Tuesday, July 12, 2005
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An immigrant's take on offshoring
Suketu Mehta has an op-ed in the New York Times on the rise of offshoring to India. Mehtu comes at this from an interesting angle, as he and his family "came to America in 1977 not for its political freedoms or its way of life, but for the hope of a better economic future." While acknowledging the anxiety caused in the tech sector by offshoring, Mehta's conclusions are straightforward:
Indeed.posted by Dan on 07.12.05 at 11:20 AM
Its a very good article. Especially important is the indictment of our educational system compared to India (and elsewhere). Its old hat now that Indian immigrants score far better in math, but they also score better at English and _American History_. Thats scary. Anti-free trade folks like Rustbelt better take this to heart. Its not entirely about dollars and cents. The worst Indian students are better prepared and educated than most Americans, that simply tells us our educational system is a wreck and we dont expect _nearly_ enough out of our kids. The odds of living a middle class lifestyle without being educated are simply diminishing over time. Turning back the clock is not an option.posted by: Mark Buehner on 07.12.05 at 11:20 AM [permalink]
I am not anti free trade.
I am "anti" treating displaced America workers like human garbage while our elites roll in lobster and cognac.
For what it is worth I have devoted much of my life to education and I have a file full of hate mail from public school teachers who don't like my comments on education quality.
Change will happen. How we manage it is the key. So far we seem to be using the reverse Robin Hood method.
By the way, college would be much more affordable for the middle class if we eliminated tenure and insourced Indian and Chinese professors.
Education is key to everything! If Indian programmers are cheaper AND better educated, then there is no hope for the American IT/software worker. Sometimes people don't realize that education doesn't only come in university form. Spending a little bit of time reading and practicing outside the work place (I know, in that oh so infinite spare time) will add to your portfolio little by little. Typically it is the guy who has nothing and so much to gain that will strive to do just that because in the end it is worth it; the man who currently has it all is more likely to stop and smell the roses too often and not realise it can all slip away with a single pink slip of paper because they are no longer worth keeping.
So this is how you sell globalization to the NYT's core audience - as payback for the western sins of colonialism and conglomerates?
Just one example: "They can't provide huge subsidies for their agricultural conglomerates and complain when Indians who can't make a living on their farms then go to the cities and study computers and take away their jobs." Sorry, that's just false. India is a net exporter of staple crops, thanks in part to DOMESTIC agricultural subsidies and a highly protected home market. Indians are leaving their farms for the same reasons my ancestors left a hundred years ago - an overabundance of labor, due to mechanization and rationalization of production.
More later but this is pathetic. Whatever happened to the idea that outsourcing (and free trade in general) is good because it actually benefits people, rather than punishes the rich world for its past sins?posted by: Jos Bleau on 07.12.05 at 11:20 AM [permalink]
"struggling to stand on their feet after 200 years of colonial rule"
Oh, please...they're struggling to stand on their feet because of half-witted policies implemented AFTER independence, not before.posted by: Al Wheeler on 07.12.05 at 11:20 AM [permalink]
As a teacher from the city at my rural high school asked my class when some argued for the necessity of supporting family farms: "When was the last time you bought a barrel from a cooper or a pair of shoes from a cobbler?" Yes, we need to show compassion for those who are losing their jobs to offshoring, and maybe provide some transitional support. Some of those who loose their positions at an advanced age will never again find a job in the same income bracket and we need to recognize this instead of simply crowing about the progress of globalization as though there were no losers. But the author of the article cited here is right. We cannot subsidize the economic sectors of the past without jeapordizing the economic sectors of the future. And I think we are deluding ourselves if we think that economic change is ours to manage. Have a look at France and especially Germany.posted by: ken on 07.12.05 at 11:20 AM [permalink]
So far we seem to be using the reverse Robin Hood method.
Are you talking about the tactics of those who are outsourcing the jobs-- or the wealthier programmers who object to jobs going to India and raising the wages there?
Make no mistake, wages are increasing in India, and rapidly, to account for this. It's all that economics would predict, too-- the rush of jobs will increase the wages until there is little gain from offshoring. Wages, in the long run, always rise to meet the average marginal value produced in the industry. (Which is why productivity is good, not bad.)
Of course, this op-ed is slightly amusing, considering how many of the Times's favorite politicians will tell you exactly how essential those dairy supports are.posted by: John Thacker on 07.12.05 at 11:20 AM [permalink]
It's been said that the greatest harm that Britain did to India was to educate her future leaders at Oxford and Cambridge, where they became Fabian Socialists.
The world is full of people who'd gladly work for 1/10th of what American's do. There's nothing special or novel about being poor and having to work hard to get by. There's also nothing new in noting that technology has now allowed rich worlders to profit from that fact.
Mehta's morality play theory of outsourcing (its OK because it hurts people who deserve it, even though it doesn't, really) is a tiny bit novel, but we should ask the question that he's apparently to busy bragging about his son's prep school to ask: Why did China become the world's factory and India it's call center? Why didn't it work out the opposite way, or some other way entirely? And what does that difference (differences?) hold for their future - and ours?posted by: Jos Bleau on 07.12.05 at 11:20 AM [permalink]
...reverse Robin Hood...
According to a civil settlement at least 12 major Wall Street firms sold stocks intentionally using fraudulent analysis...none of hnave been prosecuted
The feds are now negotiating a special plea bargains so hundreds of senior executives (who won't be named) who knowingly used illegal tax shelters can settle without seeing federal prison...
I could go on and on, but you see my meaning...posted by: save_the_rustbelt on 07.12.05 at 11:20 AM [permalink]
"We cannot subsidize the economic sectors of the past without jeapordizing the economic sectors of the future."
I presume then you are in favor of dissolving teachers' unions and eliminating tenure and civil service protection for teachers?posted by: save_the_rustbelt on 07.12.05 at 11:20 AM [permalink]
"I presume then you are in favor of dissolving teachers' unions and eliminating tenure and civil service protection for teachers?"
Finally something we can agree on :)
I was a student in the class I referred to, not a teacher so I have no self-interest in the continued existence of teachers' unions or their dissolution. But I don't see what that has to do with the question at hand. Existing professions have a stake in their continued existence. Those who will work in the professions of the future can't yet speak in their defense. If we let that dynamic determine our economic policy, we will be left behind by the rest of the world and will one day have to pay the price for that. It is nice to think that we can get off the economic merry-go-round, rest on our laurels, and all live happily ever after, but it doesn't work that way. Gradual change over time is better than the rude shock that awaits, for example, the Germans as they deal with the restructuring they have been putting off for decades.posted by: ken on 07.12.05 at 11:20 AM [permalink]
While the Fabian socialists did real damage and I am no fan of theirs, I have to acknowledge their efforts were still many multiples better than the Raj. During the Raj, economic growth was less than 1%. But during the post 1947 socialist period, the much derided "Hindu rate of growth" was about 3.5%. Somehow, nobody mentions the rate of growth during the British Raj when they spit on the post Independence socialist period. Literacy in British India by the time of Independence was less than 10%, but by 1991 (the end of the socialist period) was more than 50%.posted by: JM on 07.12.05 at 11:20 AM [permalink]
Outsourcing for Thee, But Certainly Not for Me
Thank you, Prof. C.K. Prahalad, for educating us
One reason for outsourcing is curbs on immigration. If you control the H1-B visa (control the number and add the cavet that each H1B visa holder wage cannot be less than the prevailing market wages) then the capital will leave to the places where labor is cheaper. It is pretty simply!
In fact, the capital in the IT industry is much more mobile as it is mostly intellectual (patents, source code, and so on). When IBM decides to cut jobs in US and move them to India, it doesn't need to relocate factories to India. All it needs to do is purchase new hardware in India and transfer the documents and source code with its India's office. And work can begin in India within a few days.
In such conditions it is futile to expect that you can control wages in US by controlling number of H1B visa granted or putting some stupid conditions that prevailing wages be not disturbed!posted by: Ashish Hanwadikar on 07.12.05 at 11:20 AM [permalink]
Some of my best professors were Indian, Taiwanese, etc.
Seems if a wide open market is good enough for factory workers, it should be good enough for college professors and high school teachers.posted by: save_the_rustbelt on 07.12.05 at 11:20 AM [permalink]
'Seems if a wide open market is good enough for factory workers, it should be good enough for college professors and high school teachers."
And so it is. There is no barrier to hiring a non-American professor if s/he is better qualified than an American candidate. It happens all the time as your own experience demonstrates. Furthermore, though some professors have tenure, there are entire colleges that fold, in which case tenure is worth nothing. If university tuition continues go go up at a rate significantly higher than the rate of tuition, there are a lot of colleges and universities in this country that will find themselves without students able to pay the price of attendence the next time there is a serious economic downturn. American college professors are workers in a very competative industry, but they are not entirely immune from economic turbulance. I hope not too many think they are.posted by: ken on 07.12.05 at 11:20 AM [permalink]
Are you kidding or what?
Other than adjuncts and community college part-timers almost all turnover in the ranks of professors comes from retirement and lateral moves.
I can't think of any college in this region folding in the past fifty years, except a few for-profit trade schools that advertised on match books.
The last time I tried to get an incompetent high school teacher fired I was shown the model Ohio contracts which makes terminating a "tenured" teacher almost impossible. Although the administrators agreed with my assessment he was allowed to teach for 33 years and then "punished" with a full pension.
Hey Dan, refuse your grant of tenure - join the free market!posted by: save_the_rustbelt on 07.12.05 at 11:20 AM [permalink]
It is a rare occurance, but it does happen and it could happen more in the future if campuses follow the current trend of offering ever more lavish facilities to attract students. I don't know how students from average families afford private college tuition as it is and the rate is rising faster than the rate of inflation.
If you wish to replicate the success of India's schools here, the recipe is quite simple: put all the nation's resources into education for the elite, even if it means closing down schools or offering watery educational gruel for the bottom half (I know, I know, it's not great now, but public eduation is compulsory here, it is not in India). This might be a hard sell, here, to be sure. But we may need the savings to teach everyone Hindi! Nevermind that Bangalorans don't speak it either. Gotta give New Yorkers some alternative to the Mandarin they are all signing up the kiddies for nowadays. Is this long-term vision, paranoia or the ultimate in bet-hedging? I don't know, but to date my study of Hindi has come in handy far less often than the French I took in high school--inclusive of a stint in India, where MOST people don't speak it and many become violent when you try to use it (we won't talk about internal imperialism--might upset Mr. Mehta).
Mostly by those who have 1) agendas and 2) no knowledge of what they're talking about. The socialist leaders did follow a wrong-headed post-independence policy of economic development, but they did help to throw out the British. If people like that great freedom fighter and fan of poison gas Winston Churchill had their way, India would have remained a British colony and an agrarian country forever. Also the socialists did help to set up a democratic country, which puts them well above 95% of Third World leaders (whether left-wing or right-wing).posted by: erg on 07.12.05 at 11:20 AM [permalink]
What JM was saying is that literacy was far higher at the end of the socialist era in India than it was at the end of the Empire. That part is indisputable. Its also indisputable that some of the highest literacy rates in India are in socialist/communist states like Kerala. It may not have been strictly Fabian socialists in the Nehru mold, but it was largely socialist/leftist governments and activists. The point is not that the Fabian socialists were great for India, but they were a heck of a lot better than the British.
posted by: erg on 07.12.05 at 11:20 AM [permalink]
Take the most efficient IT firm in the United States - one with a clear absolute advantage over every other IT firm in the world regardless of wages (there aren't many out there, but there are a few). Have them bid on some jobs in India and report back with the results. Thanks.
Crankyposted by: Cranky Observer on 07.12.05 at 11:20 AM [permalink]
Better than the British is not the point, erg. India has been independent for more than half a century now. To have regions like Rajasthan where fewer than half the women can write their own names--tell me what kind of progress the country has made there?
MY point is not that India is not better than it was, but that it is not nearly as good as it should be (compare it with any of the Asian "tigers" or China if you have doubts), and Mehta's self-satisfied advice for Americans to teach their children Hindi is as insufferable as it is wrongheaded.
And as much as we have clashed in the past, I suspect you will concede this much at least, or have I overestimated you?posted by: Kelli on 07.12.05 at 11:20 AM [permalink]
I read somewhere recently - wish I could remember where - that many school districts in the US were top-notch that one would not expect. If you remove problem urban school districts, there are very large sections of the country, rural and suburban that are up there in math and science with singapore. think Nebraska, for example. Wish I could source this.
It brings up another point, that free-trade defenders of outsourcing like to puff about how terribly we do things here in the US of A - bad engineering, bad education. No wonder those Indians do bad things to us!
But guys, that is not the reality here. The reality is that the IT revolution spawned here in places like Silicon Valley was the most Successful The World Has Ever Known. Outsourcing is NOT about quality, it is only about cost.
You drive the cost down enough, companies develop management chains to deal with the lowered quality.
What will happen to innovation, etc - well, we don't know that yet, do we.posted by: camille roy on 07.12.05 at 11:20 AM [permalink]
It is the point for me when we have people claiming the worst thing the British did for India was educating its generation of Fabian socialists. Certainly the British had no interest in India's economic development, while the socialists did, even if their ideas were wrong.
That I agree with.posted by: erg on 07.12.05 at 11:20 AM [permalink]
I'm actually a programmer, so I may be able to comment and say some useful things about this. I've worked in the US on an H1B and have now returned home to Australia.
The specifics of the debate for programming are important.
I don't fear offshoring. It is not the reason why many programmers have been laid off and it will not lead to all programmers being laid off.
The main reason that programmer's jobs are declining is the end of the bubble. People were piling on programmers without good reason and in stupid ways. As an example, I was offered jobs on the spot in shops when I said what I did. It was a gold rush. It was crazy. It was pets .COM. It could not last.
The other big reason that there are lots of programmers being laid off is because programming is an engineering occupation and engineers suffer from a terrible thing, they put themselves out of work by solving problems. A large part of programming has become putting databases on the web, which was, in 1995, a new thing. These days there are a zillion great frameworks for doing this that have sped development massively.
Lawyers, accountants, lobbyists and many other professions multiply themselves with the more work they do, engineers do the opposite. Just as engineers have put millions of manual labourers out of work they do the same thing to themselves. And programmers do this chronically. An old programmer (mid 40s) was talking to me about this and he said that today programmers produce code vastly more code than they used to twenty years ago (the details are technical, but he knew his stuff and had no reason to BS me). Good editors, object oriented programming, SQL and other things have made things much easier.
The other reason for not fearing off shoring is because in the real world there is a huge value in being next to a client. Cranky is outright wrong when he says that an American firm will lose to an Indian firm everytime. Imagine a very typical case, you are a small firm that requires a website to sell something. Now, you can look online and pay some Indian firm some money, but you may only be doing that. If they produce something useless you have just thrown your money away. And do please try and sue them. Also, assuming that you can get a firm that can and will do what you are asking the next question is will they get it right. Standing next to someone and talking to them about what you want is much, much more effective than doing something remotely. I've worked remotely and with remote staff and you soon realise that being able to meet and talk is vital. It does not have to be every day, but every week at least is very important.
IT projects have a horrendous failure rate, and off shoring increases the likelyhood of failure enormously.
Certainly, there are some large projects that can be outsourced and some consultant bodyshops are undoudbtedly moving people to India, but this is not that great a proportion of all programming work.
Also, H1Bs are not evil. Why? Well, the US pays people more, even with H1Bs and H1Bs make American programmers more effective. America has the world's best programmers (on the whole). Linus Torvalds moved there, so do many others. Good programmers in proximity to each other make each other better. It is not a zero sum game. If this were not so Silicon Valley would not exist. The rents are crazy high, but still, having a large market of technically capable people together in one area is STILL worthwhile.
The worry about IT offshoring is an overstated bogeyman. Things are just returning to normal from a bubble in a sector that is REALLY solving problems and thus reducing the number of people required but increasing the skill of those needed.posted by: sien on 07.12.05 at 11:20 AM [permalink]
My comment was in response to Al Wheeler's,
"Oh, please...they're struggling to stand on their feet because of half-witted policies implemented AFTER independence, not before."and Jos Bleau's,
"It's been said that the greatest harm that Britain did to India was to educate her future leaders at Oxford and Cambridge, where they became Fabian Socialists."
"erg" got my point correctly, which is that while the socialists were far from optimal, they were hugely better for India than the British.
As for stats on literacy, here are some: http://www.ashanet.org/stanford/links/need.html and http://www.education.nic.in/htmlweb/adledu.htm
The choice for India in 1947 was not between the Brits and subjugation but between statism and free markets.
Before 1947 - well, when the first Europeans "discovered" India 500 years ago it was in the process of being conquered by colonialist imperialists - from Central Asia. Samarkand, to be exact. And the 'other runs' or Aalternate History for Indian history involve domination by the French, the Dutch, or the Russians. There simply isn't a plausible happy land where Hindu overlords get to oppress their recalcitrant semi-co-religionists anywhere excpt in BJCP dreams.
I don't know of any Indians who wish they had the 19th century history of Vietnam, Indonesia, the formerly Soviet Central Asia, or China.
Your original claim was that the worst thing for India that the British did was to educate several Indians with socialistic tendency. Well, there are a lot of Indians who happen to think that being part of the British empire was a little worse than training of a few socialists. The socialists also helped to remove Britain from India and whatever their defects in the economic field, did set up a democracy for India.
Now you seem to think that a few decades of part-socialism (to be more precise a mixed economy) was a lot worse for India than anything else the British did in 200 years. It is your prerogative to hold that position, but allow this Indian-American to say that it is total nonsense.
it should also be added that many conservatives in Britain like that great defender of freedom Winston Churchill were perfectly happy to keep India a part of their Empire. One cannot blame the leaders of India for gravitating towards those who did support Indian indepdendence
Warning !! False Analogy alert. There are several plausible scenarios that could have happened in India absent British rule. Some would have been worse, some would have been better. In any case, the presumption that anyone objecting to British rule is perforce positing some sort of Hindu dominant rule is total nonsense.
[And for the record, its BJP, not BJCP]
And I know no Americans who wish that 1776 had failed and that they had remained colonial subjects ? Your point ? [ Other than the fact that the British's greatest crime in India was allowing a socialist opposition to spring up]
What no one is mentioning is the people who will gain directly in the US from outsourcing. Companies outsource because it is cheaper. This will result in extra profits going to the company. Since companies are legal fictions that don't drink, this extra money will then be taken in executive salaries (if you believe the work on executive capture which I find quite convincing), returned to shareholders, in taxes, or through competition to consumers. We will ignore the issue of what the government will do with its extra taxes and concentrate on the shareholders and the consumers.
The shareholders and the company executives are recieving their earnings directly. They will in all likelihood either spend it or invest it, rather than hiding it in cash under the bed. This will provide additional money to some other Americans who wouldn't have had it before as it was going to computer programmers earlier. Who knows what those people will be doing? They might be artists, chefs, organic farmers, nurses (if we are talking about elderly shareholders living off their investments), etc. Or they might be the young entrepreneur who gets some additional start-up money. Surely these people count as much as the computer programmers?
And if the profits from outsourcing are competed away into lower prices for consumers, then consumers will face the same opportunities to spend money elsewhere. Again, what will they spend it on? Increased wealth has meant I spend less of my income on food and clothes, so I spend more on books and travel.
And we must count the Indians as well. They will have higher incomes than otherwise, and will spend some of it too. Maybe they will spend some of it on Japanese cars, and the Japanese will spend it on American-developed pharmaceuticals.
America's wealth won't disappear. It will get shifted around, but the people who will win count as much as the people who lose, even if they're not so easily identifiable.posted by: Tracy on 07.12.05 at 11:20 AM [permalink]
I'll second what sien said. I'm a computer researcher devising those automated tools that he mentions. The tools exist today to eliminate a significant percentage of low-level jobs in IT. I'd guess that a programmer today using bleeding-edge tools is 10X more productive than he was a decade earlier. I tell everyone the same thing: automation will put more people out of work than outsourcing, and everyone will adapt and do something else. It's happened before (remember the cotton gin?), it will happen again.posted by: dude on 07.12.05 at 11:20 AM [permalink]
You get what you pray for ... so pray for good things. For India, for US, for Sri Lanka, ... even for Saudi Arabia.posted by: Huggy on 07.12.05 at 11:20 AM [permalink]
"Oh, please...they're struggling to stand on their feet because of half-witted policies implemented AFTER independence, not before."
Interesting comment. I agree. Policies BEFORE India's independence were certainly not half-witted. They were just exploitative, imperialist, repressive...
Mehta's article has this line about his family, which you point out: that they came to America in 1977 not for its political freedoms or its way of life, but for the hope of a better economic future.
Actually, it would be interesting to know (if such things are possible to know) how many immigrants to the US came in search of that "better economic future", and how many for "political freedoms" and the American "way of life."
Freedom is good and attractive, but I suspect many, perhaps most, immigrants are simply in search of better money. (In some cases, both might amount to the same thing). And that applies to people who migrate within countries as well.posted by: Dilip D'Souza on 07.12.05 at 11:20 AM [permalink]
posted by: Ashish Hanwadikar on 07.12.05 at 11:20 AM [permalink]
Some of this was and is utter tripe: " "We are the creditors." We are here because you were there."
That might work in the UK - but try it on 5th Avenue sometime. They would not know what was meant. Abraham Lincoln was not crowned Empress of India.
So whatever outsourcing is it isn't payment for a bill due - or it would be the American Indian presenting the bill - not a Desi Indian. Try Hyde Park - or maybe the Champs Elysees or Lisbon......
No, it's about the rise of comparable economic advantage wherever it comes from. And before rattling on about economic justice between nations I suggest triumphant Indian IT executives look a little closer to home - to the 20 or 30 to one difference between their income and that of Indian farmers - who remain poor.
Don't you think the fabian debate is a bit irrelevant. They were great leaders who did what they had to. The choices they made were a product of their times. With the benefit of hindsight some of their choices do look flawed, but then a lot of things look bad when you look back upon them. Whatever they did India is where it is now. It is by no means perfect but it is a successful democracy, it is largely safe, people are becoming propersous and we are making steady (if sometimes slow) progress towards a better future. I see no reason to complain about anything at all.posted by: nattu on 07.12.05 at 11:20 AM [permalink]
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