Thursday, March 12, 2009

Is Globalization and Outsourcing "The Devil"?

Often we hear cries that globalization and outsourcing are the demons of capitalism and create unfair playing fields for local business while oppressing the poor of foreign countries for the benefit of the rich. Unfortunately, often many activists have reason to complain.

Many altruistic people are comfortable drawing parallels between our lifestyle versus those of developing nations, akin to: "You should be happy with what you have compared to what poor people in other countries have." I would propose that responsibly exporting components of success that lead to a shared and similar lifestyle is the first step towards achieving that dream.

While good intentions are the motivations at the start of the journey, it is necessary to have the engine to drive you there which I propose is the idea of fair trade and responsible globalization.

I think that if you are aiming for the noble goal of global equity (as the aforementioned statement assumes) than you will have to rely on some degree of globalization to happen. And as with anything, a good idea can be poorly applied if the implementation is not well planned.

I do believe that globalization is inevitable (for better or worse). Furthermore, I perceive the inequities in terms of purchasing power and lifestyle as inherently unstable scenarios that free trade should theoretically begin to remedy. However, I can understand an activists concern at the potential (or rather, historical) of exploitation of poor foreign workers (or even "opportunistic disaster capitalists" as Naomi Klein describes them in her book Shock Doctrine) which subsequently also results in lost jobs in home countries. While the opposite strategy would be considered protectionist, this strategy certainly seems reckless, benefiting only a select few based on morally weaker ground and attracts negative attention.

The focus should not only be on exporting the engine of capitalism, but also the standards that come from more developed countries in terms of workers rights and democratic process that should go with it. This is to bring a more broader definition of success and prosperity into an economically (and potentially politically) less developed country.

Any company that attempts to outsource without taking these issues into consideration will certainly struggle as consumers and workers demand more corporate responsibility from their leadership and insist that company's stick to their stated core values.

Assuming a more optimistic tone, a corporation that is sensitive to these issues will not abandon globalization, but will rather do it in a more responsible fashion. The economic assumption from free market and supply side advocates is that a company opening a new factory in an area should be increasing the labour demand curve and as a result raise the wages of the local populace. While a rise in real wages is a great metric for describing success, what is more important for the population at large in this case is that the entrant companies are providing options for local workers.

That is to say, if current workers are unhappy with their working conditions in their current jobs, this new opening will need to provide them with incrementally better opportunities in order to attract them from their current positions or to fill a vacuum of unemployment. This is the opportunity that foreign companies can and should offer to locales where they open new operations.

For companies who are constantly looking for differentiation, this leads to the obvious marketing and PR component. In this day and age, it is simply not enough to do social good without having an open and frank discussion about it in public (in a closed loop communication system). Corporate communications should proclaim their messages of good faith coupled with their good deeds so that the public can transparently judge them based on their actions.

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