Wednesday, April 13, 2005

fyi Gorbachev: IT could learn from Pope John Paul II


Pointer to article:,10801,101029,00.html?source=NLT_PM&nid=101029

Kobielus kommentary:
This is one of those peculiar stories where the former head of an aggressively atheist state cites the late head of a theist state and religious institution. And reveals his lack of understanding for development economics. I doubt that the recently departed pope understood these things any better.

Fundamentally, the last premier of the Soviet Union is calling for more offshore outsourcing of IT jobs to the developing world. In other words, he’s recommending (superfluously) the continuance of a strong trend that’s well underway. Citing the late pope, Gorbachev implies that this strategy is an act of charity, or should be regarded as such, and should be encouraged on those grounds. Somehow, oddly, communism and catholicism share a belief in the primacy of institutional charity over free-market commerce. As if the former were inherently more virtuous than the latter, or more fruitful materially and spiritually, or more blessed in the eyes of God or Marx.

I think that’s a well-meaning but wrongheaded way to look at the situation. I’m no fan of Ayn Rand, but I believe that self-interest in a competitive market culture is healthy for the society as a whole, and for individuals’ growth and self-realization. Yeah, I’m a secular humanist. Offshore outsourcing should be pursued selectively, only for those functions (call center, development, design, manufacturing, etc.) where it makes sense, in terms of cutting costs, improving quality, accelerating delivery, and so forth, without compromising quality or service. To the extent that offshore outsourcing doesn’t advance those business objectives, it shouldn’t be pursued. Sure, companies shouldn’t be discouraged from the occasional charitable donation, and there are certainly important niches for non-profit orgs, but the mainstream economy must depend on profit-maximizing enterprises. Besides, developing nations wouldn’t benefit, in the long run, from ill-considered outsourcing moves, such as those that jeopardize the outsourcer’s solvency and/or competitive posture.

Offshore outsourcing is capitalism, not charity. Gorbachev implies that offshore outsourcing should be pursued even if it doesn’t contribute to profit maximization. That’s a self-defeating approach to economic development. Charitable acts are sometimes critically necessary as one-off or situational responses to need, or when the recipient needs ongoing support without any hope or expectation of their being able to repay the gift. Charity’s a one-way street: it doesn’t normally empower the recipient to eliminate their need for future charity. By contrast, investment acts aim at fostering long-term economic development, wealth formation, and greater independence at the recipient’s end. Investment’s the “gift” that keeps on giving.

Contrary to Gorbachev’s claim, the US-based and other companies that engaging in offshore outsourcing don’t generally worry about cultivating potential competitors (though it can certainly have that long-term effect). An outsourcer primarily focuses on the tactical necessity to farm out some function to a low-cost location. It’s only the misguided nationalists—the politicians, not the business people—who beat a jingoistic xenophobic drum over such things. As if nations were economic fortresses and not simply economic amoebas with shifting shapes and porous membranes.

Gorbachev complains that “the U.S. must allow Russia and its companies to have equal footing. Russia will not accept a position of junior partner." My response to him would be that it’s not a matter of the US or any other country “allowing” Russia and its companies that “footing.” It’s a matter of Russian companies seizing that footing by competing aggressively. Just the same way companies from Japan, Korea, India, China, and other countries have done and will continue to do. If you want our investments to bootstrap yourselves to that level, then provide a conducive investment environment. If you want to fund your own economic development, then create the appropriate entrepreneurial culture, legal system, fiscal incentives, and so forth.

There are certainly a lot of smart, well-educated, professional IT people in Russia, and in other developing nations. They shouldn’t simply depend on other countries’ IT companies to outsource this or that peripheral function. They should grow their own. And play on the world market, like everybody else. Same rules, same playing field, same risk/reward equation. No guarantees.