Outsourcing: The Candidates Take Sides—or Do They?

By Chris Nolan  |  Posted 2004-08-12

Outsourcing: The Candidates Take Sides—or Do They?

How tough is the outsourcing issue for Democratic presidential nominee John Kerry?

Tough. So tough that Democrats wont talk about it. Calls to the campaign press folks in Washington, D.C., werent returned, and a request to talk to Silicon Valley executives who just endorsed Kerrys candidacy was declined.

Its not that surprising. Earlier in the campaign, Kerry called executives who hired overseas "Benedict Arnolds." Arnold, for you math majors, was the first American traitor. Born in Connecticut, he ended his life in London.

In his speech accepting his partys nomination, Kerry was a lot less specific on the whole issue. Caught between economic and political realities, Kerry picked his way carefully, saying he wanted to create "new incentives to revitalize manufacturing" and would invest in tech to create new, high-paying jobs. A third leg of Kerrys economic plan would close "the tax loopholes that reward companies for shipping our jobs overseas."

Theres not much new there. But here is something different. And it sounds very much like the ideas put together by the partys biggest supporters, the unions, who provide money and armies of campaign volunteers. "We will reward companies that create and keep good-paying jobs where they belong—in the good old U.S.A.," Kerry said. "We value an America that exports products, not jobs—and we believe American workers should never have to subsidize the loss of their own job."

Kerry, of course, didnt use the word "outsourcing," but thats exactly what hes talking about. And it could be trouble with tech in particular, where sending jobs overseas is old hat. "The tech industry has always tried to be global, said venture capitalist Floyd Kvamme, a staunch supporter of President George Bush. When Kvamme helped start National Semiconductor "back in the 60s," tech was an international business. "The first thing we did was go to Europe. The second thing we did was go to Japan," he said. "Once you are a global company, you have to be a global competitor."

By that reasoning Republicans like Kvamme think its counterproductive, if not impossible, to force jobs to stay in the United States. By his figures, some 22 million manufacturing jobs have "left the planet," evaporated by all sort of efficiencies in the way products are made. "Im pretty sure they didnt go to the moon, he joked.

Next Page: Living with outsourcing.

Page 2

A recent study by the Bay Area Economic Forum and Joint Venture Silicon Valley, both business-oriented think tanks, says as much. The study, "The Future of Bay Area Jobs: The Impact of Offshoring and Key Trends," concentrates on San Francisco and Silicon Valley, home of a large concentration of U.S. tech jobs, but its findings arent parochial. "Outsourcing is a reflection of a number of business trends and trends in the global economy that are here to stay," said Sean Randolph, the Economic Forums CEO. "We basically need to live with it and make the right policy choices."

The trends outlined by the Economic Forums report include things well beyond the control of any politician: the economic maturity of countries like India and China, once called "developing," and their willingness to compete; a cheap and reliable international telecommunications system; and American companies (like National Semis) willingness to segment their production and other processes and farm them out to other organizations.

What are the solutions? Concentrating on what works, on whats been successful, says the Economic Forums Randolph, not on penalizing companies that feel they have to move jobs abroad. He offers a list of suggestions that could fit into either partys agenda. They include the following:

  • Fund and encourage research, particularly high-end, high-concept innovation with state and federal support;
  • Help small business. Companies with less than 500 employees are the biggest job creators, but they need help not just with tax or other financial incentives but with soft supports like affordable housing, good public schools or workable mass transit; and
  • Help develop and create not just new companies but new industries, which often start small—from one well-educated persons good idea—and grow quickly. "Its the small businesses where most of the new ideas are going to come from Randolph said.

    "All the jobs arent going to go away, Randolph said, noting that creative stuff—research between disciplines, for instance—remains strong in the United States and continues to be a source of well-paying jobs. "This stuff will find a balance at some point."

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