Geography is History Part 3

I have been thinking about this outsourcing business. I am a direct beneficiary of the globalization process for I run a business that does work in India for clients in the United States.

During the course of Webex meetings and conference calls and face-to-face interactions with people across the world, I have realized, first hand, that people from some countries seem averse to the idea of outsourcing. Europeans, for example, are generally not too thrilled with work that could be done at home, moving to another part of the world. While this causes a fair bit of consternation at work, I have to admit that I too, would not be thrilled about the prospect of outsourcing work from India to say Bangladesh or Nepal or Sri Lanka or England. I have found myself lamenting the fact that we in India seem to be buying too many products made in China, when we should be supporting our own manufacturers. So much so, in fact, that I make an active effort to look for alternatives if the product I wish to buy is made in China or made in England. In some areas, this is well nigh impossible. Try buying a computer or a pair of running shoes that is not made in China.

Which brings me to this question. How is it that Americans are so ready to outsource work even when unemployment is a problem at home? I know, I know, comparative advantage. But at a personal level, is the average American such a die-hard capitalist that s/he is willing to undergo hardship or see a friend undergo hardship for the esoteric benefit that society accrues through comparative advantage?

The United States is the largest economy in the world, and until recently, was the worlds biggest manufacturing powerhouse. They couldn't have gotten there by frittering away any advantages they have built over the last 2 centuries. Perhaps it takes just the kind of business maturity that the United States displays to be able to consistently maintain competitive advantage. They have figured out what they are good at, and they focus on doing that stuff. The US is exceptionally good at generating and nurturing new ideas and figuring out new ways of solving ever new problems. And they have moved on from trying to manufacture key-chains and shoes at home. They will invent and manufacture the first airplane, the first phone, the first photo-copier, the first computer, the first cellular phone, the list could go on. Their greatness lies in the fact that they are then willing to let others manufacture in the millions, copies of their inventions, while they move on to invent the first space telescope and the first Mars Rover and the first...

It speaks of a level of maturity as an economy that the US has attained, that allows them to move on. Perhaps, we in India, need to figure out what it is we are exceptionally good at and then concentrate on doing more of that stuff, while we start to import sweaters from Bangladesh.

I met an Australian many years ago, and I was telling him rather proudly that we make our own cars here in India. His response is still food for thought. "We have figured out that we are not very efficient at making cars," he said, "so we do other things and we import our cars."