8 February 2011

How can offshoring impact poverty?Hoe kan offshoring impact hebben op armoede?Hur kan offshoring påverka fattigdom? Wie kann Offshoring Armut verringern?

About Hugo Messer

Hugo Messer is a Dutch entrepreneur, distributed agile team specialist, and author. He is the founder and owner of Bridge Global, a software services provider, and ekipa.co., an agile coaching agency. He has been building and managing teams around the world for the past several years. His passion is to enable people that are spread across cultures, geography and time zones to cooperate. Whether it’s offshoring or nearshoring, he knows what it takes to make global cooperation work.

12 thoughts on “How can offshoring impact poverty?Hoe kan offshoring impact hebben op armoede?Hur kan offshoring påverka fattigdom? Wie kann Offshoring Armut verringern?
  1. This is a great article, and creative capitalism is definitely beneficial to society at whole. Bridge is a good example.of a company engaged capitalist business undertakings while serving society locally. Thanks

  2. A very thought-provoking question…..

    The increase of economic activity in any place will be felt by everyone, without a doubt. But the ethics of a society, especially those ideas which relate to poverty, will inevitably impact the process of a society being lifted up from poverty.

    The assumptions differ from east to west – for example, India’s economy is growing rapidly and some would say a revolution is afoot in that country. I would agree.

    Depite this revolution, there are too many people still feeling little of the uplift of this growth. Hunger and malnutrition, lack of access to clean water, and not even a basic education still elude too many in India.

    I would offer that the global sourcing only has a positive impact on a society being able to supply the basic needs of its citizenry, but the acceptance of low standards may impede the breadth of impact.

  3. Creative Capitalism is an interesting concept you mention as having been proposed by Bill Gates and suggesting profit and / or recognition as incentives for companies

    Profit and recognition are both drivers for people to achieve and for companies to perform effectively – perahps Bill chose profit first then when very rich became philanthropic

    Wthout profit companies cannot survive but of course people seek recognition also, particularly when they realise money does not bring everything they thought it would

    Offshoring can impact poverty by providing work to poor areas although it can also exploit them too

    The real impact upon poverty will be decided by the real reasons behind the offshoring, how the offshoring is managed and how any increased profit generated from the offshoring is (or not as the case may be) used to reduce poverty in the offshore area concerned

    Offshoring also has to to be balanced against the potential poverty it may cause in the area from which work has been transferred due to any loss of income / jobs

  4. Hugo, this is an interesting question and blog post. It triggered another thought in my mind, which is “does offshoring encourage enterpreneurism?” I’m thinking along the lines of the micro-lending that Muhammad Yunis is famous for. If offshoring encourages startup ventures in developing economies wherein new companies are created with local ownership (as opposed to just creating a “branch office” of a big multi-national), then I do think offshoring can be a positive force for creative capitalism. This mode of ownership is less likely to be exploitative, or at least, more aligned with the local cultural values and whatever beneficial traits capitalism has in that local context.

  5. I like the question since I was watching the interview on this topic with Bill Gates posted on Youtube.
    The theory is great. I like it; however such idea always comes up when the guy over-exploited the world with its products and services with its monopole situation. It is never too late to change any model for a better one.
    In my view offshoring in poor areas does not really solve the poverty, since in majority of the cases we are talking about exploitation and not real investments, with real added values. I have not seen one single country in the world where foreign investments did not took advantage BY FAR and BY ALL means of the advantages of that country (maybe there are a very few exceptions). The best example is China and India, but I could give you several examples from Eastern Europe also. For these countries took almost 20 years to ONLY partially overcome this problem; and will take them another couple of decades.
    There is a theory model called “bubble-gum” theory which was used by someone from US to demonstrate immigration policy since 1920. I guess this model applies also here with some modifications. You should look at it and you will understand that if applied the entire model should be changed from the bones.
    The actual working model was very well created and will be valid for many years to come, since again, charity/supporting/offshoring left and right, those countries/regions are changed/modified/raised from poverty when driving forces (the ones exercising offshoring) wants it. Not sooner and not later. It is sad but this is reality in my view.
    It is a slow process and no one ‘real interest to change it fast since could cause severe problems in the base/home/onshore economies and/or companies.
    Best regards,

  6. I like that a book could be published on a speech that was probably written by a low level staffer and then spewed out by one of the richest men men in the world to a room full of the world’s richest men…
    How can off-shoring impact poverty?

    The model is simple…if you never had a job and live in a slum and then one day Microsoft builds a call center in your living room, they put you to work and pay you a salary. Right there you have had an impact on poverty.
    Just by relocating the slums a few miles down wind of the trash facility is an ‘impact’.
    So, you give this cat a job and pay him. Next, he wants to have a new place to live. This time, a door would be nice and a refrigerator and perhaps some food to put in it…right there, impact again and yet, now he requires more income to pay for the cable television and putting food in the fridge.

    These are all impacts on poverty…that is the ‘off shore’ model.
    The domestic model is that you take a worker with a job and home and a family and a car and you take his job and put it in the slums of suburban China. Now this person in the US is poor, on government assistance and their children are either going with out food and medical care or just barely getting by.

    That, is how off shoring impacts poverty…What the speech and the book negated was that is does not positively impact all lives…

  7. Offshoring often serves to impoverish the working class of the country doing the outsourcing. At the same time, it does not necessarily bring prosperity to the people taking these jobs. Especially in the cases of corrupt governments and businesses, the leadership gets rich while the people are given just enough to survive and keep providing labor. I am a big believer in boosting local economies. Microloans are a great way to do this and have had great success. In the USA, it would be a great boost to the economy if the banks we bailed out in the last few years, actually made the kind of small loans to American small business that are so badly needed.

  8. I am familiar with what outsourcing has done in India. While everyone speaks about the (relatively) few directly employed by the outsourcing companies, who directly enjoy the proceeds of outsourcing, there is a lot of impact downstream, so to speak – both good & bad. My theory is that every directly outsourced IT job in India supports at least 3-4 downstream jobs (I am sure there is a scientific study out there someplace on the subject).

    On one of my visits to India, I was driven from the Bombay airport to Pune by a young man. As I spoke to him I realized that if it had not been for this job he had, he would have been a criminal. The simple (and not very well-paying) job of driving functionaries like me around kept him off the streets and probably kept him alive. There are any such stories.

    Another point to consider – the recipient of the outsourced jobs is in itself a market – however, it is market that needs to be addressed on its terms. That is the impact that needs to be derived, and something at is often times missed.

  9. Let’s keep this simple. How could the creation of new jobs in an impoverished area NOT have a positive effect on the local economy? Even if these jobs don’t pay much more than the few jobs that are available in the area, you have increased the net amount of money flowing into that local economy. How can that be bad for the locals?

    I agree that the concept of micro-finance is a powerful one, and suggest that anyone who is interested in micro-loans and the eradication of poverty read “The Fortune at the Bottom of the Pyramid” by C.K. Prahalad. The combination of new jobs (created by any industry- it doesn’t necessarily have to be off- shoring) and micro-financing coupled with recent technological advances such as inexpensive prepaid cell phones and Internet cafés have the potential to eliminate poverty in many areas of the Third World.

    Also, check out Kiva if you are interested in micro-finance. There is a group here in LinkedIn dedicated to Kiva,and there is no easier way to help out. Note: There is some criticism of Kiva because of the allegedly high interest rates they charge (sometimes as high as 20%) but Kiva’s expenses are understandably high, and we must realize that local moneylenders charge up to 400% to make the same loans.

  10. Hugo – I like this issue

    in our small business, we have started an experiment where we combine business development (within specific segments), networking and charity. Although we have only started in May 2010 the results are encouraging and I would venture to say that with little effort it is possible to make quite an impact, everybody involved seems very enthusiastic – with this I wanted to share with you that we can all give our own company and activity a “charity edge” and challenge ourselves how we look at our products and services – don’t forget to have fun as you go along !

  11. Isn’t foreign direct investment the holy grail of development? When rich companies inject millions or billions of $$$ into developing economies it’s going to help the poor. Of course there are a lot of variables as to how much actually trickles down to poor people.

    I know Bill Gates is very generous but the term ‘creative capitalism’ seems a little disengenuous. I think companies move operations to countries where costs are lower. Lower costs are typically present in countries with lots of poor people. So maybe companies can believe they are generating good karma through their foreign direct investment and offshoring activities, that might be true, but their primary intent is to increase profits. It’s just convenient for them that increasing profit can coincide with reducing poverty.

    I don’t believe it’s right to frame this problem in terms of “products and services for rich people” versus “incentives to serve poor people.” Developing economies are growing at around double the rate of developed economies. That means that the buying power of billions of people is increasing. That’s a huge opportunity for investment in products and services for those markets. It also has the ancillary benefit of reducing poverty.

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