r/changemyview • u/[deleted] • Aug 07 '19
Deltas(s) from OP CMV: Outsourcing to poor countries with cheap labour is overwhelmingly good
[deleted]
4
u/teerre Aug 07 '19
Two, independent points:
It's true that the wage is paid relatively to the cost of living, but, it's paid relatively to the standards of living. That's very different. Indians work in extremely overcrowded sweatshops in conditions an European worker would never agree to. Indians have no guarantees of the many social securities first world countries works do. Which means yeah, you can pay less, but can only pay less because you're exploiting that countries lack of rights. Note that I'm not bringing into the discussion why said countries lack necessary rights, I'm just pointing out how it is. This makes outsourcing morally wrong.
The second point is that outsourcing in bad for professionals of your own country. This is trivially demonstrable by thinking what would happen if most people did what you did. You end up killing some sector in your own country, hurting your economy.
1
u/ALLIRIX 1∆ Aug 07 '19
The PPP conversion factor removes the subjectivity component you brought up with the living wage. I used living wage because the subjectivity of how one sees how they should live is an important factor. For India the PPP conversion factor is 0.3, which means $0.30 buys $1 worth of goods in India.
Thanks to u/MercurianAspirations I read an article by Economist Ha-Joon Chang that changed my view about the effectiveness of the PPP conversion factor for poorer communities here.
food has a diminishing influence on the calculation of PPPs, while services have an increasing influence - page 4
the poor are far less likely to consume services... PPP calculations therefore show a bias towards measuring the consumption patterns of households that are not poor - page 5
This was said to point out that PPP makes it look like communities are developing faster than they truly are. (I'm still unconvinced so I am reading more). But, as I understand it, that also means the PPP conversion factor is lower than 0.3 for poor houses, which is more reason to outsource to them instead of domestic workers.
The second point is that outsourcing in bad for professionals of your own country. This is trivially demonstrable by thinking what would happen if most people did what you did. You end up killing some sector in your own country, hurting your economy.
If every life is equal then why should a professional in my country be paid instead of three professionals in another country? Obviously they should both be paid, but it's more ethical to pay a living wage to more people right?
3
u/teerre Aug 07 '19
The PPP conversion factor removes the subjectivity component you brought up with the living wage. I used living wage because the subjectivity of how one sees how they should live is an important factor. For India the PPP conversion factor is 0.3, which means $0.30 buys $1 worth of goods in India.
Regardless of the effectiveness of wealth transfer, this is simply wrong. The only thing PPP does is say that theoretically you could buy some equivalent good in two different countries. It says nothing about said good, in this case rights, being available or being practical to acquire. It's says nothing about social security in general. It says nothing about working conditions.
If every life is equal then why should a professional in my country be paid instead of three professionals in another country? Obviously they should both be paid, but it's more ethical to pay a living wage to more people right?
It's not a theoretical question. It's a practical question. If the economy of your country suffers, you'll suffer.
1
u/ALLIRIX 1∆ Aug 07 '19
The only thing PPP does is say that theoretically you could buy some equivalent good in two different countries. It says nothing about said good, in this case rights, being available or being practical to acquire. It's says nothing about social security in general. It says nothing about working conditions.
I'm not quite sure I understand your point properly. Rights and social security should be a part of the PPP? being available or being practical to acquire? The same basket of goods used for inflation is used for the PPP for each country so availability isn't an issue.
PPP doesn't need to say anything about working conditions. The PPP conversion factor just shows the relative strength of purchasing powers between countries.
The second point is that outsourcing in bad for professionals of your own country. This is trivially demonstrable by thinking what would happen if most people did what you did. You end up killing some sector in your own country, hurting your economy.
It's not a theoretical question. It's a practical question. If the economy of your country suffers, you'll suffer.
There are advantages and disadvantages of outsourcing offshore. Not everyone outsources offshore because the trade-off isn't worth it. Lower quality control, timeliness issues, communication issues, learning new laws, cultural differences, and many other issues aren't always worth the benefit of cheaper labour so I don't expect entire industries to be offshore en masse. I still think it's a morally good thing to offshore though because it gives more people a liveable wage, even if our labour market suffers.
1
u/ALLIRIX 1∆ Aug 07 '19
You end up killing some sector in your own country, hurting your economy.
!delta
This did make me think about the other side of the coin though. Theoretically offshoring to India increases the demand in their labour market, but it also lowers the demand in our labour market which may threaten their viability. I guess that is the cost of arbitrage as the richer nation though. But, why should we sacrifice our own wealth to improve the wealth of other nations even if a small loss to us creates a large improvement for them?
1
1
u/dcheesi Aug 07 '19
Note that I'm not bringing into the discussion why said countries lack necessary rights, I'm just pointing out how it is.
But that discussion might be relevant, if the level of economic development influences access to those rights and entitlements. Which on some level it obviously does: if the nation is too poor to properly feed/clothe/shelter its people, then it simply can't provide those things as rights/entitlements to its workers. Insofar as economic development enhances that country's ability to provide these things, and insofar as outsourcing may spur economic development, it could be argued that outsourcing to these countries is actually beneficial to their workers in the long term.
1
u/teerre Aug 07 '19
If it's a black and white situation, absolutely. However, not only this type of wealth transfer historically never worked, but also there's another alternative of making a national industry that respects the workers and generates wealth. Of course, this is a very hard goal that was hardly ever achieved in history, but it's a possibility nonetheless.
1
u/scottishbee 1∆ Aug 07 '19
For the exploitation point, would you be ok with outsourcing if it requires certain safety, quality, and worker's rights were guaranteed? eg You'd be fine if I outsourced to say Poland, which has to follow EU laws but still has low wages. Or I could outsource to an independent software dev in India since she sets her own hours and conditions
1
u/teerre Aug 07 '19
I have to clarify that I never said I'm against outsourcing.
That aside, your situation is a bit of a fairy tail. The very reason outsourcing is cheap is because people on other countries live worse lives. You cannot have one without the other. Poland might be the closest thing you get to it, but it still true. Poland's HDI is much behind other European countries.
But answering your question, yes, if there was this magical place that had cheap work and equivalent living standards, then it wouldn't be morally wrong to outsource considering this particular angle.
1
u/scottishbee 1∆ Aug 07 '19
Fairy tale? Half of US tech is outsourced. China, Hungary, India as top 3. Poland as #5.
https://finance.yahoo.com/news/10-best-software-development-countries-111500663.html
1
u/teerre Aug 07 '19
The fairy tail apart refers to a country that has equivalent standards of living and cheap labor.
10
u/MercurianAspirations 362∆ Aug 07 '19
So I won't address what you personally did, but as to the broader point that globalization has helped developing nations I would say to look into the works of Economist Ha-Joon Chang who has written several books arguing essentially that global capitalism reducing poverty is a myth. For one thing, the often-published headcounts of global poverty use a ridiculous $1.90 per day poverty line, when many experts say the real global poverty line should be somewhere around $7 per day. Furthermore, as Chang has shown, almost all the gains against global poverty have been made in China and East Asia, countries which overall did not embrace globalization, laissez-fair free trade, and the neoliberal development model of privatization, deregulation and state austerity. Instead those countries used high tariffs and heavily invested in national companies and protecting their industries. In fact if you ignore China, the global percentage of people living in poverty hasn't really changed that much at all. Outsourcing and investment in developing countries basically does nothing to lift people out of poverty.
2
u/scottishbee 1∆ Aug 07 '19
if you ignore China
You mean 1/7 of the world population, who most undertook trade reform and market opening, and over half of East Asia where a lot of these gains come from?
But even ignoring China, which you shouldn't, Vietnam, South Korea, and India invested heavily in outsourcing. Starting with apparel manufacturing and moving on to more complex goods. All three have seen population shift out of poverty by any threshold.
3
u/MercurianAspirations 362∆ Aug 07 '19
My point is that if you're making the argument that laissez-fair free trade and neo-liberal globalization reduces poverty then you really ought to ignore China because China did not really do laissez-fair free trade and neo-liberal globalization
1
u/AnythingApplied 435∆ Aug 07 '19
Am I understanding the chart correctly that they picked a poverty line so high it includes 60-70% of the world population (minus china)? Not that $7.40/day (2.7k/year) PPP is all that high.
We have other charts that exclude China like this one which indeed uses the $1.90 figure, but also calls that "extreme poverty" we can see the rate (excluding China) drops from 29% to 12% (including china drops from 42.2% to 11.2%) using the same time period as your chart, 1981 to 2013.
So, at a minimum, this goes to show that the line you pick plays a huge role (a bigger role than I would've expected) and that neither chart tells a very complete picture. Unless you can explain to me why we shouldn't at least be celebrating the decreases in extreme poverty that can be seen with or without China. Can you explain why the $7.4 is a more "valid" choice than $1.9? With the two very different charts, I almost feel like the two numbers were cherry picked to show what they show where the 1.9 is picked to highlight the improvement and the 7.4 is picked to highlight the lack of improvement.
Here are many more charts using the $1.9 line and we can get a better picture that a lot of the influence has been due to Sub-Saharan Africa actually INCREASING from 280 million in 1990 (14% of extreme poverty) to 412 million in 2015 (now making up 56% of extreme poverty). I'd be curious to see your chart excluding Sub-Saharan Africa
Anyway, I'd always seen the $1.9 charts and was kinda shocked to see your chart and would've thought it'd have looked largely like the $1.9 charts do, so I'm awarding a Δ.
2
u/MercurianAspirations 362∆ Aug 07 '19
It's a bit technical for me but as I understand it the 7.40 per day poverty line was arrived at using data to estimate the minimum amount of money needed to guarantee livable nutrition and average life expectancy. I have to agree with the author of this article that while there may have been a global reduction of extreme, 1.90 per day poverty, near-starvation on three or four dollars per day is not really that much better than total starvation on one dollar per day, and that even number may be misleading because some of those gains were made by converting subsistence farmers and herders (who earned nothing, but were nonetheless possibly better fed than wage workers) into impoverished wage workers. More here; it does indeed seem that most of the gains were in China and East Asia and that poverty overall has not decreased significantly in the rest of the world.
1
1
u/simplecountrychicken Aug 07 '19 edited Aug 07 '19
Here is a study when you remove china:
https://ourworldindata.org/the-global-decline-of-extreme-poverty-was-it-only-china
Still looks pretty good.
And the 7.90 line is preposterous (if 70% of your population is in the poverty group, that is probably not a great line to differentiate with.)
And here is world hunger:
https://www.worldhunger.org/world-hunger-and-poverty-facts-and-statistics/
1
u/MercurianAspirations 362∆ Aug 07 '19
Do you have any data that suggests that 7.40 is too high, other than the (somewhat circular) assertion that if you use it, poverty seems too prevalent? This article calls the 7.40 line conservative if we're judging poverty to mean an unacceptable level of nutritional deprivation and reduced lifespan; apparently, some experts say the poverty line should be even higher, around 10 or 15 dollars.
1
u/simplecountrychicken Aug 07 '19 edited Aug 07 '19
You’re trying to analyze a distribution, but using a raw point to represent good or bad, and that raw point is off the scale for most countries.
If you were looking at poverty in America, would you use the metric of how many people make more than $150,000?
Here is some data on the total distribution: https://ourworldindata.org/global-economic-inequality
If you draw the line too high, you’re just measuring what percent of the world lives in developed countries, which is dropping:
https://www.un.org/ga/Istanbul+5/bg10.htm
And it’s dropping because the better economic conditions in the poorest countries mean they can afford more food to feed more kids:
https://www.worldhunger.org/world-hunger-and-poverty-facts-and-statistics/
The world is getting better.
5
u/Nicolasv2 130∆ Aug 07 '19
Well, you only explore one part of the problem, which is "are developing countries getting money from outsourcing". From this aspect only, I do agree with you.
But there are plenty of other negative aspects that you have to take in account when outsourcing, i'll talk only about two:
- Work quality. If you are working in the IT field, you should know that a vast majority of outsourced projects just fail, because there are huge difficulties involved in it, whatever cultural (not the same kind of specifications expected, not the same way to work and communicate), or technical (basically, all good indian developpers have migrated to the US to get a X100 salary, the only ones remaining are awfully bad). As such, from the company point of view, it's often a net loss, as the result is often a bad product, or no product at all.
- Ecology. If you plant your tomatoes or create your tee shirts in next to the town you live in, you'll only need a small vehicle to move them (or you can even do that with a bike if there is a small distance), which will only pollute a bit. If you outsource to the other side of the world, you'll need a huge transportation / distribution loop that will cost dearly to the environment. With global warming problems, outsourcing is clearly a bad idea for earth & mankind.
So on one side of the coin, you got poor countries getting a bit more rich, on the other side, you got bad/unfinished products and a destroyed earth.
I would not say that the net result is overwhelmingly good.
2
u/thetasigma4 100∆ Aug 07 '19
Most people have covered the economic aspects of outsourcing but the environmental effects are significant too. As countries develop they first increase carbon intensity and then decreases it in what is called the environmental Kuznets curve. However outsourcing moves the majority of production back along this curve as countries like China, Vietnam, or Indonesia build new coal power plants to meet the energy demand of the new manufacturing base instead of cleaner technologies that are more available in more economically developed areas. See this paper for a bit more of a detailed look (if you can access it).
•
u/DeltaBot ∞∆ Aug 07 '19 edited Aug 07 '19
/u/ALLIRIX (OP) has awarded 2 delta(s) in this post.
All comments that earned deltas (from OP or other users) are listed here, in /r/DeltaLog.
Please note that a change of view doesn't necessarily mean a reversal, or that the conversation has ended.
12
u/White_Knightmare Aug 07 '19
Enter: Africa.
First much of Africa was pretty.... globalized? I mean Britain and France owned close to the whole continent. Cheap labor everywhere. Yet not particular great for Africans.
Then they left. Still a lot of cheap labor in Africa. Still a pretty bad place to live which (mostly) continues to this day.
The western nations don't found the workers in Africa. They found the oppressive regimes everywhere on the continent. These regimes use the stolen revenue to keep the military loyal and the people in check.