Outsourcing Debate, April 24, 2004, MIT
Moderated by Dick Gordon
Special Keynote Address by:
ROHIT KHANNA
(Candidate for US Congress, CA)
Moderated by:
DICK GORDON
(Host of 'The Connection', National Public Radio)
Paul Almeida (Dept. President, AFL-CIO)
Ian Fletcher (VP, American Engineering Association)
Prof. Amar Gupta (MIT Sloan School)
Max Michaels (Managing Director, CRYZTAL Capital)
Prof. Lakshmi Srinivas (Wellesley College)
U.K. Sinha (Joint Secretary, Ministry of Finance, Government of India)
Ian Fletcher (VP, American Engineering Association)
- U.S. can become a third world economy if we ignore this problem. Us upper middle class Americans ignored it when it was blue collar jobs, but now it’s affecting us. We were told the New Economy will solve it all, but that’s not the case now.
- Don’t trust the economists – they change their opinion with the opinion of their funders, the corporations. Economic theories serve the corporations and the elite which fund them.
- Many of the globalization edicts are not followed by the successful economies like Japan and India.
- At the forefront of economics, the “free trade consensus” – the idea that free trade is always the best thing is being chipped away, e.g. Paul Krugman. The idea that free trade is always in the national interest of U.S. is not tenable any more.
- The free trade supporting theories have a lot of assumptions that are not true anyway.
- Also don’t trust the figures – the ITAA figures have been criticized by GAO.
?? (CTO of UPromise)
- On the one hand, in favor of outsourcing because it has helped companies.
- On the other hand, often advise against it because of the morale impact etc. on the company
- UPromise has gone offshore and it’s helped a lot
?? (SW programmer working for a bodyshopper in NYC)
- Bodyshopping – division of ADP
- Hired Americans only as window dressing
- Was never sent to client sites and were fired in batches
- Done so that INS doesn’t complain about their heavy use of H1 visas
- I was earning $48k with 4 months of experience, B.S. in physics
- Husband was earning $27k with 2 years of experience and M.S. in CS
- Completely unfair wages of course
- GAO has only spent $300k studying the impact of outsourcing
Prof. Lakshmi Srinivas (Wellesley College)
- Prof of sociology
- We can’t ignore the sociological and cultural aspects of the phenomenon
- Bangalore workers are being trained to become “insiders” in a culture they don’t live in – how is this shaping their view of this culture
Prof. Amar Gupta (MIT Sloan School)
- Outsourcing isn’t new
- It’s not new to IT
- IBM and others have been doing it for decades
- It’s not new to India
- It’s happened in other industries
- Automobile industry
- Insurance industry – processing of policies
- We can do everything here, but doing them abroad is cheaper
- Example – e-loan gave an option where customers can decide whether they want the processing to be done here or abroad (cheaper) – 86% chose abroad.
- 80-100 million in the U.S. are shareholders
- so they make money when the companies make money
- Automobile companies:
- Many of them did them abroad
- But many have decided to come back to the U.S. also
- Parts are being made abroad, but assembly is happening here
- Chip manufacturing went abroad, but is now coming back
- IT in India:
- India is 2% of world’s IT market
- 7 years ago, a number of countries, including U.S., decided that there should be no barrier to IT
- Indian hardware market got decimated!
- Now those same hardware is being used to export software to the U.S.
Q&A
Q: Why the focus on India rather than the other countries (Canada, Ireland, Israel, …) that have bigger shares of outsourcing? Is it racism?
A: No – those other countries are high-wage countries. There is similar issues raised about outsourcing to white low-wage countries like Russia and Eastern Europe.
Q: What should people train for next?
A: See WSJ, The Future of Jobs, April 2, 2004.
This is a sense of entitlement that Americans have…
But are we being asked to recalibrate our standards of living to those of India?
You should just go into engineering management, or become an entrepreneur
But engineering unemployment is at 6%, engineering management unemployment is even higher.
When chip manufacturing was getting outsourced, the corporations got protection – that was “good protectionism”. Now that labor is being affected, this is “bad protectionism”.
American and free market/capitalism
For most of America’s history, U.S. has been a protectionist society. We threw open our markets after WW2 as a bribe for the rest of the world to not go communist. This is an aberration, and it will turn back.
Call center jobs
- Many of the call center jobs sent abroad were the welfare to works people – what do they do now?
Is outsourcing inevitable?
When semiconductor industry was affected, public policy protected them. Why not now?
3:10:32 PM 
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