Offshoring and American hegemony

A number of America's storied companies have announced end-of-quarter layoffs, which isn't too surprising given the economic climate. But in the case of IBM, we see a sign of things to come: many of the jobs will be transferred to India, home, as the Wall Street Journal notes, to Wipro and Infosys, perhaps IBM's leanest, most nimble competitors in the information services business.

The Journal's William Bulkeley interviewed an irate ex-employee who speaks for many American workers.

"When IBM workers see jobs being shifted offshore, it's like stabbing them in the back," said Lee Conrad, a former IBM worker who is an organizer for the Communication Workers of America, which is trying to unionize IBM.

While it is undoubtedly true that IBM's layoffs will cause a great deal of economic hardship, it's worth noting that India is suffering very severe job losses in the IT sector and across its poverty-stricken economy. And though India has a burgeoning middle class, it should go without saying that the country lacks the "automatic stabilizers" that American workers -- let alone European workers -- enjoy. One hopes that will change over time, but for now it's not obvious to me that there any bad guys in this story, including IBM's leadership. There is good reason to believe that the downturn is, as Richard Florida argued in these pages, accelerating sectoral shifts, and not just in the United States. Long before the downturn, China was suffering vast job losses in the manufacturing sector thanks to rising productivity, and a similar dynamic is at work in India.

Moreover, as a colleague recently pointed out to me the United States will likely suffer far less from the global economic downturn than a large number of low to middle-income countries that have over the past decade or two embraced open markets and rigorous policies of fiscal restraint. Because the downturn at least appears to be "Made in America," you can see why many in these countries -- Brazil, India, Turkey, China, among others -- might feel as though they have been stabbed in the back.

It is easy to see how a renewed anti-offshoring backlash could have ugly consequences for the American economy. As the purchasing power of workers in low to middle-income countries increases, so does the economic opportunity for American workers, not least because products and services created elsewhere will enrich our lives in all kinds of unanticipated ways. But if the United States is seen as frankly hostile to economic progress in the Rest of the World, the Rest of the World is fully capable of biting back.