outsourcing is prohibited. The Glaxo’s drugs will be more expensive than those manufactured by an Asian company.

They will be ousted from the world markets and the American people will lose their jobs. On the other hand, outsourcing would lead to the transfer of many jobs to the developing countries. The American people stand to lose in either situation.

President George Bush appears to understand this dilemma: He has clearly said that he will place no restrictions on the outsourcing. This way, at least, the American companies will be able to maintain their competitiveness even if the American people lose their jobs.

The American companies can pay dividends and taxes in America from the incomes made through outsourcing. Some benefits can be provided to the American people with this money.

The alternative of prohibiting outsourcing is worse because the American corporations will be killed along with American workers losing their jobs. Thus, America has taken the path of lesser evil.

The developing countries should understand that the information technology has fundamentally changed the nature of world production by making it possible to transfer services like telephone calls at nominal price. Globalization necessarily means that the global wages too should be equal.

Therefore, developing countries should ignore the opposition to outsourcing that is emerging in the rich countries and continue to march ahead.