by Jack Roviere

Created on: March 10, 2007   Last Updated: March 12, 2007

It seems intuitive that companies that offshore and outsource to other nations - as part of the move to "globalize," no less - only care about their bottom lines. They want to employ the cheapest workers possible, and they are willing to replace as many laborers from home with these alternatives.

In this case, it seems like everyone loses in globalization, except maybe the business. Under this raw scenario, the old workers lose because they lose their jobs, while the new workers are being exploited by the businesses.

Economics often views issues as national concerns. Even the debate concerning globalization has been misidentified as a national concern. It is true, as economist David Ricardo posited, that globalization helps to maximize the benefits of trading according to "comparative advantage," but this is not the only benefit. In this economic perspective, globalization actually improves each nation that engages in freer trade because it simply seeks to efficiently manage resources; that is comparative advantage. According to this concept, each nation has an endowment of the four factors land, labor, capital, and entrepreneurship, but because these resources are scarce, international policy should guide trade to best maximize these resources use.

To take theory and put it into real world application, the situation with China as a rising power perfectly exemplifies comparative advantage. China, with its one-billion-plus population, has a MASSIVE comparative advantage in labor-intensive industries. So, for nations that do not have comparative advantages in labor, it is cheaper to outsource labor-intensive manufacturing to China, and this is being done more and more each year with nearly every major nation.

So, who really benefits from globalization? The original scenario wasn't quite complete.

1) Consumers benefit from the lower prices available because of globalization.
2) Consumers benefit AGAIN from the diversity of products available to them because of the world market place.
3) Business benefit because of lower cost and lower profile for their businesses, as well as increased international leverage.
4) The workers who are outsourced to actually aren't being exploited...in most cases, outsourcing still brings a raise in quality to the new workers.

But what about old workers? It seems that, in both cases, they lose. It's very easy to say that, "Someone must lose in order to progress," but this doesn't directly hit the issue. The reason outsourcing and offshoring are so popular is because there is some inefficiency in resource allocation; the business realizes that its current employees are not adding enough value to sustain their wages.

It sounds cold, but consider that this is the same change that occurred in industrialization. As machinery advanced, workers lost jobs because they no longer added significant value over and above the machines. In both situations, workers were called improve and become more malleable in their skill sets. Globalization simply requires workers to improve their skills in such a way that they ensure their own job security. While jobs found to be routine can be outsourced, creative jobs, entrepreneurial job, specialized jobs...all of these cannot be outsourced. Globalization just emphasizes this importance to reach as high as possible and avoid being caught in the crowd.

Thanks to outsourcing, offshoring, and even the most unlikely of hosts - the Internet - more people are able to start their own companies without requiring enormous sums of capital. Globalization allows ANY creative citizen with an idea about how things should be to start a new organization to create a product that people won't believe they EVER lived without.

Learn more about this author, Jack Roviere.
Click here to send this author comments or questions.