A Key Element of Economic Globalisation

A new round of globalisation is sending upscale jobs offshore. They include basic research, chip design, engineering—even financial analysis. - From "The New Global Job Shift," A Feb 2003 Business Week Cover Story. (Quoted in Chikiamco 2003) In the last two to three decades, the world economy has gone through a dramatic process of reorganisation: integration through international trade and the disintegration of production. They both are part of economic globalisation. The disintegration of production shows itself in the new way firms organise across borders, outsourcing some of their activities and participating in global supply chains.

Offshore outsourcing is therefore part of the globalisation of the economy that has been accelerating in the more recent times. Economic globalisation has sped up through the development of currency exchange markets, free trade areas, and new technologies, especially the Internet, that enable low-cost and quick communication around the planet. In popular imagination, globalisation is commonly associated with the outsourcing of jobs abroad. At one time, it was blue-collar jobs that were outsourced, but the 1990’s and 2000’s saw the outsourcing of clerical and then professional jobs, especially in the field of information technology.

The explosive growth of the economic role of IT technologies worldwide since the nineteen nineties has facilitated globalisation, in the form of international outsourcing (Kamel 2003). The advances in IT have made possible by international supply chains and patterns of outsourcing that would have been inconceivable half a century earlier. Viewed from the other end, the most important factor favouring IT outsourcing is globalisation. In India and China, the cost of writing software can be as little as ten to 40 per cent of the cost of doing it in the West.

Therefore, great amounts of work has been transferred there; and more would follow. Globalisation is a very controversial issue. Anti-globalisation camp stresses on the fact that free trade associated with globalisation is eroding American jobs and the American way of life. Moreover, free trade is "exploitative," it is alleged, taking advantage of workers in developing countries and putting people everywhere at the mercy of multinational corporations over which they have no control.

The implications of job outsourcing and its rapid acceleration tend to present a dire picture of future for American workers in particular and workers of the developed world in general. Protestors often contend that through outsourcing, competition, and insistence of firms on "labour flexibility" globalisation has resulted in a "race to bottom" in global labour standards, job insecurity and the exploitation of sweatshop workers, including child labour (Farrell 2006).

Globalisation and outsourcing of jobs are intimately connected with each other. Since firms generally find it most profitable to outsource the most labour-intensive processes, the increase in outsourcing has hit non-college-educated production workers hardest. But outsourcing of software development projects to offshore organisations in India, China, Russia or other countries is one of the most important and recent manifestations of the phenomenon of globalisation, that has been going on for a considerable time now (Vashistha, Vashistha 2006).

Not too infrequently, outsourcing and globalisation (meaning economic globalisation) are often used synonymously. Outsourcing is perhaps the hottest issue in the globalisation debate. Indeed, outsourcing can be better studied and understood in the larger framework of economic globalisation. In the sections to follow, we focus on the general scene of economic globalisation, its meaning, context, and history, as well as its significance to our times — so that outsourcing is put in a broader context.