When it comes to the economy, everyone knows that small, locally owned businesses are a good thing. Outsourcing, on the other hand, hurts the economy - or does it?
Since the collapse of the Berlin Wall and the emergence of the Asian market, the global economy has opened up to limitless avenues for exchange. Globalization continues to change the way businesses operate, both on an international and local level.
To the average American worker, the term "outsourcing" strikes a painful nerve, and with good reason. The loss of manufacturing and service jobs to Japan, India, China and other countries has taken a significant toll on the US economy. It's not surprising that the idea of relocating any aspect of a business to a location where it can be done at a lower cost is often met with significant resistance.
Most would agree that to restore financial power to the US, a return to the basics is necessary - encourage the growth of local business so that dollars can resume their flow in the form of job creation and tax revenue. What kind of local business is best? In Oregon, the manufacturing and retail sectors have declined or remained stagnant over recent years, but information technology has proven resilient, adding jobs at a steady rate. Companies and organizations of all kinds have been digitizing their operations and moving marketing online, creating an ever-expanding market for IT services like software and website development. Here's the ironic part: Although these services are offered by local businesses, they are made affordable by offshore labor. Most information technology companies rely on the assistance of workers in China and India to write the thousands of lines of code that allow their specialized programming to operate. Without their contributions, Oregon's information technology sector would barely exist. On a national level, the outsourcing of information technology work contributed $68.7 billion to the GDP in 2005, and created 257,000 jobs in that year alone.
While the US has taken the lead in technology-based industries, Asian countries have been building their economies on manufacturing. Unlike information technology, however, many of the parent companies that provide the driving and creative force in the manufacturing industries have moved all of their operations to countries like China and India. China is now the world's second-biggest economy, and is expected to match the US in overall output in the next decade. Its economic power is so huge that it is has been buying up pieces of US companies - GM, Maytag, Unocal and IBM, to name a few.
The bottom line is that, today, all industries operate in a global economy, and it is rare to find a market that doesn’t transcend national boundaries. But some things haven't changed. A particular company's contribution to the local economy can be observed in its level of involvement in the community, how it treats and pays its workers compared to its top executives, and whether it stays afloat by producing a good quality product at a competitive price. By sending some of the low-skill labor involved in information technology services overseas, small, American-owned companies benefit. Their start-up costs are lower, allowing them to leverage their dollars and create high-paying jobs at home for programmers, designers, writers, and other professionals. In addition, other local businesses benefit by having access to technological services like web design and application development, which are powerful marketing tools. Most important, the creative and technical nexus of business stays in the place where it can provide the biggest economic benefits for Americans - on US soil.
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About the Author
Tuula D. Rebhahn holds a BS in Magazine Journalism from the University of Oregon.