Offshoring

I’ve decided to try and support the UK companies that annouce they will not offshore services. This is tricky as no doubt some companies will lie in their advertising or at least withhold the whole truth. Statements like “We will not offshore our call centre staff” probably means they will offshore everything else.

My first attempt at supporting this philosophy failed when NatWest refused to let me open a bank account. Because my existing account is with an Internet bank, I couldn’t provide them with statements on official paper. Without this I couldn’t have an account. Despite this I plan to continue my crusade as offshoring is evil. It puts people in this country out of work and gives their jobs to underpaid workers in other countries where health, safety, pensions, working hours directives and minimum wages can be swept under the corporate carpet.

I’d be interested to hear from anyone who thinks this is a good/bad philosophy.

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One Response to Offshoring

  1. Arrakistor says:

    Trying to support a brand or company because they don’t outsource will not be effective. Surprisingly, you are damaging your own country’s position. This was something I learned in my economics class when discussing the fallacy of the “Buy American / Made in the USA” trend.

    The issue arises because of the assumption that you can keep value inside your own country by limiting specific transfers to that country. The problem is that you are trying to keep water in a strainer by plugging one hole. That can work in a socialist country which doesn’t depend on the resources of another country, but not in any system where capitalism prevails.

    For example, let us say that you are in the US. Socks made in the US cost $2, socks made in the Philippines cost $1. The market will choose to purchase the $1 sock by and large. Why is the sock $1? Because the workers are paid $10 a day, and the materials and operating costs are very low. $10/day is indeed an underpaid wage, if you are in the US. But in the Philippines, $10/day could be a living wage because their costs of goods are very low, because the cost of living might be low, and the terms of trade for the currency may be high, and they don’t live in an opulent country with all sorts of gov services. So the filippinos are getting a good wage. It is the competitive advantage for the country to have low labor costs, and low materials costs.

    However, the supply/demand curves will always shift to equilibrium. As the amount of socks purchased goes up, so does the wealth of the country due to the flow of money. Then the cost of living increases, and suddenly there is no longer a competitive advantage and the production of socks switches to indonesia. No big deal. There will always be countries on the rise from unskilled labor to skilled labor. This is what is happening in China as it frees up its economy from gov planned to market planned.

    To try to retain jobs by limiting trade or refusing to do business will not work. If you are not the best at what you do, you should do something you do have a competitive advantage in. That is why manual labor jobs are low in the US, and high education / skilled services are 70% of the GDP.

    Let me show you why it doesn’t work: Let us say you refuse to do business with such companies. Others still will so you don’t stop them there. Further, by you chosing to use someone who doesn’t have the competitive advantage by buying socks made in the US, half your money goes to buy half the amount of sock you could have had, and the other half goes to support inefficiency as a philanthropy.

    Such a choice is based upon the fallacy that there are winners and losers in every trade off. There is no reason why there can’t be a win / win in EVERY trade situation. If you wish me to further explain that fact, I certainly can, but I don’t wish to prattle on if this isn’t a discussion you care to hear more about.

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