I like the fact that he sticks up for Americans jobs.

Why should the US economy at large be involved? If a sector or pocket benefits, then that’s it, why should a individual company be bothered about the whole US economy?

Second, MGI fails to account for how the increased imports resulting from white-collar offshoring will be financed by the U.S. economy. An individual company need not concern itself with finding exports to offset its imports, but any analysis of the effects of offshoring on the U.S. economy must do so.

Where is the need for the US economy to finance the import? If a company is doing the outsourcing, the export and import are on the company’s numbers.

AND, the individual company would be bothered about buying and selling. If it cannot sell, why would it keep on buying (importing). Plus, if it can sell, why should it be bothered who’s buying (either to domestic consumers or as export), as long as it makes its cut?

Third, while the firms that have already engaged in offshoring may have reaped large returns, this still does not mean that recent trends toward increased offshoring are an unambiguous windfall for the American economy.

How on earth should a individual firm keep track of how their individual action is going to affect the whole American economy? Why, even the most expert among economists (I mean competent ones, not ones like Lou Dobbs) don’t have a clear answer (apart from the obvious fact that it is good in the long term) cannot say if it is a certain good/bad! How then, can one firm calculate its outsourcing’s effect a 11+ Trillion economy? And again, why the hell should it?

I guess this is the point in the argument where the moral balderdash begins and the Benedict-calling begins….

Despite studying Economics in college, Lou still has the cojones to maintain a list of “Benedict Arnold” companies (including his employer Time Warner). How unfortunate.

The number of indians engaged in bpo+IT sw tech industry is at best 2 million (a recent study suggested 1.3 million) This includes work being done for local consumption as well as export to every one. The effect on india is tiny. The only thing it did for india was give it a one industry asociation to the country. An average fella will think that Taiwan=Asic Malaysia=IC packaging India=sw. In indias case the economy is a lot larger still largely rural and the growth is coming from internal consumption. Many Economists have pointed out that fact out. This segment BPO+IT is visible b/c to many it seemed like it came from no where all of a sudden (but that was more of a tipping point effect as in one guy wrote about it and on and on) Tata had been selling sw services since the 70′s. TI the DSP firm started shop for software app notes regional sales for its dsp in 1985. Just cause it wasnt noticed dosent mean things were not happening. The indian economy under the brits was losing 1%/yr in growth. post independence it was growing around 3% till the 80′s when it jumped to 5% and now its around 7-8%. It wasnt just one day some american decided to send some work to infy or tata and economy started to grow. Its something that has been happening over decades. Things get so oversimplified, outsourcing is not a big part of indian economy.

Considering that McKinsey has always been a pro-outsourcing shill for companies and policy makers who push the pro-outsourcing agenda, I don’t think EPI can be faulted for providing the opposing view because of who its directors are. I daresay Mckinsey has less than an impartial and neutral view when it comes to outsourcing:

While there are no numbers, anecdotal evidence suggests that scores, perhaps hundreds, of former GE and McKinsey executives and consultants play key roles as both suppliers of outsourced services and customers for them. “Every time we have an outsourcing forum, it’s like a GE and McKinsey alumni association meeting,” says Sunil Mehta, vice-president of NASSCOM, India’s software industry association. http://www.businessweek.com/globalbiz/content/feb2006/gb20060223_186829.htm?chan=globalbiz_asia_today%27s+top+story

The debunking of the McKinsey “study” is here:

First, the implicit rate of return from engaging in offshoring (14%) identified in this example is enormous, and likely implausible for the U.S. economy at large. It is based, according to MGI, on a proprietary data set of firms that have already engaged in offshoring to India. As such, it is essentially a self-selected group of firms that have chosen to offshore their labor specifically because offshoring provides the largest economic gains. This rate of return, then, applies only to those firms for which offshoring would have the largest payoff; it is not the average payoff that could be expected from a representative U.S. firm sending work offshore. Second, MGI fails to account for how the increased imports resulting from white-collar offshoring will be financed by the U.S. economy. An individual company need not concern itself with finding exports to offset its imports, but any analysis of the effects of offshoring on the U.S. economy must do so. In MGI’s example from Figure 1, they assume that one dollar of goods previously produced domestically will now be offshored from abroad—meaning that imports into the United States will increase by one dollar. MGI assumes that this generates five cents worth of exports. But the other 95 cents of imports still has to be financed by increasing exports, which transfers resources (that could instead be used to support U.S. consumption and/or investment) to the rest of the world. MGI, by focusing only on a select group of firms instead of the wider economy, enumerates the benefits of offshoring (i.e., cost-savings gained from importing goods that once were produced domestically) while remaining silent on the costs (transferring domestic resources to finance increased imports). Third, while the firms that have already engaged in offshoring may have reaped large returns, this still does not mean that recent trends toward increased offshoring are an unambiguous windfall for the American economy. While it may make sense for an individual firm to offshore, if this practice becomes widespread enough to result in a rapid increase in foreign productivity in sectors in which the United States is a net exporter, this could actually result in a loss to U.S. income through terms of trade effects (as pointed out recently in the Journal of Economic Perspectives by Nobel Laureate Paul Samuelson (Samuelson 2004). This possibility describes precisely the situation that occurs when U.S. companies offshore production in high-skill professions that produce U.S. exports, such as software.