Source: www.marketwatch.com
Obama’s rhetoric won’t change the facts
By Darrell Delamaide
WASHINGTON (MarketWatch) — One of the biggest bogeymen in the current campaign is outsourcing. During the primary fight, Barack Obama and Hillary Clinton pounded the drum about the damage done to American workers by outsourcing and outdid each other in promising to stop it through tax policies and renegotiating trade agreements.
Obama still inveighs against it in his stump speech, as he did on June 27 in his Unity, N.H. rally with Clinton. “We can keep giving tax breaks to companies that ship jobs overseas, or we can give tax benefits to companies that invest right here in New Hampshire,” Obama said.
On other occasions, as in a June 11 speech in northern California, the presumptive Democratic nominee is less dogmatic about free trade and outsourcing, acknowledging that globalization has irreversibly made the world a more competitive place. His solution is to make American workers more competitive in this environment, through education and fostering innovation.
No one can argue with that - it would certainly help the economy. And yet John McCain is derided by his Democratic critics if he suggests that outsourcing and globalization are good for the American economy. He is essentially saying the same thing as Obama without demonizing outsourcing or the companies that practice it the way that the Democratic candidates (think of John Edwards) have been wont to do.
A chief executive who recently outsourced his customer call center to the Philippines and his IT help desk to India says the main reason was the much higher efficiency of those service providers - resulting in huge savings for his customers and his shareholders.
Lower wages were not the motivating factor. Anyone who outsources abroad because of lower wages is being short-sighted, he says. Rather, for him, it was the performance of the provider on quality metrics like percentage of calls answered within 30 seconds - much higher than the in-house operation at the company.
When he visited the call center in the Philippines, this manager found that employees invariably had a college education, and were motivated in their work because the service provider offered them a career path based on their performance. By contrast, in the U.S., call centers are seen as a dead-end job and plagued by high turnover that is very costly.
Why don’t American companies offer the same efficiency at a call center? Well, this chief executive suggests, tax and regulatory policies in the U.S. can make it difficult for entrepreneurs to start up businesses. Also, it’s hard to find people qualified and willing to do this kind of work.
By the way, this American company didn’t get any tax breaks for shipping these jobs overseas. The savings were operational, and the decision was a simple business decision - the company’s customers and shareholders, and so ultimately its employees, benefited from higher quality at lower cost.
This is the kind of competition that will force American companies and American workers to be better. Tax incentives like those proposed by Obama may lead to some job creation, but not jobs that can be done more efficiently abroad. By the same token, some of the tax increases proposed by Obama - such as increases in the capital gains tax as well as higher income and social security taxes on high earners - may not facilitate business startups and job creation.
This is what happens when you let political rhetoric interfere with economic analysis. McCain, for all his professed ignorance of economics, seems to have grasped the basic facts of trade and globalization, while Obama, in his efforts to counter Clinton and Edwards, has gotten it only half right.
This is not the issue that will decide the election, but the winner may not decide the issue, either. When this chief executive, who is an Obama supporter, visited his call center provider in the Philippines, they asked whether an Obama victory would mean he would have to cancel his contract. No, he told them, that’s not the way our system works. End of Story
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