Question

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Global outsourcing, is it good, bad or ugly?

In the recent years, we often heard about global outsourcing in US business.

Especially, when US economy was sluggish, one of major blames went for Global outsourcing, due to US job loss to overseas.

Q1) Global outsourcing, is it bad? because US manufacturing jobs went to China or India at the expense of US labors.

Q2)Global outsourcing, is it good? because US business can take an advantage of cheaper foreign labors to survive like an introduction of new technology such as robot or computer or can attract insourcing from overseas.

Q3) Global outsourcing, is it ugly? because US business can exploit the sweat shops from overseas.

Q4) Global outsourcing, is it inevitable like new technology? The robot with artificial intelligence could replace human labors in the future.

Q5) Give us your personal verdict over Global outsourcing. Also do you think which direction of trade policy is better for the economic welfare of US as well as the rest of the world; one US policy makers continue to move US toward more open and global economy by promoting trade, or one US policy makers move US toward more closed and isolated economy by protecting US industries?

Answer 1

Solution

Global outsourcing has done both good and bad for developed countries like the US,UK,etc.,

1.No,I do not think the global outsourcing is bad.Yes I agree that due to global outsourcing many manufacturing jobs went to developing countries like India,China,Bangladesh,Vietnam,etc., BUT I can say that this is only one way of looking at the coin which is negative.

On the positive side,we can say that even though there is job loss,there is shifting of only low value adding jobs and jobs for which resources are not available / not profitable to be done in the US (due to high labor costs) to the developing countries.In this proces,the profitability of the US companies has improved which is very essential in this extremely competitive world

2.Yes I think the global outsourcing is good.The US companies can attract cheap labor from across the world because of wage difference.The US currency USD has higher exchange value than many currencies across the developing world.Ex: The exchange rate for USD is approximately 1 USD = 75 INR

According to a study in the Indian IT sector,due to outsourcing the US companies are able to employ around 4-5 Indian resources in place of 1 US resource.So,to increase the profitability obviously the US companies will restrict the count pf their US employees in order to improve on their profitabilty.

3.No,I don't think so.Yes I agree that due to globalization,the developing countries are becoming sweat shops.

But if this should not happen then I would say that it is the responsibility of the governments of the developing cuoubtries to frame their respective labor laws so that they are not taken undue advantage..

For Example: In Bangladesh,it's capital Dhaka has become a sweat shop for garment manufacturing for premium brands.Eventhought it is bad in one way.But the advantage they got in this process was they grabbed the business that was previously going to India (since in India,the labor laws are comparatively very stricter)

4.Ye, it is inevitable just like the new technology because it is related to achieving efficiency,more profitablity,optimal usage of resources.

Yes,the robots with AI could replace the human labors but not completely since not all tasks can be automated and also they require humans for automation.

5.I would go with option 1 - US policy makers continue to move US toward more open and global economy by promoting trade

Because,this policy would increase trade which is good not only for the US but it's trading patners also.We know that in the process of trade,all the trading parties benefit because they try to produce the goods where they have competitive advantage.So,they want to concentrate their resource to produce particular goods & services they are comparatively good at.So,this means improvement in efficiency / better usage of resource.This leads to production of higher amount of goods than in the situation without trade.

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