This time it's personal

When manufacturing job are lost abroad, we shrug; when it's service jobs, we flinch.

by Richard Reeves
Last Updated: 31 Aug 2010

Tom Wolfe, the greatest contemporary chronicler of status anxiety, captures in his latest novel, I am Charlotte Simmons, both edges of the globalisation sword. The CEO of a large finance company listens to the father of the eponymous heroine describe the effects of international competition: 'I keep hearing on the TV that this "globalization" is good for Americans ... All I know is, it ain't particularly good for you if you live in Alleghany County, North Carolina. We lost three factories to Mexico. Marietta came in and built a plant in 2002 ... That's Mexico, three, Alleghany County, one.'

Of course, it was ever thus. The textile workers of England long ago lost the fight against overseas competition. Globalisation, under its previous, less glamorous, title 'international trade', is as old as humanity.

And concerns about a foreign 'them' taking 'our' jobs can be traced back to at least the 17th century. But there are moments when a particular result of the merciless logic of the international division of labour sparks a sudden flaring up of anger.

International outsourcing - quickly dubbed 'offshoring' - is the current firestarter. The press is full of it, the unions are sick of it, and conference after conference debates the pros and cons of the movement. There are serious discussions about whether a firm can offshore jobs and still be 'corporately responsible'. But it is only certain kinds of offshoring that strike a nerve. Few bat an eyelid when manufacturing is moved abroad: James Dyson's reputation easily survived moving his production to the Far East. It is the moving of services, and in particular call centres, to other nations that has caused an outcry.

Why all the fuss? On the face of it, the reaction is an irrational one.

What's the difference between call centres and vacuum cleaners? There are perhaps three reasons for the response. First, call centres are concentrated in the less affluent north of the UK, and so the job losses are felt more keenly. Second, the period of time between call centres emerging as major job creators and being lost to overseas competition has been short - a decade at most - which just doesn't feel fair.

But the most profound difference between the offshoring of call centres is that, by definition, continual interaction will take place between the consumers of the 'losing' nation and the new employees of the 'winner'.

The person ringing their bank to transfer some of their redundancy package will talk to a call centre operator in India. There is no comparison with goods such as TVs or T-shirts. I don't talk to the person who made them. But in human services such as call centres, the fact of globalisation is laid bare in an entirely unprecedented way.

It is this humanisation of globalisation that accounts for the racist abuse that many Indian call-centre operators report. Suddenly, the 'they' who took 'our' jobs are on the phone, chatting to you - and it is more than some people who think nothing of buying a JVC stereo can take.

From the perspective of a policy maker, or CEO, the benefits of international trade - of which offshoring of call centres is but a fragment - are obvious.

The UK exports £15 billion more of services than it imports - and exports a total of £2.5 billion to India alone. As consumers, we all want cheaper, better goods and services - and must therefore be willing to pay the price if other nations can meet this demand.

And the idea that firms that offshore call-centre operations are in some way being irresponsible is at best woolly proselytising and at worst veiled racism. What is the difference between moving an activity from Brighton to Bolton and moving one from Bolton to Bangalore? In both cases, jobs are lost and gained. In both cases, there are 'winners' and 'losers'. But while the first is applauded not only as a sound business decision but as bringing much-needed jobs and wealth to a poorer part of the nation, the latter is seen as an unacceptable facet of capitalism.

Although some unions, such as Connect, are level-headed about these matters, others seem to be living in a parallel universe. Amicus, protesting against offshoring plans at Friends Provident, demanded: 'We would like to know how Friends Provident intends to prove that offshoring is a decision necessary to secure the company's future rather than just a way to cut costs and increase shareholder profits.'

How does Amicus think the future of a company is secured, if not by attempting to maintain a gap between costs and income and thereby increasing profits and returns to shareholders (who provide the capital needed to invest for the future)? This is a classic case of economic Nimbyism.

We're all in favour of the global economy - just so long as it doesn't come to our town.

Of course, none of the macro-economic arguments cuts much ice with the people thrown out of work. They never have, and never could have. While the benefits of globalisation are diffuse and largely invisible, the costs are immediate and personal. Globalisation is an example of what Schumpeter called capitalism's power of 'creative destruction'. To those who are at any point in time dislocated by the forces of competition, it just feels destructive: Mexico, three, Alleghany County, one. But for society as a whole, the gains of international trade far outweigh the losses.

The challenge is to make the losses bearable.

- Richard Reeves is director of Intelligence Agency, an ideas consultancy; e-mail: richard@intelligenceagency.co.uk.

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