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Worse off than sheep?
If "offshoring" is just global laissez-faire, then what are shepherds doing in the English suburbs?
March 11, 2004: 1:59 PM EST
By Jeffrey Pfeffer, Business 2.0

SAN FRANCISCO (Business 2.0) - A few months ago at a human resources seminar in England, I sat at the head table with an impressive collection of business leaders from the United States and the United Kingdom. The hot topic du jour: the "offshoring" of white-collar jobs, such as call-center operations, software programming, and billing, to countries like India, the Philippines, and China.

With me were the heads of the largest British and American HR associations, a top education official from the administration of Prime Minister Tony Blair, a woman who heads an organization trying to bring more social responsibility to business, and the human-resources chief from one of the largest boroughs of London. Nice, progressive folks all.

What can be done?

Yet when the talk turned to possible ways to slow the offshore job exodus, the group reached immediate consensus: Nothing can or even should be done, because offshoring is simply the global market at work.

New jobs, they agreed, will be created and companies and the economy will eventually benefit.

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Tech answers no prayers

Then it hit me: My wife and I had just spent about a week driving through the English countryside and had arrived at Harrogate, a small town near Leeds, the fastest-growing city in England, and considered to be one of the wealthiest and most expensive suburbs in the British Isles. And what had we seen, in prime land near this exclusive burg? Sheep! Everywhere, sheep!

So I asked the group this: Is the English countryside packed with sheep and farms because the United Kingdom has a comparative advantage in agriculture? Nope.

Is it because the highest and best market-determined use for land near Harrogate is sheep farming? Hardly.

It's because agriculture and agricultural products are protected from the vagaries of the market -- not just in the United Kingdom and the United States but throughout the developed world.

Protectionist measures in agribusiness are, in fact, the reason that recent efforts to reduce trade barriers and tariffs and increase global trade have foundered. Poor agricultural countries resent the fact that rich, developed countries protect their farmers and farm products.

In other words, we take it as gospel that knowledge workers must compete in the global economy, but sheep farmers and sheep? They needn't worry.

Conventional wisdom may not be so wise

I'm not suggesting that the billions of dollars the United States spends protecting farm products such as sugar from foreign competition, for instance, is wise public policy, or that countries should do the same thing for employees. I am suggesting that conventional wisdom -- the unquestioned acceptance of laissez-faire in today's global markets -- is terribly naive.

In the United States, government and private industry have a long history of conspiring to tweak markets to their liking. That's why we don't import lower-cost drugs from Canada, or, until recently, cheaper crude steel from foreign competitors without charging hefty tariffs.

There are dozens of examples of similar "safeguards" imposed on heavily scrutinized markets, yet business leaders still seem resigned to embrace offshoring as a natural outcome of global economics -- and Wall Street still applauds when it sees labor costs falling on earnings reports.

But maybe it's time that everyone took a closer look at the issue. An executive I know who ran the supply chain at a large electronics company recently admitted to me that the company had underestimated outsourcing costs.

Outsourcing had left the supply chain more complicated, and ratcheted up costs for shipping and materials. Worse, the vendors began charging more than promised -- to a point where the company had to hire several expensive analysts to police the errant bills.

In the end, hundreds of jobs had been lost for what turned out to be illusory savings. So much for the wonders of global markets.

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Instead of placing so much faith in the conventional wisdom of the moment, companies and governments ought to make more honest assessments of the benefits and costs of offshoring. Governments need to balance gains to consumers with the loss of income and tax dollars to their economies when jobs leave, and help with the transition costs incurred in changing their economic structures.

Maybe then employees will fare as well as England's sheep.  Top of page

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