The decision of the Ohio state government to restrict outsourcing for government contracts has created a furore among IT and other business groups. Barack Obama is also bashing the outsourcing industry — and Indian companies.
But is all this new? In 2003, New Jersey went down the same populist road. Here’s a report from that time: “The Scottsdale, Arizona-based eFunds, a firm that processes electronic fundtransfers for some 200,000 New Jersey welfare recipients, will end its Mumbai operations shortly and open a customer service centre in the same state. The new call centre, to be opened in Camden City, New Jersey, will cost $340,000 a month, about 20% more than the $270,000 it cost to run it out of India. The extra cost will be underwritten by the state government…”.
“This is a victory for New Jersey and its taxpayers. We have 6% unemployment and it is important to show our people that the government is sensitive to their job search,” said Shirley Turner, a state senator who moved a bill to limit outsourcing.
That bill was passed in the senate by a 40-0 vote in December 2002, with an amendment removing the possibility of even legal aliens in the US being employed for servicing the contract. It provided that only citizens of the US “shall be employed.” Asked how she would justify the higher costs of functioning out of the US and criticism from free traders, she said the government had to respond to a “higher calling”.
‘Higher calling’ is a very interesting expression to use in global trade and commerce. Imagine any Indian politician talking about a ‘higher calling’! With the unemployment rate touching 15% among young and poor groups in many states and elections looming in November, one can expect many such ‘higher callings’. Fortress USA is going to emulate Fortress Europe.
But first it needs acknowledging that outsourcing is a favour done by Indians to the US. Using low-cost Indian firms helps US companies stay afloat in a recession when it may take at least 40 quarters (10 years) for the US economy to recover. With a national debt of more than $13 trillion (it is going to top the GDP soon), America is becoming a banana republic. Not only that, the budget deficit is skyrocketing and is more than 10% of the GDP — and rising.
Most state governments are broke and they are producing spurious, Satyam/Enron-type accounting tricks to stay afloat. Many state universities are in dire financial straits. There will be furious printing of more currency to make ends meet. The expected inflation is going to rip society apart. One of the largest-selling items last year was handguns.
The US is a confused empire on the decline. It is not just facing an economic crisis, but also a social one. Its family system is collapsing, with married and continually married persons becoming a minority. Unfortunately, US society has not created an alternative to the family as a unit of human endeavour.
Dysfunctional families are increasing and giving rise to a dysfunctional society with some schools feeling the need to install metal detectors for gun screening. Individuals are to be cared for by the state, not by their spouses or children or grandchildren. The family is broke, and so is the state.
In the next 20 years, India and China will have a respectable share of global GDP — nearly 40% — as was the case in the early 19th century. The US’s real problem is that it is still to come to terms with this reality. Obama is long on rhetoric and short on substance — not unlike our own politicians — and the US is now more divided than before.
US society unites only when it has a permanent enemy. During the cold war, the USSR served that purpose. Now, it is radical Islam. But Obama is confused even here. He has tried flattery (in his Cairo speech, he attributed many scientific achievements to Islamic civilisation), but it hasn’t worked.
He has tried bribery and bullying (pandering to the Pakistani Army and the ISI is a case in point), but nothing is going to hide the fact of the US power being on the wane in many parts of the world.
Since nothing works, Obama is trying the last option: arm-twist potential friends to buy peace with its real enemies. If the ISI needs to be appeased with a piece of J&K, then the US will try to arm-twist India.
Here’s my prediction: When Obama visits India in November, the level of violence in J&K will increase to convince him that Kashmir is the problem. Someone in the foreign office should plot the correlation between visits of US officials and mob frenzy in downtown Srinagar.
In the last century, a declining British empire created havoc by partitioning India. With friends like these, India will have to play its cards carefully. We must use the clout of our huge market to invite those in who will subserve our national interests. US bullying needs to be ignored with the contempt it deserves.