How Outsourcing Affects the Global Economy

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How Outsourcing Affects the Global Economy

How Outsourcing Affects the Global Economy

How Outsourcing Affects the Global EconomyOutsourcing is a subject that draws much attention and controversy whenever it’s discussed in a public arena; something that is unlikely to change, no matter how convincing the arguments are. This is often why outsourcing discussions occur behind closed doors and involve only high level business executives.

However, while the delicate nature of outsourcing will always provoke controversy and carry negative connotations, there are actually numerous benefits to the global economy. To analyze these more closely, it is a subject that is better addressed in terms of benefits to the local economy and the foreign economy - the former being the western economy who will outsource to the latter foreign economy.

The impact of outsourcing on the local economy

The immediate argument that springs to mind whenever outsourcing is mentioned is the inevitable loss of local jobs. And yes, while this is a concern, there are many tangible benefits that can realized by outsourcing to another country as well.

Outsourcing is usually considered in an attempt to reduce costs and make a business more efficient; thus, in turn, making it more competitive. Failure to do this may ultimately lead to the business becoming unprofitable and almost certainly cease trading. The impact that this scenario will have on the local economy is far more detrimental than a few jobs being lost to outsourcing. In fact, an exponentially greater amount of jobs will be lost if the company folds.

Furthermore, a more competitive local business will appeal far more to potential investors, whose investments will ultimately drive greater growth in the local economy as the business expands. These investors may even be foreign investors, so the benefits realized by outsourcing will have come full circle and further boosted the local economy.

Local businesses that don’t improve efficiency through outsourcing, or cease trading because they are no longer competitive have only one other option: consider operating abroad. Driving local businesses to foreign countries will damage the local economy as jobs are lost, skills will eventually fade and the local government is unable to recuperate anything through taxation.

The impact of outsourcing on the foreign economy

A lot of skeptics will cite that outsourcing to a foreign country and paying reduced wages is tantamount to exploitation. However, there is a definite failure to look at the situation in terms of the benefits that these modest wages bring to foreign workers and their respective economies

How Outsourcing Affects the Global Economy

Whilst these lower salaries may seem almost scandalous in the western world, the reality is that they are often life changing for the foreign workers receiving them. In fact, they can be the defining factor between a life of borderline poverty or one of relative prosperity.

Outsourcing also affords much growth in the foreign economy because of the influx of new money. Individuals who are working on an outsourced contract from another country inevitably have more money to spend. This means that they can buy products and services from other sectors in which they wouldn’t usually shop, ultimately giving them a boost.

Perhaps the biggest win-win aspect of growing foreign economies is that they develop into potential future business partners for western nations. Their stronger economic standpoint allows them to conduct business on an international level and purchase products and services from the very nations who outsourced to them in the first place. Again, this is an example of the benefits of outsourcing going full circle.

The outsourcing debate will undoubtedly continue and there will be those that argue for it and those that argue against it. But there is one last issue that possibly overshadows all the ones mentioned above and can be positively tackled with outsourcing and that is the growing gap between the world’s richest nations and the world’s poorest nations. This issue is one of the biggest challenges faced by the world today and building international peace, security and prosperity through globalization will allow for a better future all round.

Ike Stranathan

Ike Stranathan

Ike Stranathan founded STAFFVIRTUAL in 2009 after moving to the Philippines from California. Ike lives just a block from his offices in Makati, Philippines, and is passionate about helping companies achieve dynamic growth by outsourcing.

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Michael Anthony Ruiz 6:17 PM (3 hours ago) to me