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Outsourcing, and the US elections

Call centres can become a poll issue with the launch of a portal to persuade CNN anchorman Lou Dobbs to run for the White House. Pramit Pal Chaudhuri tells us.

world Updated: Jan 20, 2008 21:12 IST
Pramit Pal Chaudhuri
Pramit Pal Chaudhuri
Hindustan Times

The launch of a website to persuade CNN anchorman and anti-outsourcing critic Lou Dobbs to run for the White House could make call centres an election issue. The surprise, if anything, is how little a ripple outsourcing has made despite nearly a year of pre-election campaigning.

It has not been from lack of trying. Economic populism has been a strong theme among all the Democratic hopefuls and even among some Republicans. The main reason it has not taken off yet is simply that outsourcing has not affected too many people. Jason Kierkegaard of the Peterson Institute for International Economics says that when it comes to "major firing rounds" in which more than 50 people lose their jobs and a plant is shut down, only four to five per cent are because of outsourcing. "This is a trivial number in the grand economic sense."

This is particularly true for the software sector where unemployment rates have fallen to two or three per cent — in economic terms, that means full employment. "The India surprise has submerged. In 2004 it was possible to whip up a frenzy about 'everything IT is going to India.' Not so anymore."

The candidates have been both feral and cerebral when it comes to outsourcing.

Democratic Senator Barack Obama is probably the best example of this strategy. After the Virginia Tech massacre in April 2007, Obama compared the student killings to "the violence of men and women who have worked all their lives and suddenly have the rug pulled out under them because their job is moved to another country." Yet he also speaks of the need to improve educational standards to make American workers more competitive, and overhaul immigration to make it easier for H-1B visa holders to stay on in the US.

Obama, Hillary Clinton and John Edwards — the leading Democratic candidates — all regularly say outsourcing is an important issue and talk of closing a "tax break" for outsourcing. A US company that does not repatriate overseas earnings but reinvests them does not pay US corporate tax.

However, they generally argue for structural changes in education and healthcare that are key reasons for the high cost of US labour. Republicans like Mitt Romney have expressed concern about outsourcing but treat it as a competition issue.

A leaked Obama campaign memo highlighted a strategy of using Clinton's investments in outsourcing firms and her on-and-off support for call centres to undermine her working class support. Notably the memo was entitled "personal financial and political ties to India". The implication being that Clinton's Indian links could be used to smear her as a supporter of outsourcing.

While outsourcing has not yet achieved the same level of attention it did in the last election, the US stutter in the economy worries political observers. "At this point, outsourcing per se doesn't seem likely to be a big campaign issue," says Ashley Wills of lobbyists WilmerHale. "It will become a big deal only if we head into recession with much higher unemployment."