OUTSOURCING- The REAL TRUTH

Manufacturing accounted for about 15% of the GDP of most western nations and the benefits of outsourcing of what were essentially very high paying jobs easily outweighed the the costs of temporary unemployment.And those who lost jobs in manufacturing were told that they would be able to upgrade to jobs in the service sector which accounts for a whoping 70% of the GDP; after all a total of 15 million manufacturing jobs were shifted to China since 1979 from the U.S and 8 million from Europe. After a lag of about a decade the promised service
sector jobs did come albeit most of it in the IT sector, and since being highly 'outsourceable' because of falling communication costs in the 1990's and the growth of the Internet, a lot of high end software and consulting jobs in the IT sector got outsourced.

World over businesses run on the maxim of lower costs and higher profits .i.e the bottomline.
It is this obsession with the bottomline growth that there is no stoppage of the growth in outsourcing. Based on this maxim which is universal irrespctive of any nation, businesses will never give up the advantage of labour arbitrage as saving on costs and increased efficiency is like the flow of water from a a higer slope to a lower one due to the force of gravity, and in stopping the flow they will only be constructing a 'dam' around themselves at their own peril.


Nobody knows what the future 'higher' productive jobs are and where they are going to come from, and what is the time lag before they actually fructify. MAny of these armchair economists do try to play Moses and lure policymakers and think tanks to the promise of more productive jobs in the future in lieu of the jobs displaced,and debunking the 'zero sum game' theory, by drawing analogies to the first 'wave' redundancies and this comparisons can in no way prognosticate the coming third 'wave' redundancies made possible because of falling
communcations costs and the Net and this in no way allays the uncertainties of people about what kind kind of work they would be able to upgrade to. I am not an Alvin Toffler and my best bet as a layman is nano technology , and it is a safe bet that it is still more than a decade
away, and even if the next 'wave' is based on this , it is no guarantee that the U.S or Europe will be the trendsetters and lead in this area. Read more about this in my next analysis on the competitive advantage of nations.

A more credible explanation lies in the theory that free markets aim to achieve equilibrium prices through equilibrium supply and demand. For today's unbalanced world economy to reach equilibrium something has to go up and something has to come down. It is clear that the standard of living in developing countries has to go up-will have to come down
in developed ones.