Politics could be good some of the times.
The Politics Of Outsourcing
Lisa DiCarlo, 02.18.04, 2:15 PM ET
On the evening of Feb. 17, the two leading U.S. Democratic presidential nominees derided the loss of U.S. jobs to foreign countries. They claimed that, if elected, they would implement ambitious plans to keep jobs in the United States. On the morning of Feb. 18, Bank of America announced, in its latest outsourcing move, that it is establishing a subsidiary in Bangalore, India, and will hire 1,000 workers there.
The Bank of America (nyse: BAC - news - people ) news comes in the same week as Germany-based Siemens (nyse: SI - news - people ) said it would hire thousands of technical staff in China, India and Eastern Europe. It's unclear whether Siemens' move will affect its U.S. operations, but it's clear that job growth--particularly in the tech sector--is happening everywhere but the U.S. Joseph M. Tucci, chief executive of EMC (nyse: EMC - news - people ), recently said the data storage company would step up its hiring of technical staff in India.
You can't put the genie back in the bottle. The jobs that have been lost will not return and, in fact, more white-collar jobs will leave the U.S. as companies continue to cut costs to remain competitive.
Outsourcing has become one of the hot-button political issues of this presidential election season. It's not surprising that Democrats are blaming President George W. Bush for the loss of U.S. jobs and what has been--so far--a jobless economic recovery, with gross domestic product having grown much faster than the unemployment rate has dropped.
The Democratic front-runners, Sen. John Kerry from Massachusetts and Sen. John Edwards from North Carolina, each propose tax incentives for companies that keep jobs in the U.S. Kerry also proposes a permanent tax credit on research and development spending, as well as the elimination of capital gains taxes for investments in small companies that are held for a minimum of four years.
The latter initiatives are a nod to the notion that job growth can only be achieved through technological innovation. Indeed, captains of industry have coalesced behind this idea and may have a better shot at making sure the U.S. does not lose its status as the world's leading technical innovator.
In October, IBM (nyse: IBM - news - people ) Chief Executive Samuel J. Palmisano announced the National Innovation Initiative, co-chaired by the president of Georgia Technical Institute. The NII is an offshoot of the Council on Competitiveness, which was formed 20 years ago as the U.S. was losing market share to foreign competitors.
The Council, which is made up of CEOs, labor leaders and academics, benchmarks U.S. competitiveness and helps to shape policy debate. On its Web site, the group says "the threats to economic competitiveness that existed two decades ago have been overcome."
That may be true, but how concerned should we be that six of the top ten patent-award holders in 2003 are Japanese companies?
The NII will try to answer some of these questions. How can the government bridge the private and public sectors? How can innovation be financed? Should tax dollars be allocated for this purpose? What about private sector and venture capital investment? Are universities creating new disciplines, such as life sciences, energy and nanotechnology?
Next week, some working groups will meet in Atlanta to populate the committees that will study the issues. In October 2003, Palmisano said the group would report its findings within nine months, and within 15 months it will convene for a National Innovation Summit to present its policy recommendations and begin lobbying businesses, policy experts, universities, labor leaders and top researchers to adopt the recommendations.
IBM says it will put up $200 million to train 100,000 of its employees in high-skilled jobs that might otherwise go to workers outside the U.S. Back in October, Palmisano said he's concerned that other countries are "replicating the structural advantages that historically have made the U.S. the center of innovation."
It's an interesting paradox. On one hand, Palmisano says we shouldn't begrudge the advancements made by other countries; on the other hand, he is among those instilling a sense of urgency to increase the United States' technical lead.
Kerry's sound bite to stem the flow of jobs is to "outsource President Bush." Perhaps what should be outsourced is the politics over the issue. Would it be an issue if this were not an election year?
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