The Other ( Dark ) side of the moon.

First of all , let me make it clear that I am no economist or management expert, just an ordinary ( but nonconformist )individual with an investigative bent of mind. And neither i am a doomsday prophet.
In the previous decade, the Indian economy has grown by leaps and bounds ,and India has emerged the second-fastest growing major economy of the world. India now has great economic clout . Most of this impressive progress has been due to the practice of OFFSHORING, defined simply as the practice of hiring an external organization to carry out some business-functions in a country other than the one where the goods and services are actually sold. It is an example of labour arbitrage, in which a company outsources work to low-wage countries to save manpower costs. The simple logic behind this practice is that a worker ( whether a call-center employee or a computer programmer ) in India takes only a fraction of the wages taken by a US worker for the same job, thereby saving the company great deal of costs and hence improving its competetiveness and enabling it to offer goods and services to customers at a much lower cost , than would have been otherwise possible.

I have observed that Indian media just reveals the benefits of offshoring, not its negative consequences . Common sense would reveal that there is a flaw in this practice: a flaw that might eventually undo the very reason why offshoring was adopted. If offshoring contributes to increasing job losses in the US, then the consumer spending in the US is bound to plummet, and the sales and therefore the profits of the companies are bound to suffer . ( and if this continues unabated, the loss in sales due to mass unemployment will might even neutralise the cost-saving on offshoring work overseas. ) Indeed, at the time of writing this article , the US was staring at what is called a " jobless recovery " with the GDP growing at 5.7 % but with double-digit unemployment.

A simple web-search on Google.com ( not on google.co.in ,the Indian version ) reveals that even today, there is no consensus among economic experts on the long-term sustainability of this practice. There are arguments both FOR ( in favor of ) and AGAINST this practice, and many experts seem to be unsure that whether , in the long run, which one of the set of arguments would win. The situation seems to me (after reading expert opinion on many American websites ) that even today , there is NO UNANIMITY or CONSENSUS among experts about the long-term consequences of this practice. Proponents of offshoring often cite a report by Mc Kinsey , released in 2003, which declares offshoring to be a " win-win situation " , which will bring benefits both to US as well as India, but disproportionately more to the US. But soon the accuracy of this report was challenged by another report released by Economic Policy Institute.

Even I myself found some of the arguments of offshoring's proponents to be flawed: one of them being that when low-skilled ( and low paying ) jobs are offshored, American companies would be able to create more higher-skilled jobs due to the more profit earned after offshoring. For anybody who has ever turned the pages of a psychology textbook, this seems to be a poor joke. Simply because most of the low-skilled workers would lack the intelligence (IQ ) to take up higher-skilled jobs . ( the correlation between IQ and work performance has been known since decades ) . This might leave the laid-off low-skilled workers unemployed for long periods.

I also was not convinced by the arguments of the proponents of offshoring that how offshoring would create more jobs in the US in the long-run. Today, a whole spectrum of jobs, from call-center to programming , to website designing to even reading X-ray reports and medical transcription are offshored . The proponents say that services like retail , restaurants, education , construction etc are ones which can never be offshored and expansion in these would compensate for the loss of jobs in call centers and IT. But I am not sure if I know anyone who considers the job of a restaurant waiter or cook as prestigious as that of a IT professional.

Once again, I would emphasize , that I am no expert, I have only read many articles on this issue, analysing them neutrally. And I have come to the conclusion that there is simply no consensus among economists about this practice, that offshoring has both its pros and its cons . (right now the pros outweigh the cons, but how long will this last ? ) As a psychology student, i have often wondered why the Indian media only reveals the positive aspect of offshoring, only the arguments in favour of offshoring , only the pros and not the cons ? Is this not an example of selective exposure ?

http://management.about.com/cs/generalmanagement/i/offshoring.htm-- read both the pages of this neutral , balanced debate.
http://www.answers.com/topic/offshoring : another balanced, neutral discussion.
http://hei.unige.ch/~baldwin/ComparativeAdvantageMyths/IsOffshoringWinWin_McKinsey.pdf
--the Mc Kinsey report often cited by offshoring proponents.
http://www.epi.org/publications/entry/bp155/-- Mc Kinsey report challenged for its alleged inaccuracy.
http://www.citizenstrade.org/orftc-release100308.phpnearly 1 in 5 Oregon jobs are offshorable . countless such articles can be found online.
http://www.citizenstrade.org/orftc-release100308.php-- the grim picture for MN.