Outsourcing Trade in Informational Technology

Outsourcing

Trade in informational technology and U.S. economic growth

Once upon a time in the American computer industry, almost every component of a computer system was manufactured in the United States. American companies such as IBM lead the way in the development of the modern PC. However, in the 1960s and 70s, the availability of cheaper labor abroad caused American firms to outsource the manufacturing of most of the major components of their systems to Japan, Taiwan, and South Korea. Today, only the most complex and highest-tech aspects of computer hardware, like microprocessors, are made in the United States.

There is much hand-wringing over the loss of American manufacturing jobs, and what this means for America on a cultural level. America has increasingly shifted to a service rather than a product-based economy in the new global marketplace. But outsourcing has made computers 20% less expensive for the American consumer. It could be argued that the expanded availability of knowledge has been a boon to the U.S., despite the loss of manufacturing jobs. Cheaper computers have reduced the depth of the digital divide for countless Americans. Expanded access to computers means it is easier to obtain knowledge, including college degrees and information about economic opportunities. Cheaper computers have helped to create a more democratic America.

The reduction in costs enabled by outsourcing has also made businesses more productive, resulting in an estimated 230 billion dollars injected into the U.S. Gross Domestic Product (GDP). This means that despite the loss of jobs caused by outsourcing in the short-term, in the long-term outsourcing computer-related jobs has apparently generated new occupations because of the expansion of domestic businesses, as well as the availability of less expensive technology. Not only has there been job growth in the technology industry as a result of outsourcing -- there has been growth in all economic sectors that use technology, because technology often results in lower overhead costs in the long run and greater efficiency.

Theoretically, in the new free market of the global economy, everyone benefits from international trade. Developing countries benefit because the sudden influx of manufacturing jobs puts much-needed revenue in the pockets of ordinary citizens. Opponents to globalization counter that the wage level paid to foreign workers is exploitive and low and that conditions in factories are open to abuse in terms of the hours worked by employees. These businesses may also be more apt to operate in a less environmentally-friendly fashion than they would in the U.S. Advocates of outsourcing respond that the accumulated revenue can be used to fuel development in the local economy, including domestic businesses in the developing world, making a nation more rather than less independent. Also, U.S. businesses must be more mindful of conditions abroad, given that their own livelihood depends on a stable foreign workforce. Globalization of the economy creates a more interdependent and peaceful world.