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How India is Saving Capitalism
alphakappa writes "Salon goes onsite to Chennai (Madras) in India to investigate the whole offshoring phenemenon (free daypass) and comes up with an interesting series of stories. Katharine Mieszkowski starts with a company CollabNet which creates collaboration software for teams to work together on projects from locations all over the globe, and has centers in Brisbane (CA,US) and Chennai (India) - a company that would not exist if they didn't have access to engineers from India. She makes the case that in most cases, it is the necessity to survive, rather than greed that has fed the offshoring process. As Behlendorf from CollabNet puts it - 'We saved the jobs of the people who are employed in San Francisco by hiring people here [in India],' he says. 'I don't know that we would be around as a company if we hadn't done that. What was the right thing to do, morally?'"
Since when did capitalism have anything to do with morality?
that every company's situation is different. While it may be true that CollabNet has to outsource to survive, other companies (Dell comes to mind) DO NOT need to outsource to survive, they outsource because it is cheaper. We can argue all day about the morality of outsourcing, but the bottom line is going to be profit in many cases.
'I don't know that we would be around as a company if we hadn't done that. What was the right thing to do, morally?'"
The right thing to do, morally, is probably to go out of business. What if the choice was to not pay for workman's comp insurance or go out of business? Or to pay their employees $2 an hour or go out of business? Using "but... but... we'll go out of business if we don't do this" is a lame ass excuse.
To ensure perfect aim, shoot first and call whatever you hit the target
Thats why its been called "A race to the bottom". Once your competitors start hiring offshore, you're forced to do it to compete on price.
The NY Times Tom Friedman has written many articles arguing a similar point.
Nike wouldnt exist if it wasnt for childeren in Pakistan. http://www.american.edu/TED/nike.htm
Are you intolerant of intolerant people?
Then maybe instead of whining and complaining about it, Americans need to be proactive about making employment more competitive. There's no good reason why a company should keep jobs in the US if they can get the same quality of work somewhere else for half the price or less.
"Light is faster than sound." - "Is that why people tend to look bright until you hear them speak?"
The real question here should be not was this right morally, I think we Americans are being far too self-righteous (not like that'd be unusual..) if we put it in terms of morality. What we really should be asking here is what can we do to warrant our pay? How can we become more competitive in an increasingly connected world? Rather than complaining about outsourcing, we need to find out how to be more competitive. Any ideas?
The old rationalization was "we outsource to increase value for our shareholders". How generous!
Now, this rationalization, it's "we outsource so at least some people in the US can keep their jobs". How noble!
Prediction: later it will be "we outsource because otherwise we'd have to move entirely out of country and then the US wouldn't get our taxes." How civic!
All have the same underlying message they wish to send, "we want to help people!" But corporations don't generally exist to help people, they exist to make money.
There are 2 _good_ reasons to outsource, both based on the fact that labor is always the number one expense for a company.
1) We can stay in business, whereas otherwise we can't. 2) It makes us more money long-term (not just short-term profit sheets). Unfortunately, both may be true right now.
A.
As many people are still wanting the wife/husband, 2.3 kids, a dog/cat, 2 cars, a TV, home theatre, good computer (maybe 2), etc, goods and services will have to remain relatively inexpensive.
Now add in health insurance for the family, dental insurance, minumum wages, retirement matching, etc etc that a company has to setup for its labor in American, and you'll see that goods and services cannot be inexpensive if made in America. The cost of labor is too high here if we are to guarantee cheap goods and services.
It's an interesting paradox: In order to keep prices reasonable for a middle class, a majority of the labor needs to be paid at or just above the poverty line...which would theoretically remove the middle class.
So what should we do? In my eyes you either make wages worth more to the people (ie lower taxes) so you can offer less, or you cut down the overhead cost of labor (ie have the government install laws against frivolous malpractice lawsuits to reduce health insurance costs).
What do you think?
If companies refused to go off shore, then everyone would be able to survive and we wouldn't lose any jobs.
Or the company cannot keep costs down and thus fails to meet shareholder's expectations and flounders, bringing everyone down with it.
(Taking tongue away from cheek) Ha ha only serious. On a more positive note, it's also India's Bandwidth Capital because of all those transpacific cables landing here via Singapore. And electricity is very cheap here, probably the cheapest among all of India's major cities.
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When will the middle class realize that the upper 2% is screwing us in the ass daily, and actually do something about it???? We are the *majority* afterall...
Never if most of the middle class keep believing politicans who claim tax cuts/etc. are aimed at helping them out. I am shocked at how many educated smart people that believe these claims without even bothering to investigate to make sure they're valid. I don't hold much hope of the majority of middle class voters ever getting a clue on this, so I'm afraid the answer to your question may be "never".I was planning on making some "In Soviet Russia" joke, but I guess you won't understand why it was funny.
/. probably means that you fall in that top 2% (when you consider the planet as a whole). Remember, the majority in this case is the billions of people in the third world who also want a piece of the action.
PS. Just the fact that you are posting on
People couldn't type. We realized: Death would eventually take care of this.
You know, there's a similar situation going on in the farming industry. It's been declining since the 70s - THE 1770s. Back then I think 90% of people were farmers, and thanks to *progress*, we don't need that many people working to feed the country. There are people all over the midwest complaining that their way of life is going to disappear, and we all pay extra taxes to subsidize their plight -- the plight of people unwilling to change jobs when the market disappears.
And not only do we pay higher taxes, and higher prices for food, but farmers in places like Africa have nowhere to send their goods, and they don't have the infrastructure to do anything else.
I think it was Bill Maher who said (and I'm paraphrasing), "Americans seemed to be more concerned with taking their own lifestyles from 10 to 11 than to help others bring theirs from 0 to 1." And that's the absolute truth. No one reading this is starving. Even if you did nothing but collect welfare, your lifestyle would still be better than 90% of the world.
So, you're a programmer. Someone else can do your job for 1/4 of the price with the same quality. You have a few choices:
1. Find an employer who requires a warm ass in a seat in the States.
2. Raise the quality of your work.
3. Be your own boss.
4. Change careers.
You know how the RIAA doesn't provide a unique service anymore? Neither do you. You have lots of competition, and right now you can't compete. Or can you?
My biggest problem with outsourcing is that it is the product of a system which is skewed in favour of corporates, and screws the little guy. The problem as I see it is that one of the reasons why wage costs are so high in developed nations is because our cost of living is equally high. And one of the reasons for the cost of living being so high is because people cost too much to hire. But the problem we are getting now is that companies don't want to hire expensive people so they outsource. But the prices don't go down to reflect this. So as a labour force we still can't compete because our cost of living remains too high.
Detroit was faced with the same problem in the 70's. The Japanese were whipping us six ways to Sunday. The unions wanted us to support American-made cars even though they were utter crap. You could go into a showroom and see that the doors were mis-aligned, switches were poorly installed, etc. And that's just what you could see doing a casual inspection. American public said, "I don't think so" and purchased Hondas, Toyotas and Datsuns (now Nissan) They were simply far better products.
Detroit bitched bellered and bawled about it but finally got their act together and started producing a much better product. For Detroit, it was a stark reminder that they couldn't just throw up barriers and hope to have a captive market. It was painful but they came around and are able to compete globally now where in the 70's they were getting creamed.
Same thing is happening to us - we simply have to be able to compete. Whining about unfair competition just makes us look like whiners.
You might ask how you can compete with a $5/hour worker. What I've done is started a small business that uses software I wrote. The business is large enough to support me and a couple of other people but small enough that it doesn't attract competition. Niches abound if you're willing to go look for them. Just don't sit around waiting for someone to hand you a job - get out and create your own job.
What was the right thing to do, morally?
Quit paying you and the top executives and senior management team filthy, unreasonable salaries. Not only are they inappropriate in most cases, the fact you failed (repeat that over and over again a few times to let it sink in) means the top brass should take it, not the producers in your company.
This is not the rant of some 20-something employee just out of college. I've run two companies I founded and grew, and don't see that I should fleece my customers or shareholders for obscene personal benefit (yes, $100K individually and over in this economy is obscene - you need to be living with less, providing good jobs for people, and investing in rebuilding your company!)
I see this over and over again. Wharten, Harvard, Yale types born on third base (thinking they hit a triple), that are slaughtering company after company for short term protection of their fat income. I own and run a tech company in the midwest that employs twenty people, and I'm the lowest paid. And no, it doesn't produce amazing profits I pocket as dividends. Someday it will be a nice company but I haven't earned that yet.
I get those silver spoon types all the time telling me how I should outsource my labor - which would be possible for us. Put all the tech oversees, along with support call center. I'd be making over $300K annually. The funny thing? They simply cannot understand why I would want to make less and employ people, because (you may have guessed), THAT IS WORK! Outsource it and collect the checks is the new Harvard MBA strategy, apparently.
Seems I saw the movie Wall Street. I've seen people pursue short term profit through slaughter. But you know, someone's gonna have to be around to buy your product, and if you get rid of the middle class, you might not have many customers. And don't forget, as long as you're expensive overhead (and not producing hard, tangible results towards the bottom line), you're expendible too.
It's a dirty little secret of modern Capitalism that it basically can't work the way it's "supposed" to, given the current conditions. I'm not trolling, and I'll be specific.
The Classical theories on which Capitalism is based were written in the 19th Century. At that time, capital was basically land, and labor was much more free to move about than it is today. Before anyone objects that transportation is more advanced today, let me explain what I mean: in those days, workers were not locked into compartments from which they could not escape, and could basically go where the work was without having to worry about passports and work visas. Anyway, because of the conditions that obtained in the 19th Century, the Classical theories are based on assumptions of immobile capital and highly mobile labor.
The conclusions of the Classical theories are nice, especially "mutual advantage." Unfortunately, those theories have about as much to do with our current reality as the "spherical cow" of every physics nerd's favorite joke. In today's world, capital moves at a high fraction of the speed of light through wires, or even at the speed of light as radio signals in the air or visible pulses in fiber optic cables. Meanwhile, because of the fortified borders between countries and the need for passports and work visas and such, labor is basically locked into little compartments. As a result, the situation of today is almost exactly the opposite of the situation assumed by the Classical theories.
Because of this, the conclusions, like "mutual advantage," are utter bunk in today's world. In fact, there is basically nothing now preventing capital (a term I also use to refer to those who control large amounts of capital) taking total advantage of labor. So when American workers want adequate safety conditions at work, capital dumps them and goes to Mexico. When the Mexican workers get uppity and want a decent working wage and don't want pollutants dumped in their rivers, capital takes the jobs to Vietnam... etc., etc.
More relevant to this discussion, when computer programmers in Silicon Valley start getting six-figure salaries, capital starts by importing Indian programmers. When the imported Indians get wise and jump ship to higher-paying companies, capital gets smart and takes the work to India. In general terms, capital (the "2%" mentioned in the parent post) can play the labor forces in different countries against each other and pick and choose which countries' laborers will get work.
Is all lost? Maybe not. It might be possible to restore something more closely resembling the "mutual advantage" ideal of the Classical theories (though I'm sure there are some who don't see "mutual advantage" as a positive ideal and prefer the current situation...). All we have to do is restore the mobility of labor. Make the borders as open to people as they are to capital. Yes, in the short term, there would be disruptions, like a huge mass of people whose knowledge of the USA comes from Hollywood, who would flood the USA temporarily looking for that streets-paved-with-gold-and-everything-works paradise, but eventually, things would settle down again, only with better conditions for workers (read: people).
For those who worry a lot about the short-term consequences, consider that that worry is part of the "playing labor forces in different countries against each other" I mentioned above. You want to preserve the apparent advantage workers in your country currently appear to have, and capital plays on that to make you oppose the kinds of changes that could actually make Capitalism work for many people, instead of horribly failing the great majority, as it has been for quite some time.
--Mark
"It is nice to know that the computer understands the problem. But I would like to understand it too." --Eugene Wigner
With all due respect to Mr. B and Collabnet, "we saved the SF jobs" sounds like a well thought out rationalization, for a much larger problem which is ultimately destroying IT, research, and technical innovation in America.
The first excuse from companies from two or three weeks ago, was, "American colleges are not producing graduates with strong enough skills in CS, math, science, and engineering, so we are forced to outsource"..
Now we're hearing, and I bet other corporations (of Collabnet's size and position) will pick up on this, that in order to save a few jobs and the company there was a "moral" directive to go get cheaper labor.
Nobody says American companies are required to create jobs - but by outsourcing everything they're destroying the next generation of technological innovation - you saw the last wave of hackers in the dot com boom. The next wave you see is going to be a mix of MBAs and sanitation engineers - the new U.S. demographic mix.
The technical industries are far more important to preserve than say, the automotive industry, ever was. Cars burning petroleum were never going to be the final answer for the planet - we knew that since the 50s.. technological innovation is going to save the planet. Too bad it won't be coming from the U.S.
- A Chennai resident
Supposedly anyone who kicks against outsourcing is against companies being profitable. I have no problem with companies being profitable.
What I have a problem with is the fact that I'm in my mid-40's and high up in the payscale for my particular niche. If my job got outsourced, I'd like to know what these profitable companies expect me to do for a living?
So far -- as the article points out -- all the executives can tell us is "Uh, think of something."
So forgive me if I don't cheer for India's (current) good fortune. Twenty years ago, when the manufacturing jobs began leaving the US, at least The Information Economy was on the rise, and most people managed to change gears.
Today there's nothing on the horizon unless you count flipping burgers. Uncool.
Well not compared to other Americans anyway. What happens is that value of the Almighty Dollar falls as the economy weakens, becoming worth less on the global market. *That* effectively reduces your wages compared to the rest of the world, making you cheaper to employ and your products cheaper. Your pay remains at a similar level compared to other Americans. e.g. A Harley now only costs 5200GBP. That same Harley cost nearly 9,000GBP a couple of years ago.
I don't know if you've noticed but the Dollar has been falling for the last couple of years. In 2002 1 dollar would have bought you 0.7 pounds sterling (GBP) or 50 Indian Rupees (INR). Now, 1 dollar will only buy you 0.55 pounds sterling or 44 Indian Ruppees (INR). That's more than a 10% reduction in all American's wages right there.
Another example is the Japanese Yen. It halved in value during the 90s while their economy was contracting, effectively halving the wage bill compared to the rest of the world. Harder times for everyone in that economy.
Government of the people, by corporate executives, for corporate profits.
If open source is good for programmers, than outsourcing is also good for programmers.
The United States is a third world country that hit the lottery. We were the last man standing after WWII. People bought our stuff because most of the rest of the manufacturing base in the world was bombed flat. Rather than invest that money into improving education, we squandered it as profit, has a moon shot or 4, and built a really big road system.
We are now sliding back into a largely agrarian economy. About the only thing we produce that the rest of the world wants is food. For a while it was computers, but in our absolute lust for profit we sold the production capacity to Asia for cheap.
We have a first rate University system, but increasingly our own students aren't educated enough to use them. We can spend 600 billion dollars protecting ourselves from missiles that don't exist, but we can't spend 6 cents on education without some regulatory string attached to it.
We have fine hospitals that none can afford. When my wife delivered our baby, we were surrounded on all sides by women with no insurance, who often had no pre-natal care. And that stuff is cheap at twice the price.
We have sports fields that are subsidized by taxpayers that few citizens could afford tickets to. Our schools are scraping change, but we can cut massive tax breaks for a couple of billionaires to build a new ballpark.
And hey, I am an American. Born here. Educated here. Live here. But this place is a playground for the rich. There is the resort, but outside the resort is abject poverty.
"Learning is not compulsory... neither is survival."
--Dr.W.Edwards Deming
Why not analyze the flip side of outsourcing. I am a software developer who is about to be "bangalored". Fine. I am not going to pout about it. The media writes that we are in a "global economy" so deal with it. OK I will. But we should take the global economy one step further. If US corps. can offshore their labor, allow US consumers to offshore their consumption. For example, if Pfizer Pharm. can offshore its IT staff to save money, then I should be able to purchase my drugs from Canada or Mexico to save money. I would like to see how IBM would react if I could buy an imitation Thinkpad laptop from Singapore for $300. US corporations are lobbying for the right to offshore yet also lobby for protection for their products. I say make it fair. If you want free trade, you should feel the sting a free trade. Allow US citizens to buy goods directly from countries with lower costs of living. I guarantee that offshoring consumption will make the big US corps. whine and pout and hopefully, the outsourcing proponents will deliver the same message that you are delivering to the US IT workers that are getting laid off. Free trade is good for you. It's a global economy. Deal with it. The threat of duty free imports will make CEOs rethink their offshoring strategies.
So, considering the Caste system still exploits nearly 200 Million people - called Untouchables -- treated as virtual slaves by their caste superiors, its nice to see American Capitalists praising India for its Capialist Victories.
The trouble is simple, there are many many poor in India. They are many educated intellectuals, and a growing upper class. YET they still have teaming masses of poor. I can gaurantee you that India's poor will not tolerate the this -- India is a Secular Democracy -- and its people can see the "promise" of Capialism for what it is: Extending the domination of the Upper Class.
In a global context, the USA is the Upper Class. The rest of the world is being (via propaganda like this, WTO treaties and open Warfare(justified time and again by self-serving lies, but still never comes close to excusing the Imperial Warmongering Aggressors to anyone with perspective, a lack of jingoism, a bit of history and a mote of objectiveness) taught a lesson (and sold a noble lie) either continue to serve our economy or face conequences. The DOMESTIC US middle and lower classes had better wake the heck up -- only you will prevent the US plutocrats from extending their Empire over the world. If you dont, these (cluefull) foreign masses *will* eventually kick off their yokes. Inspite of all this flower-y "India as proof of Capitalism" propaganda. The only thing it is proof of, is that YET AGAIN, USA's Plutocrats will make league with ANY CORRUPT system that will butress their status... Saddam, Shah of Iran, Gen. Zia ul-Haq of Pakistan in the 1980's (who helped nurture what later became Al Qaeda), Gen. Suharto in Indonesia, Mobutu Sese Seko in Zaire, Ferdinand Marcos, and and and. Obviously the American people DO NOT CARE about justice and democracy in the world as long as they Can Get Rich.
So when you middle and lower classes in the USA finally realize that "Free Trade" really means "Tolerate sinking living conditions at home, so we can finance the extension of our empire and underclass-serfs, so we may get stinking rich or else be hungry today." than we can discuss what the implications of Free Trade with India's wonderfull New Capitalists.
It is ironic that India that succumbed to a single British corporation - The East India Trading Company - should be seen as savior of capitalism. Here is the classic example. Indian weavers and cotton and silk was some of the best on the planet. The Egyptians mummies were wrapped in Indian muslin (ends in an 'n'). The British at the onset of their Industrial Revolution had no consumers for the crap their power looms produced. So the East India company kills Indian cottage industry, takes away Indian cotton to England, processes fabric and sells it back to India. Some percentage of that fine industrial age English middle class must have immigrated to the United States.
It is not much different today. The iron ore produced in India gets shipped to Japan to come back as automobile engines, the GSM chip designed/QA'd locally comes back as Motorola cell phone etc.
Morality? Gimme a break.
It's the "Ant and the Grasshopper" story. During the boom, many people with high paying jobs purchased expensive house, SUVs, boats, and various other toys and got into even more debt. When the bust happend and their last their jobs, they blamed everyone except themselves. Meanwhile, the "Grasshoppers" saved their money and bought stocks at dirty cheap prices during the bust.
1f u c4n r34d th1s u r34lly n33d t0 g37 l41d
It applies to software, and here is a similar one:
In the economy, you are the following 3 things:
1) a consumer
2) a investor
3) a worker
Now pick two. What's good for those 2 choices may not be good for the remaining one.
Currently, it's number 1 and number 2.
If you look at this story you will see the real issue. US companies going overseas and hiring workers, and making profits on those workers, don't have to pay tax on those profits.
That's a losing proposition for American workers. I know some web designers who would have accepted $20k/yr to do work, if they could work from home. THey had broadband, there was no functional difference between them and the Indian worker. The problem is, corporations can hide profits made my Indian workers and skirt paying taxes, and all the other hassles American workers have with them, such as employment benefits, the paperwork associated with W2s. You can write a single check to an outsourcing firm overseas. Anyhow, read the Yahoo article.
Bush doesn't care, he'll give US corporations anything they want, any tax loophole they can find he will support. The middle class is destroyed, and so you will need business skills and the ability to create an LLC and be an indepedant IT consultant to make it, because nobody will hire you.
mostly any american clothing, you have no moral right to whine about outsourcing.
Oh wait, outsourcing is good when it isn't YOUR kind of job being outsourced, is that what you're really saying? tough luck.
i had a sig, once..