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The Ohio Debate

September 11, 2010

It is said that if you win Ohio, you are half way through to the White House. That is the kind of political weight-age contestants to the highest office in the United States of America give to this critical state. Obama knows the importance of November polls and both Democrats and Republicans are going all out in these crucial elections. 

In India, however, Ohio is getting known for all the wrong reasons. The state of Ohio has recently banned outsourcing of jobs to other countries. Ohio’s Democrat governor Ted Strickland said that ‘pervasive service delivery problems with off shore providers including dissatisfaction with the quality of that services they are providing’ as the reason for the ban. This comes a day before President Barack Obama was to visit Cleveland, Ohio. The move is clearly aimed at Indian Information Technology industry. There has been an outsourcing of IT jobs to India from American companies. US companies find India an industry friendly destination where the wages are low, the people have good command over the English language and their proficiency in their field of knowledge is second to none. For example IBM has employee strength of more than a hundred thousand and the numbers are rising. The exact figures are not known and IBM has refused to divulge the exact numbers because of the sentiments back home.

It is true that the western world is going through a recession. The unemployment figures in the US are close to 10 percent and the numbers are not likely to get any better in the near future. Even in Europe the situation is not too rosy. Spain seems to be the worst hit with an unemployment rate of 20%. Other European countries are also not doing too well either and this mood of despondency has seen political leadership react in different ways. Ireland, Portugal, Greece and even France have high unemployment figures that are giving sleepless nights to the political leaderships in these countries.

Obama administration has come up with an ordinance where companies cannot outsource jobs if by doing so they do not create more jobs in the United States. While Ohio has come up with a blanket ban on outsourcing, there is a federal decree that companies that cannot create more jobs within the United States cannot outsource jobs. On the face of it this seems pretty reasonable. The problem starts when the same United States expects all countries including India to practice ‘free trade’. It is also true that American companies have benefitted immensely by outsourcing IT and services to India and other third world countries. Their costs have gone down, their efficiency has increased and in today’s shrinking world it is but inevitable that there will be more cooperation and cohesion between people and companies that find synergistic benefits in working together. Getting work done from India or Philippines or Malaysia or Singapore is definitely easier as communication is real time and the company never really sleeps. By stating that American companies cannot outsource jobs abroad, Ohio and Obama administration is trying to turn the clock back. This is just not going to work. If at all, this is going to stunt the growth of American companies and they will lose their competitive edge in the long run. India and other Asian countries may suffer a temporary setback but in the longer run they will find more work coming their way as clients of American conglomerates will flock to Indian companies that were doing their jobs in the first place. I see this as a blessing in disguise for India Inc.

The other question is as to how a company will prove that by outsourcing jobs they are able to create more jobs within the US. That is a fundamental question and that will be a tricky one to answer. Obama is trying to show people of the United States that he is as concerned about the jobless rate as anyone else and he wants to be seen to be doing something about it. He has resorted to populism that is the easy way out. Protectionism sells well in any faltering economy. One would have expected the home of capitalism to have sanity to avoid falling in the trap of protectionism that will, if anything else only make things worse and the world economy may take that much longer to revive. American companies will lose their competitive edge and will find it difficult to meet targets. The question is – are there enough educated unemployed to take over the jobs for the pittance companies pay in countries like India? The answer is a resounding no. Elections are round the corner and Obama wants to prove that his magic still works. He will therefore do just about anything to make sure he gets the votes. The unemployed are much more than those with the responsibility of giving jobs – the company owners and the small businesses. So it is politically smart to talk about the welfare of the unemployed – if that means more unemployment in the long run, politicians like Obama don’t care a fig because he is concerned only about his term in office which is half way through. The man is looking at another stint in the White House and he believes that such populism works. He may be in for a surprise as the American people are much smarter than he thinks they are. It is reported that Obama has decided to skip his few hour scheduled stop to Bangalore on his November visit to India.

I will take this argument of keeping jobs within American shores a bit further. While service sector is catered to by India and other developing countries, the manufacturing sector is catered to by China solely. Most American companies have a dedicated manufacturing hub in China. Apple’s i-Phones are being manufactured in China – Funskool toys are manufactured there as are garments, tennis rackets and golf balls and what have you, all under American brand names. China is America’s manufacturing hub, as also of the Japanese and Europeans. American companies are outsourcing manufacturing jobs to China as they find that they can get both good quality and low prices in China. American companies are benefitting immensely and they enjoy their competitive edge from getting their products made in China and then selling them across the world at hefty prices, earning impressive profits. If service sector jobs are flying to India and other countries, manufacturing jobs are going to China. The British National Party, the extreme right wing political outfit has been saying for long that manufacturing jobs should remain in Britain and the industrial revolution that saw the rise of Britain must not be lost. They contend that by keeping the manufacturing jobs within Britain they will make their country stronger and the people better off. Is Obama planning any such move? Because if outsourcing is such a bad idea then there should be a blanket ban on outsourcing and not just ban any one industry or any one kind of job. Is the west ready to do that? There will be an outcry from the thousands of companies that get their products manufactured cheaply from China. What is true for the manufacturing sector is true for the service sector too. To say that ‘we will not let jobs fly from Buffalo to Bangalore’ may be a catchy phrase and may get the applause from the people but it is bad economics and is a threat to the future of the people who are cheering such grand standing unaware of the dangers in such rhetorical statements.

Let’s face it – America’s commitment to free trade is just another of the gimmicks to further its interests around the world. When the same adherence to the capitalist mantra of free trade tests their resolve they shrink back to protectionist postures. It’s tough to tread the right path. It is tough to walk the talk. It is in times such as these that real men and real people stand out – whose commitment to ideologies and beliefs remains unshaken come what may. Once again we Indians have experienced that the Republicans have stood by us at all times, while the Democrats have given us nothing but sweet talk.

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