Is it time to turn our back on the global economy?
Wednesday, August 19, 2009
During the last few weeks, there have been articles in the press, and I have been approached on a number of occasions, asking the question, “Is it time to now move back to protecting local jobs?”
My answer each time has been, “Absolutely not!”
If you consider the question from the perspective of the global economy, which of course is essential, outsourcing (both in IT and BPO) has resulted in a massive growth in countries like India and China and is starting to result in growth in other geographies. For example, in India alone, there are 4 million people employed in the sourcing sector supporting the Western world, which represents 4 percent of GDP and is a major reason why the Indian economy is growing by 7-9 percent per year (slow by their standards), while Western economies are struggling to get even into positive figures.
As a result, outsourcing has helped to generate the rapid growth of the middle classes in both India and China, clearly evidenced by their rapid expansion in use of mobile phones, purchase of consumer goods and availability and use of low-cost airlines.
So what does this mean to the West? Well, it is a circular and symbiotic process – the more that is spent globally, the more the economy will grow; but simultaneously, the more efficient you are as a business, the greater the share of this new economic growth you stand to gain. Outsourcing can be the trigger in both instances.
Outsourcing ploughs money into economies that can rapidly expand, such as India and China as shown above. At the same time, it inherently allows the Western companies to become more efficient and able to respond to market pressures, and therefore take advantage of the recovering economy that has been sparked by the cash injections. Outsourcing very quickly becomes the means to create the upturn and the ability to take advantage of it.
There is a new fad in the UK which is the revival of Keynesian economics, developed by John Maynard Keynes, a theory that has been until recently out of favour. Keynes states that the more we invest globally, the more we can recoup globally, and the quicker we can recover from a recession. Therefore, as far as the private sector is concerned, it is absolutely not the time to retreat to our British castle, pull up the drawbridge and wait for things to get better.
From the public perspective, the basic principles remain the same, but the politics makes it more difficult. The recent intention to export jobs abroad is much more politically charged, but the basic principles still apply. UK PLC as a whole, and certainly UK Government, is bankrupt. We have a stark choice to make – whether to sacrifice back-office jobs or reduce government spending to enable the private sector to grow.
Please take a moment to look at Keynes’ theories and please still embrace the global economy perspective.