Outsourcing under attack

For several decades, most politicians in most developed countries were in favour of relatively free trade. They became protectionists only when political pressures for the adoption of such policies became hard to resist. Agriculture in Europe - and, to a lesser extent in the United States - has remained protected from free competition.

Farmers in both America and Europe carry political weight far in excess of their number in the population of the two continents or the contribution they make to the gross domestic product.

The same is true for textile producers and workers. Even when tariffs charged on imports were being lowered by all rich countries following various rounds of trade negotiations, textiles were exempted. This was done under an agreement with the developing world widely known by its acronym, the MFA. This agreement is set to expire in January 2005.

Would the West stay committed to free trade as another development has begun to affect its labour markets? This question refers to the flow of tens of thousands of jobs from America and Europe to places such as China and India.

The phenomenon has come to be called "outsourcing." The US by far is the largest "outsourcer" in the world. It is also now engaged in a tussle between two candidates in the presidential elections due to be held in November who are approaching the subject from different angles.

Two fears are fuelling the heated debate in the US about the effect on the country of outsourcing. One is that labour and skill abundant in countries such as India that provide US companies with services across a broad spectrum that stretches form call centres to software development and medical services are to be blamed for the "jobless" recovery that seems to be taking place in America. There are plenty of seemingly scary estimates floating around that add to this fear.

Some months ago Forrester Research, a reputable consulting company estimated that 3.5 million US service jobs will migrate abroad by 2015, mostly to India. Berkeley University came up with an even larger number - 14 million white collar jobs will be lost not only by the service sector but also by other parts of the economy. The Berkeley study is behind the second fear - that white collar jobs of all kinds are now under threat.

Numbers, of course, don't lie. The lie comes from the way they are used. The Forrester estimate - or even the much larger figure in the Berkeley study - are not worrisome given the size of the US labour market and the speed with which it turns over.

Between seven and eight millions jobs are lost every three months in the US. This means that the country witnesses the vanishing of some 20 to 25 million jobs every year.

Stretched over a decade this totals 200 to 250 jobs lost. If the Berkeley estimate of 14 million jobs leaving the US and moving abroad is correct, that amounts to less than seven per cent over the space of ten years.

This change did not worry the politicians in the 1990s for the simple reason that the economy was growing fast enough and in a way that more jobs were being created than lost.

In fact, during the Clinton era the rate of unemployment declined to only 4.5 per cent of the labour force, the lowest it had reached in decades. The worry then was not loss of jobs but lack of workers with appropriate skills.

Washington came under pressure from corporate America to issue special visas so that the domestic labour market could be augmented with foreign imports. That produced the avalanche of migrants to the US, a flow that was reduced to a trickle not by economic developments but by 9/11.

Why is the current economic recovery so different from that presided over by President Bill Clinton? The answer is provided by some economists that technological solutions such as those we have seen in the area of information and communication technology bring about rapid structural change only after they have reached a critical mass.

That happens when a large number of people and economic entities begin to use the same technology. It takes about five years for that to occur.

The enormous investment made in ICT by corporate America during the Clinton economic expansion has begun to bear fruit during the recovery presided over by President George W. Bush. (Although given the current political climate, the Bushites would not call this result a "fruit.") The current growth spurt in the US has been propelled by impressive gains in productivity which means that a higher level of economic activity is possible without increasing the number of workers. This is the reason for the phenomenon of "jobless recovery."

People act foolishly under pressure and politicians are, after all, people. In the first week of March, the US Senate voted to deny federal contracts to companies that do work abroad. The Senators were repeating what had been done by several state legislatures. Several months ago New Jersey legislated that no government work could be sent overseas.

In the second week of March, US trade representative Robert B. Zoellick said that the Bush administration was about to change its mind about the use of the programme called trade adjustment assistance.

For months the Bush administration fought a law suit brought by a group of computer programmers whose jobs were outsourced abroad, arguing that they didn't qualify for government benefits aimed at people coping with layoffs caused by imports.

Now, said Zoellick, Washington might be prepared to support a bill being sponsored by the opposition, the Democrats, to expand benefits further to service workers such as engineers, architects and telephone call centre employees whose job losses to India and other countries had become such a hot political issue. John F. Kerry, the Democrat presidential candidate, lost no opportunity to wave an accusatory finger at President Bush for allowing job losses to proceed.

As the presidential contest becomes more gruelling, there is every reason to believe that some action will be taken - or, at least promised - that would affect the speed with which outsourcing was occurring. Would such initiatives hurt a country such as Pakistan that was getting ready to climb on the bandwagon of outsourcing? Would the bandwagon get stalled by the concerns and fears produced by the jobless economic recovery in the US?

By early March, even the Bush administration that had relied so much on stimulating growth through fiscal and monetary measures - lowered taxes and easy money - had begun to recognize that it was faced with a serious problem.

On March 5 the Labour Department came with the dismal news that just 21,000 new jobs were added in February. Total non-farm employment remained almost 2.5 million below its peak reached in March 2001 when nearly 132.7 million Americans were employed.

This was not a good political news for the administration. For comparison, in the early 1990s when the government headed by President Bill Clinton established its reputation for sound economic management, the economy was in the same cycle of recovery as it is now. Although that recovery was also called jobless, non-farm payrolls had already surpassed their previous peaks.

All the hand-wringing about job losses didn't seem to worry corporate America. That was not surprising. Shareholders of companies want managers to increase their value and that can only be done if the people who run businesses keep their eyes focused on the bottom line.

For the managers their experience had given ample proof that outsourcing helped company profits by cutting down costs. When the outsourcing debate began to pick up International Business Machines Corporation (IBM) said that it was planning to double its workforce in Calcutta (now called Kolkata) from 2000 to 4000.

The city was joining other locations in India as an attractive destination for work currently done in the US or other industrial countries. India was not the only country IBM was targeting; it had plans to send another 3000 jobs to other countries that had skilled labour available.

At the same time, the company said that its US workforce would remain stagnant - decline. It had plans to add another 5,000 new jobs in America. IBM was not alone in defying the rapidly building public sentiment against outsourcing. Accenture, a giant consulting firm, said that it had plans to increase its employees in India from 4,800 to 10,000.

So much political talk is bound to result in some policy change. Exactly what could be done to stem the outflow of jobs - or, if the trend could not be bucked, then how to help the affected workers move over to other occupations - was not clear to those who worried about this phenomenon. Among the many approaches that began to be floated as the American political season heated, three had some serious political implications.

To the surprise of many of his supporters, President George W. Bush gave a strong speech in Ohio, one of the states that had lost a large number of manufacturing jobs.

The speech was given soon after John F. Kerry had clinched the Democratic presidential nomination. He expressed his full confidence in international trade. Yes, there would be job losses but ultimately there will be more employment opportunities as economic growth picks up not just in America but all over the globe.

This is precisely what Gregory Manikow, the president's chief economist had said a month earlier in the council of economic advisers' annual report on the state of the economy.

Manikow was loudly condemned, not just by the Democrats but also George W. Bush's own Republicans. Now the president was following the same line, following orthodox economists' view that growth without any need for tinkering by the government would ultimately produce the jobs the US workers needed.

The second approach is being put forward with increasing vigour by John Kerry whose catalogue of reasons for the current jobless recovery was a familiar one. These included the outsourcing of jobs to low-wage, high-skill countries such as India; the weakening of labour unions and, consequently, the inability of the workers to counter the total focus of managers and owners on profit; the tilt of the tax system in favour of the wealthy investor.

To remedy this situation and to produce a level playing field for the working class, Kerry suggested a number of remedies. They include tough trade rules, restoration of workers unions' organizing and bargaining rights, a fiscal system that rewards those who create more jobs at home and punishes those who ship them abroad. Kerry also advocated improved education, particularly in technology, for the American and government sponsored skills training for those who did lose jobs.

A third road has begun to take some traction. It was initially proposed by Barney Frank, the Democrat Congressman from Massachusetts. His proposal is to tax some of the wealth the private sector is now producing so abundantly - a "fairly small percentage" he advocates but large enough "and employ people on socially useful purposes." This approach is akin to those adopted successfully by another president who had, at an earlier time, dealt with another jobs crisis in America.

Franklin D. Roosevelt had successfully launched a large works programme. Frank urged that we "take some of the wealth that is being created by this wonderful increased productivity, this new technology, and let us use it for our own undisputed public purposes.

Let us give our cities and states more money so they can have more people policing, fighting fires, cleaning up the environment, repairing facilities that need to be repaired, enhancing train transportation, building highways, helping construct affordable housing in places where that is a crisis, helping for higher education for students."

Which way this debate eventually gets settled will have great meaning for the populous parts of the developing world waiting for jobs to arrive from America.

What US polls mean for us

When the political ticker tape recently started to swing John Kerry's way, a certain gloom descended on policy makers in Islamabad. For astonishing as it may seem, it is felt in many circles in this country that Pakistan's future, at least in the short term, is inextricably linked to Mr Bush's success in the November election.

The Pakistan foreign office, however, should not despair, for there is no guarantee that Mr Bush will be ousted. And even if he is, recent comments by Mr Kerry notwithstanding, the possibility of the White House dramatically changing its South Asia policy is remote. The spectre of the terrorist lurking menacingly in the shadows, affects both Democrats and Republicans alike. Americans are not used to, and do not like having to look over their shoulder when they travel abroad.

Over the years, the general consensus has been that Republican administrations are good for Pakistan and Democratic ones good for India. That's why if some patriotic local philanthropist ever decided to carve out his own Mount Rushmore somewhere in the Margalla Hills, in a moment of misguided exuberance, tourists would probably see busts of Dwight Eisenhower, Richard Nixon and Ronald Reagan smiling benignly on the citizens of the Islamic Republic.

He certainly wouldn't have much truck with scholars like Mr Kennedy or Mr Clinton, brilliant and ebullient in their own way, who while disrupting lazy assumptions about economic theory, would always be regarded as having tilted the wrong way and supported the economic giant across the eastern border.

That's more or less the way the local media and official policy makers react. But it doesn't seem that members of the silent majority, who don't have access to the corridors of power in Islamabad, look at the issue in the same way.

To the tiller of the soil, squeezed by the vagaries of an iniquitous feudal system, and the growing army of educated youth who are being sucked into a market where there are no jobs, and into a world programmed for competition, the issue of which one, Mr Bush or Mr Kerry, would be better for this country, is quite meaningless.

In fact, to the unemployed white collar worker, starving in a garret in a twittering shanty town, where there is neither electricity nor water and sewage flows through the narrow lanes, both the Democrats and the Republicans represent the autocratic indifference of the West to the suffering of the common man in South Asia. Even the news that came down the pike a few days ago will leave him cold.

Mr Bush, trapped by routine and ritual, was going to make Pakistan richer by a few million dollars, in gratitude for the help provided by such a staunch ally in the war against terrorism.

None of this largess will trickle down to the common man, to the coughing consumptive rotting in an ill equipped ill stocked government hospital, or to the daily wages labourer who can't afford to send his children to school.

But there is a jolly good chance that we might see a fleet of brand new automobiles, the pride of German technology, doled out to the civilian and military freeloaders for whom planned obsolescence has a special meaning.

I have encountered a certain difficulty in discerning the basic differences between the policies of the Democratic and Republican parties. Geopolitical imperatives fall partially on Republicans and Democrats alike.

After all, all American administrations, no matter how much they might differ on issues like social security, funding education and their attitude to racial minorities, will act to preserve a balance of power in Europe and to prevent extra continental annexations in the Americas.

The best indictment of Republican foreign policy was the one I came across in 1988 when Arthur Schlesinger Jr in an enlightening article pointed out that the foreign policy of the United States had been on a radically misconceived course since President Reagan took office in January 1981.

According to Schlesinger, the salient difference is that the Republican Party had been in recent times the vehicle of unilateral action in world affairs, and the Democratic Party the vehicle of international cooperation.

To substantiate his point of view, he pointed out that in the shorter run the roots of Reagan's national security policy, as well as his human rights policy, lay in the Carter administration.

It was, in fact, Carter who for better or for worse, advanced the movement away from the concept of mutual assured destruction towards a war-prevailing strategy, who approved the MIX missile, who expanded American security commitments in the Third World, and whose Carter Doctrine defined the Persian Gulf as within the zone of US vital interests.

It was Carter too who placed human rights on the world's conscience and agenda - for which Reagan roundly condemned him in the 1980 campaign, holding Carter's human rights preoccupation responsible for the "loss" of Iran and Nicaragua.

In abandoning Ferdinand Marcos of the Philippines and Jean-Claude Duvalier of Haiti six years later, Reagan unabashedly adopted the policy for which he had so righteously denounced Carter.

Schlesinger then went on to state that the Reagan administration had then given the GOP's unilateralist tradition a global application. No administration in recent times had paid less heed to the views and interests of allies, had more systematically scorned multilateral forums or had taken greater pleasure in being able to say as Reagan said, after an American plane had forced down Palestinian hijackers over Italy in 1985, that America did it "all by our little selves."

Reagan's unilateralism was inspired by a messianic conviction that the American destiny was to redeem a fallen world. It was inspired by a crusading anti-communism which hadn't been seen since the stormy days of John Foster Dulles.

Can anybody forget the paranoia of the flamboyant, hard drinking, headline seeking Senator from Wisconsin Joseph McCarthy, possibly the greatest demagogue in the history of America, who was determined to ferret out loyal Americans suspected of leftist leanings?

The ensuing witch hunt between 1954 and 1957 against members of the US army, rescued by the timely intervention of President Eisenhower, and the inquisition conducted against the actors and actresses of Hollywood, embarrassed a number of brilliant Jewish intellectuals who suffered along with their gentile comrades.

Where Carter saw the cold war as a power struggle, Reagan saw it as a holy war, a kind of evangelist jihad against an enemy that was unchanged, unchanging and unchangeable - the root cause behind most of the world's troubles. Like most crusades which exaggerate the menace of the enemy, Reagan's one wobbled the administration's sense of reality. All of a sudden, local conflicts became tests of global resolve.

But sometimes one wishes that Mr Bush would do a bit of introspection and read The Federalist Papers, written by realists who understood the obvious fact of international life, which is why the 63rd Federalist called on the Reagan government to "pay attention to the judgment of other nations... particularly where the national councils may be warped by some strong passion or momentary interest, the presumed or know opinion of the impartial world may be the best guide that can be followed."

Cricket, lovely cricket

I have been true to cricket in my fashion and faithful to it in my way. It amazes me how it can bring out the little boy in me though I have become an old man. What amazes me even more is that millions of people in the subcontinent share this passion.

Cricket started off as a rich man's game and in the country of its origin a snob-barricade kept away the riff-raff. There were the amateurs and there were the professionals, a Marxist divide between the captains of industry and the working classes, between landowners and those who tilled the soil.

The amateurs, so called because they had other means of income and played cricket for the love of the game or as a duty to their class. The professionals got paid and were treated as the fetchers of water and hewers of wood. They had a separate dressing room and they came on the field from a separate gate.

In the subcontinent, the British allowed the natives to play cricket and the maharajas and the nawabs became the game's patrons which endeared them to the rulers and at the same time ensured that cricket could not become the locomotive that fuelled nationalism which it does today.

India's tour which has now entered the less emotive phase of test cricket has been a thundering success except in regard to the final outcome of the one-day series. There was obviously some pain that Pakistan was overtaken in the final stretch but because the series had gone to the wire, the pain was not so great as it would have been if Pakistan had tamely surrendered.

Are our cricket fans getting more mature? On cricket matters, I read the national mood, not by the papal edicts issued by the experts but by such followers of the game who could not tell the difference between a leg-cutter and a paper-knife.

It is their passion, and I might add, their love of their country that is food and drink of a game that is otherwise incomprehensible to them. In a test match there is a lunch-break and a tea-interval and cricket cannot be a war for in a war combatants do not cease hostilities in order to nourish themselves.

In this particular tour by India, cricket is playing second fiddle to politics and its gains are being tabulated by the number of hearts it is winning. It seems to be a strange exercise for it implies that the sentiments of the people are factored when political decisions are made.

They have not in the past and public opinion has been fabricated and a climate has been created through rhetoric, which at times has been hysterical and always belligerent.This rhetoric has fallen on receptive ears and there has been no let-up, just as there isn't in a blood-feud which is passed from generation to generation.

Is the cricket tour a pause or has some political wisdom formed, like the dew that formed at the Qadhafi Stadium? Will the feel-good factor remain and acquire a dynamic of its own or will it evaporate at the first touch of reality?

This particular tour has an element that other tours of Pakistan by India did not have. It has involved the presence of thousands of Indian visitors and the reception given to them by the ordinary people of Pakistan should have opened the eyes of the leaders of both countries.

These Indian visitors have been, or ought to have been, overwhelmed by the warmth of the hospitality and probably startled that there has been no trace of animosity that they had been brainwashed into believing existed.

It could be that cricket creates its own ambience. But it could also be that the leaders have been out of touch with their own people. Or it could be that the people are not so dumb after all.

There is a yearning for peace all over the world and though savage wars rage and none more savage than the daily killings in Palestine and Iraq and Afghanistan or the brutal oppression of the Kashmiri people, war as a means of settling disputes has become a dead-end.

There is a greater realization that wars serve private interests and not the public good. Does it really matter to the American people that Saddam Hussain's brutal regime has been toppled? But it matters to those who will make billions of dollars out of it. War is an industry even bigger than organised crime.

But it is to the cricket one must return. It is wrong to invest some higher purpose to it. This can lead to disappointment. But if we stay with the game for its own sake only, then we can all party, as we have been doing, and have ourselves a great time. Any other gain must be seen as a bonus. The test matches may not generate the same kind of frenzy and wild enthusiasm that the one-day games did but for cricket buffs they are the real thing.

One's enthusiasm has to be distributed over five days and one cannot remain at fever-pitch for surely that would burst a blood-vessel. But it is test cricket that separates the men from the boys and the famous West Indian calypso Cricket, lovely cricket was written to celebrate a famous win in a test match and Neville Cardus and John Arlott and C. L. R. James wrote beautiful and lyrical prose about the men in white flannels and not in coloured clothing.

The tempo is different in test cricket but the melody is sweeter. But I hope that the festive mood will remain and Indian fans will continue to cross the border and bring their high spirits with them and we will continue to play impeccable hosts.