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Wednesday, 10 July 2013 05:41

In defence of offshoring Featured

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OPINION - Opponents of offshoring are not hard to find. Virtually every time an Australian company outsources a job to another country there are accusations of “Aussie jobs being lost”.

These people miss the point – globalisation is not a zero sum game. A job being done in China or India or the Philippines rather than Australia is not a job ‘lost’, it is a job moved elsewhere on the planet where it can be performed cheaper or better. This has two effects – lowering costs for the company doing the outsourcing, and boosting the economy of the country where the job moves to.

The economic improvement to the offshoring country raise its people’s standard of living, increasing their income and boosting their GDP to the extent that they are able to buy many more of the goods and services we are producing. The global economy improves, to everyone’s advantage.

And because offshoring lowers costs in the country of origin the company that does the outsourcing is able to reduce its prices to the consumer, making things cheaper and further boosting our standard of living.

This is all basic economics. It is why manufacturing is moving to China, call centres to the Philippines, and garment manufacturing to Bangladesh. Business trends towards the lower costs. It has all been made much easier by rapid advances in communications and transportation technologies in recent years, and by the lowering of customs barriers, tariffs, import restrictions and other artificial impediments to free trade as the simple economics of globalisation have become apparent even to the most hidebound legislators.

For many years India was held back by misguided Nehru style socialism, the so-called ‘licence Raj’. China was mired in the internal contradictions of Maoist ideology.

Both philosophies have largely been replaced by that of the free market, which has brought about an economic miracle in the world’s two largest countries, lifting hundreds of millions from dire poverty to something approaching a middle class lifestyle.

The same thing has happened, on a smaller scale, in many other countries.

Quite apart from the vastly improved quality of life this has mean for many of our fellow human beings, it has greatly benefitted the entire world. Again, globalisation or offshoring or free trade or whatever you want to call it is not a zero sum game. There is not a loser for every winner. There are vastly more winners than losers.

As with any structural change, there are problems. Textile workers in Bangladesh are exploited, Chinese peasant in Szechuan lose their fields to a new factory, car workers in Geelong lose their jobs. Increased industrialisation causes environmental problems.

Change has always meant disruption. But the alternative is stagnation.

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Graeme Philipson

Graeme Philipson is senior associate editor at iTWire. He is one of Australia’s longest serving and most experienced IT journalists. He is author of the only definitive history of the Australian IT industry, ‘A Vision Splendid: The History of Australian Computing.’

He has been in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time weekly IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.

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