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The Concept of Equitable Globalisation

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Rebecca Knighton

Globalisation Debates: The Concept of Equitable Globalisation and the Offshoring of Jobs

‘One of the fundamental questions of today's world is undoubtedly the question of equitable globalisation’, these were the words of Dr Janez Drnovšek (2004), then President of the Republic of Slovenia, in a speech addressing members of the Alliance of Liberals and Democrats for Europe. In order to realise the importance of that sentence, an understanding must be gained of what is meant by globalisation. A word that Godin (2006) described as a buzzword; globalisation is today used to define, justify and legitimise the interconnectedness of the world. Theodore Levitt and his 1983 article The Globalisation of Markets in the Harvard Business Review are accepted by many commentators as the origin of the mainstream use of the term (Mullen, 2006; Abdelal & Tedlow, 2006).

Equitable globalisation can be defined as an interconnected world in which progress made is fair and development is impartial. When comparing this ambition to how modern day global relationships operate, it’s clear that globalisation today does not possess these qualities. Joshi (2009) explores globalisation and describes it as the increasing economic interdependence of national economies across the world, attributing this interdependence to a rapid increase in the cross-border movements of ‘goods, service, technology, and capital’, while this idea does not contradict the pursuit for fairness, the real and tangible effects of global interconnectedness do not always embody fairness or impartiality.

The debate that will be the focus of this discussion, one that routes from the equality – or lack of equality – within global interconnectedness, is centred on offshoring. Offshoring is the process of moving parts of a business’s operations to a different country – this can be either through subcontracting with a contractual agreement or setting up business further premises in another carrying out tasks there. Mankiw (2004) describes the notion as the latest manifestation of the gains from trade ‘that economists have talked about at least since Adam Smith’, his opinion is that this so-called ‘phenomenon’ (Vedder, Guynes and Reilly 2010) is simply the next step businesses can take to profit in many ways in a progressing business environment. The source of the debate leads on from the aforementioned pursuit of equitable globalisation and the contrasting opinions, and justifications of those opinions, between those who support or disparage offshoring. The debate itself can be separated between the country a business originates from and its chosen destination of offshoring, arguments from both locations identify reasons either for or against. Throughout the debate, the economic, political, social and cultural elements of this element of globalisation will be examined.

The first area of the debate to be examined is the contrasting opinions about offshoring in the country of the business’s origin. For the purpose of this discussion, there will be a focus on the USA. A word that seems synonymous with these contrasting opinions is ‘protectionism’ – Mankiw and Swagel look into the term in their insightful 2006 article and conclude that in different arguments it come with entirely different connotations. Members of the American public are looking for some security and consistency in their job and the services they receive, and the term ‘protect’ is tantamount to this, and something they feel the US Government should prioritise. Brothers Ron and Anil Hira are prominent authors within this globalisation debate, and their book Outsouring America (2005) represents the debate well. Their view is that America policy, representative of MEDC’s around the world, is ‘naïve’ – stating that ‘the formula of free, deregulated markets and faith in American superiority ignores how the international economy has slowly and gradually shifted in the last few decades ‘. Their point follows on from book’s foreword by Lou Dobbs, in which the accusation is made that globalisation and its consequential offshoring have and continue to lead to economic insecurity which is in direct contradiction of the American Dream.

This argument is somewhat fuelled by the media (Mankiw & Swagel 2006; Amiti & Wei 2005). Within the last decade, political events such as the publishing and the controversy surrounding CEA’s February 2004 Economic Report for the President Report in the run up to the 2004 election - which mentioned offshoring - have coincided with impartial reports and media attention regarding job losses and economic slowdown. These overlapping events have led to the subject of offshoring becoming thought of as a justification for a faltering labour market.

In addition to the argument of a loss of American jobs, an element of this debate is about the quality of exported services. A customer survey by American Banker/Gallup (2004) found that of the two thirds of respondent aware of offshore outsourcing, the vast majority (78%) held an unfavourable opinion. Exemplifying this point is the relocation, and consequential return, of a call centre for the computer technology firm Dell due to customers complaining that upon its move to India, standards dropped and customer service quality was reduced, this was discussed by Taylor and Bain (2004). Although this case is not alone it its controversy, may call centres have remained in India and other popular offshoring locations – part of the Asian information technology enabled services (ITES) industry estimated to be worth US$1.5–1.6 trillion in 2020 (NASSCOM 2009a).

To refer back to the aforementioned point of varying connotations of protectionism, the opinions found in academic and particularly economic literate are that the notion carries negative implications. This academic literature forms part of the discourse that offshoring is a positive contribution to a country’s economy. In order to justify the concept of outsourcing, economists look into the theory that defines their subject area – a part of this theory is comparative advantage. This is the ability for one party to produce a good or provide a service at a lower marginal cost to its competitor (Baumol & Minder 2009) and can also be applied to whole countries. The comparative advantage that, for example, India can offer US companies for elements of their business that can be outsourced, is the driver of offshoring. One view of this concept is that of Bhagwati (2008), who labelled the phenomenon ‘kaleidoscopic comparative advantage’ is recognition of its complexity. In direct contradiction to the so-called protectionists’ opinion of a negative effect on the economy, McKinsey Consulting (2003) calculate that overall net US income rises by about 12–14 cents for every dollar of outsourcing; this is due to the increased profits of companies being contributed to tax, being used to develop and grow the business – leading to more US employment, and consumers paying lower prices for products and services that have been made cheaper by offshoring. A further point in the debate that this embodiment of globalisation is good for the economy is that these global economic developments could be liken to a third Industrial Revolution. Blinder (2006) explored this idea – he identified that such vast and unsettling adjustments are not unique today as the same repercussions were felt during both the agricultural and the manufacturing industrial revolutions, but added that both of those economic changes are looked back upon as successful and relevant steps forward. The article goes on to address the opinion that jobs are risk of being relocated are those that are typically lower paid; using an example of taxi drivers, aeroplane pilots, janitors and crane operators as ‘safe’ jobs, compared with accountants, computer programmers, radiologists and security guards as jobs that could potentially be outsource. The range of jobs that are or are not at risk do not correspond to traditional distinctions between high-end and low-end work.

A further point opposed to the argument against the offshoring of job to America is the contest to opinions that it lead to a reduced quality of customer service. Blinder (2006) comments on the constant improvements in technology and global communication, says that due to this there has been little or no degradation in quality. The education of the employees in foreign companies is discussed by Doyle (2012) – he used the example of the recent vast improvements of English Language education in India and puts forward the point that this in turn eliminates a potential language barrier that may have supposed negative effect on the customer service provided by companies that outsource their call centres to country that don’t have English as a first language.

Having explored both view of offshoring in the country of the business’ origin, the nest step to gaining an understanding of this globalisation debate is that of the country hosting these outsource jobs. Similarly to the previous arguments, using a case study will allow a more in depth investigation into the opinions and justifications of this debate. India will be the focus of this debate – chosen due to its popularity amongst business as a destination for offshoring jobs. According to the Tholons 2013 report of the top worldwide outsourcing destinations, six Indian cities are within the ten most favourable, including the 1st and 2nd being Bangalore and Mumbai respectively.

The offshoring of jobs to India is regarded as the main vendor of offshored jobs, with some estimates that an additional 400 people are employed a day due to jobs that have been offshored (Bergh et al, 2011). This contribution to the economy is the main positive with this globalisation debate in favour of outsourcing jobs to India; a contribution estimate by Nasscom to be growing 19% per year (Nasscom, 2012). Bergh et al (2011) go on to discuss the impacts of this input into the India economy, such as vast improved have been made to infrastructure that has in turn allowed further expansion and an increased quality of life.

A further part of the debate is the social side of this embodiment of globalisation: this impacts of increased employment. Despite criticism, that will be explored further into this discussion, there is evidence within academic literature and other publications that improvement are made to the quality of lives of those employed by companies that have offshored their jobs to India, Ball et al (2005) explore this point, their findings indicate that those employed by subsidiaries of the original company that has outsourced the jobs benefit from working conditions better than if they were employed by companies based in India, as well as a better sense of job security. Another point is the claims that these companies recognise the nature of the work, identifying that by working and travelling home overnight employee would be increasingly vulnerable, and by offering security and transport services care is taken of these employees (Messenger and Ghosheh, 2010).

Whilst this argument of the positive effects on the vendors’ economy and the satisfactory to good working conditions provided is legitimised by academic papers on the subject, the opposing opinions come from a strong stand point and are very well justified by both academic research and events in the media.

One underlying point of this discourse relates back to the point of equitable globalisation and the impartiality of development – a concept which ties in with the opportunity to develop sustainably. A major criticism of the presence of outsourced jobs and the effects of these in India and other vendor nations is the instability of and speed in which changes are being made. Whilst governments, such as in India, have been recognised as paramount in facilitating an inflow of not only foreign capital but also knowledge and technology. Winters and Yusuf (2007) highlight the pressure felt governments by internationally trading companies to aid their overseas operations – attributing this to the fast growth and lack of forward planning when implementing incentive schemes. This potential instability is worsen by claims that India may be losing its popularity amongst multi-national companies leading to a slowdown in investment (Helyah, 2010; The Economist, 2013).

A second element to this discourse is explored by Messenger and Ghosheh (2010), and is based on the deep rooted cultural differences between vendor countries, i.e. India, and the companies’ country of origin. This leads to difficulties in integration and segregation between higher management and workers, which is turn can very negatively affect moral. A further point in the issue of cultural difference, is the westernisation of the nation a company is operating – an example of this is demonstrated in a Post-Colonial perspective investigation into recent changes in Indian culture and an example within the paper, by Ravishenkar et al (2013), is the education system in India that is said to ‘mimick’ Western concepts and ignore local stakeholder. Whilst this change would not be considered a negative by all commentators, it exemplifies a potential loss of national identity which has been explored in the wider sense of globalisation by Featherstone (2005).

A final point in the discussion of this debate is the working conditions of people employed in offshored jobs. Ghimire (no date) commentates the topic and highlights the following point as issues within the sector: disturbed social and family life due to overbearing work commitments and a lack of flexibility by employers; detachments from local culture and lifestyle; racist abuse from customers abroad. This list is increased by further contributions from Messenger and Ghosheh (2010) who explain that of their sample over 50% have suffered from work related illnesses and conditions including back and neck pain, sleep problems and headaches; they also reveal that many regulations set out by India’s government are not adhered to or are interpreted in the favour of employees: example are having the breaks required by law being dependant on outputs and call levels (in call centres) or breaks cut short due to overloading workloads and missed, sometime considered unattainable, targets. Due to the nature of companies with insufficient working condition, data is not available across the board due to secrecy and strict employee contracts; information in the media gives an insight into how conditions are worse than this, but cannot be relied on to be true and legitimate sources in an academic discussion.

By investigating the debate with what can be identified as four separate discourses, a comprehensive understanding can be gained of the opinions, justifications and evidence of each opposing argument. The exploration of such a topical and global debate bring some difficulties – such as contradicting literature and misinterpretation of statistical evidence. The question of the practice of offshoring is a prominent debate within globalisation; and due to its so called ‘kaleidoscopic’ complexity (Bhagwati, 2008) and multiple standpoints it demonstrates the complexity in the global interconnectedness of today’s world. When returning to the initial concept of equitable globalisation, this debate highlights how the pursuit of that ideal is somewhat unattainable; the impartiality of the concept is impossible to obtain due to the nature of the profit driven forces that dominate the global relations and drive globalisation itself.

References

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