U.S. outsourcing not fault of China or India

(For The Register-Guard, August 13, 2012)

The sudden populism over outsourcing reminds me of a Chinese saying that I recently came across: “If we don’t change the direction in which we are headed, we will end up where we are going.”

Twelve years ago, when I taught at California State University, Bakersfield, I assigned a class of about 35 students the task of figuring out, through rough calculations, whether Bakersfield could compete against Bangalore, India, when it came to call centers that the local leaders were pursuing as a growth strategy.

At that time, outsourcing hadn’t entered the everyday political and cultural vocabulary, and Bangalore was unknown to most in the United States — after all, Thomas Friedman had yet to publicize these through his best-seller, “The World is Flat.”

Working in teams, the students independently arrived at the same conclusion: Bangalore will beat Bakersfield any day! My hope was that most of the class would have understood through this exercise how their economic futures could become increasingly dependent on developments in other parts of the world.

Well, we have now almost ended up where we were going — economic activities that might have generated many middle income jobs in the past have migrated to other countries that are equally, or more, interested in their development. Therefore, unemployment rates in the United States do not seem to be coming down despite all our attempts. And, yes, “outsourcing” is now a part of our lexicon and for which politicians have suddenly developed a fondness.

Yet we are not talking about outsourcing in a constructive manner. Outsourcing is being used to portray China or India as bad actors, when, in reality, they are far from any real competition to us. The average Indian earns barely 5 percent of the per capita income here in the United States. The average Chinese is in a much better position than the average Indian, but the per capita income there is only a tenth of that in the United States.

India and China are not our competitors, but they are much poorer countries where people are eager to improve their economic conditions.

Outsourcing economic activities to India or China, or any number of other countries, has made possible goods and services at remarkably low prices. From T-shirts to smart phones to customer support, we would have to pay a lot more than we currently do if there were no outsourcing at all.

It is not China’s or India’s problem that we failed to change our own direction over the years when we enjoyed the abundance of goods and services at affordable prices. Obsessed by the Internet bubble, the events of Sept. 11, 2001, and the wars that followed, and then the housing bubble, we continued to keep going without even attempting to alter our course, seemingly oblivious to how the economic structures all around the world were rapidly changing.

Should we then be surprised that it has become extremely difficult to generate gainful employment that will keep alive the American Dream for the middle class?

Outsourcing enters our public discourse only when it conveniently fits into political calculations. Sens. John Kerry and John Edwards angled for votes by referring to outsourcing and offshoring when they were on the Democratic ticket for the White House in 2004. Now, both President Obama and Mitt Romney are talking about it, but for all the wrong reasons that don’t seem to reflect in any way the Harvard credentials they both have.

Obama beats up on outsourcing in order to imply that the Chinese and Indians are taking away “our” jobs, which is a highly screwed-up interpretation. And Romney doesn’t seem to recognize that outsourcing and the globalization of the economy have not translated to real economic betterment for the middle class.

Since the Great Recession, I have increased the intensity with which I try to make students understand that any job that can be sent to a different country will be sent, and that any job that can be automated will be automated. Unfortunately, a captive audience does not always mean an attentive audience.

I suppose we seem to be bent on making sure we will end up where we are going