Lou Dobbs: Exporting America

Globalization of services (offshore outsourcing) is making significant positive contributions to global economies and to the buying power of the USA, India, the Philippines and other countries. Still, offshore outsourcing is seen as an alarming issue for many government officials, media, corporations and individuals. As a leader in the offshore advisory industry, neoIT feels it is important to provide a balanced view to the debate over the globalization of services. In a February broadcast of Lou Dobbs Tonight, neoIT’s CEO, Atul Vashistha, weighed-in on the globalization of the world economy and the new competitive reality for companies and individuals.

It is always unfortunate when an individual loses their job. It is even more of a concern when the job loss occurs in a down economy. The reality is that this trend is real, irreversible and another step in the globalization of the American economy. In the short term, it will continue to present challenges to industry, government and individual employees. Yet, it is also important to note that clients are not sending all jobs offshore. They are carefully evaluating what jobs are best suited for each global location. As companies go through this difficult decision, they are also creating programs to minimize the short-term pain for their employees. They are offering their employees reeducation programs, severance packages and outplacement services. As an advisor to these companies, neoIT continues to look at other innovative solutions to help manage this difficult personal and corporate change.

While this will continue to be a controversial and emotional debate, it is important to keep in mind that the re-distribution of resources to efficient global locations results in freeing up of capital, lowered costs for consumers and new opportunities for investments. Protectionism hampers innovation and cripples growth, which in turn can lead to higher unemployment. The failure to innovate is to cede technological leadership and, ultimately, economic strength.

neoIT is dedicated to providing leadership for a better understanding of globalization. We encourage you to team with organizations such as ITAA (www.itaa.org) and other like-minded organizations that believe in a global economy and want to keep America competitive. Join this debate and help shape how we address this complex and important issue for workers and corporations. While this is a difficult transition, this trend is ultimately good for the American economy and the many nations that provide these services. Protectionism is not the answer!

• Dobbs:
And how is it a misconception?

• Atul Vashistha, CEO & Founder neoIT:
Thanks, Lou.
It's a misconception because if you look at what offshore outsourcing is doing for America it is actually helping American companies stay competitive. It is helping them lower the cost of products and services. And actually it is improving the buying power in our nation.

• Dobbs:
How does it -- I think I understand, if you will, the premise of what you are saying. But when we watch and as we document here, literally hundreds of thousands of jobs being shipped to cheap overseas labor markets, those jobs are replaced typically by salaries that are 30 percent lower and there is no migration up the value chain, it's down the value chain. So, how does that help America?

• Atul Vashistha:
There's no denying that, in the short term we have a problem. I think the industry, the government and the companies are still not doing enough. What I can tell you is that our clients are starting to do things to combat that.

• Dobbs
Like what?

• Atul Vashistha:
For example, some of the things our clients are doing, they are actually putting money into retraining. We cannot be competitive in this new global economy if our workers don't continue to update their skills, even if your are a software programmer.

• Dobbs:
Let me ask you this, engineering, software programming have unemployment rates approaching double digits in this country. What in the world are you going to train them for?

• Atul Vashistha:
Lou, technology as you know is changing every year.

• Dobbs:
I do, indeed.

• Atul Vashistha:
If four years ago you were doing HTML, or Web based programming, you need to do a lot of different things today, because that technology is old now.

• Dobbs:
Right.

• Atul Vashistha:
I did my engineering degree and my MBA, I went back to Harvard last year to educate myself again. And I think that's something we absolutely have to do.

• Dobbs:
That's boffo (ph). But let's talk about those hundreds of thousands of jobs -- people glibly talk about training. Men and women who have trained themselves in a variety of skills who have a variety of educational pursuits and degrees, I hear people start talking about training as if that's a panacea.

What jobs should they train themselves for? We are shipping high value jobs overseas to India, to the Philippines, to Ireland, to Poland, to Russia, for crying out loud. What in the world are we supposed to train them to do?

Now, I understand the profit motive, as a matter of fact, no one is more pro-business, pro-American free enterprise than I am, but I'm also pro-American worker. What in the world -- you talk about pain (ph), we're seeing evidence of it every day.

• Atul Vashistha:
But Lou, if we don't focus on our investment on training we can't just put up our borders and imagine that these jobs will stay. In fact, companies are going bankrupt because they are not taking advantage of these lower cost markets.

• Dobbs:
Because somebody else is, is that right?

• Atul Vashistha:
Right, exactly. So there's...

• Dobbs:
So what you end up is, a race to the bottom as it's been styled. Because if one company is going over to India to get a job, to pay a salary that is a tenth of what they would be paying in this country. They are forced to compete. This is not free trade. This is not comparative advantage, as envisioned by David Ricardo, this is the wholesale exportation of American wealth.

• Atul Vashistha:
Lou, the difference here is that this is a global economy.

• Dobbs:
I understand that. But these are old saws (ph) -- globalization has been a fact since 1987.

• Atul Vashistha:
Right, Lou, take a look at what happened to the buying power in our country. It's significantly gone up. And I know in the last 2 years, 3 years...

• Dobbs:
Consumption power in this country for the last three decades have declined over the past three years... has actually fallen even more dramatically than that average over three decades. It is quite the inverse.

• Atul Vashistha:
Lou, you know, I'm sorry, I beg to differ.

• Dobbs:
Please.

• Atul Vashistha:
If you take a look at the buying power of our country, let's take a look at the last two decades. We created 22 million excess jobs than we've destroyed (ph) in this country. This is a Bureau of Labor statistic for the last two decades.

• Dobbs:
We created 22 million jobs during the course of the Clinton administration, 1992 to 2000.

• Atul Vashistha:
Right. So we created surplus jobs. I'm talking about economy change, we actually created more jobs than we lost. At the same time the buying power in this country...

• Dobbs:
What sort of evident 22 million jobs?

• Atul Vashistha:
What is happening today is... this is the next evolution in the global economy

• Dobbs:
That's wonderful. Great evolution, if you believe that the United States should be shipping its wealth, its jobs, standard of living and quality of life to third world countries where there are no regulations for environment, no regulations for labor, no standards that is a requirement here in this country.

The logical extrapolation it seems to me, Atul, is that if we are going to compete fairly, with fair trade and a globalized market, it seems to me that India, the Philippines, Mexico, a Central American nation should have the same standards, otherwise we're competing simply on the price of labor.

• Atul Vashistha:
Lou, I absolutely agree with you. In fact, if you look at the service industry which we participate in, these companies are paying higher average wages than the local counterparts. I mean so if you look at what is happening in India or China.

• Dobbs:
You're saying American companies are paid higher wages in other countries than native companies.

• Atul Vashistha:
American companies and the local companies that participate in this business. So companies like Infosys or Wipro, or all these companies in India... they are paying better wages than the average people get in that country.

• Dobbs:
The average Indian company.

• Atul Vashistha:
Absolutely.

• Dobbs:
But why in the world do ten million Americans who are unemployed in this country, give a damn?

• Atul Vashistha:
Well, Lou, here's why they give a damn, because if we don't do this, it we don't continue to innovate and let our companies be successful, we will lose more jobs.

• Dobbs:
Wait a minute. You are not innovating. You are not being more efficient. You are talking about hiring cheaper labor. Those are only code words for cheap labor. McKenzie did a study, as you're aware of, in what is the bulk of the gain for American companies?

• Atul Vashistha:
Well, it's...

• Dobbs:
All in labor savings.

• Atul Vashistha:
A bulk.

• Dobbs:
The bulk, as in 70 percent of it.

• Atul Vashistha:
Right. Lou, what happens to the money that comes back?

• Dobbs:
What money?

• Atul Vashistha:
The money that is being repatriated back to this country? The savings that happen.

• Dobbs:
We should ship all our jobs then, because it sounds like a highly profitable enterprise.

• Atul Vashistha:
Lou, it's easy to take a look at this...

• Dobbs:
(LAUGHTER)

Atul, I understand your position. I understand the profit motive, but corporations have a stake in this country, do they not?

• Atul Vashistha:
I absolutely agree.

• Dobbs:
And they have a stake in the community, in investing in their people. They have a responsibility, because they are the beneficiary of this national American economy.

• Atul Vashistha:
Lou, I absolutely agree with you. In fact, one of the things that has not happened yet is the industry, the associations and the companies have not come together to address the displaced workers. Now I can tell you, like I was telling you before, some of our companies are doing that. Apart from training...

• Dobbs:
That's a wonderful paternal outlook. But what I would much prefer to hear business people, men and women in this country running corporations and folks like you trying to make a dollar, you have a responsibility to this national economy. This is not just a market place. It's a nation. Right?

• Atul Vashistha:
Absolutely.

• Dobbs:
I would love to have you come back and talk some more, we're out of time. Will you come back? We'll have more discussion.

• Atul Vashistha:
Absolutely, Lou. Thank you.

• Dobbs:
Atul, thank you very much.