The Indian Economy Blog

April 24, 2006

No Bang, Not Even A Whimper…

The media “controversy” over offshore outsourcing subsides

Angry rants and dismal laments about offshore outsourcing are joining over-excited Internet revolution articles from 1999 in the dust-bin.

As we’d predicted.

Greg Mankiw , who’s experienced the outsourcing sturm und drang first-hand, points us to this David Leonhardt article in the New York Times:

A few years ago, stories about a scary new kind of outsourcing began making the rounds. Apparently, hospitals were starting to send their radiology work to India, where doctors who make far less than American radiologists do were reading X-rays, M.R.I.’s and CT scans.

It quickly became a signature example of how globalization was moving up the food chain, threatening not just factory and call center workers but the so-called knowledge workers who were supposed to be immune….

But up in Boston, Frank Levy, an economist at the Massachusetts Institute of Technology, realized that he still had not heard or read much about actual Indian radiologists. Like the once elusive Snuffleupagus of Sesame Street, they were much discussed but rarely seen. So Mr. Levy began looking. He teamed up with two other M.I.T. researchers, Ari Goelman and Kyoung-Hee Yu, and they dug into the global radiology business.

In the end, they were able to find exactly one company in India that was reading images from American patients. It employs three radiologists. There may be other such radiologists scattered around India, but Mr. Levy says, “I think 20 is an overestimate.”

As Mankiw says:

A good reminder that, in the public discourse, anecdotes can sometimes overtake the facts.

The Mankiw – Swagel essay is a great survey of offshore outsourcing, among the best we’ve seen. Far more robust than Blinder’s essay in Foreign Affairs, which seems a tad too casual and redolent of the Schumer-Roberts non-argument:

Economists who insist that “offshore outsourcing” is just a routine extension of international trade are overlooking how major a transformation it will likely bring — and how significant the consequences could be. The governments and societies of the developed world must start preparing, and fast.

Full Disclosure: I’m the CEO & founder of an outsourcing firm. IEB is an avocation — for me, and all my fellow contributors.

5 Comments »

  1. The usual ranters are busy talking about illegal immigration — this seems to be the fresh issue for election 2006.

    Comment by Walker — April 24, 2006 @ 9:41 pm

  2. Economics will win. As long as offshore is profitable, it will work. If offshore sucks, and the outsourced causes quality problems, back home the jobs will come.

    Comment by Sandy — September 18, 2006 @ 9:15 am

  3. Offshoring is an economic evolution, it cannot be curbed because curbing it will reduce enterprise profit and competitiveness in the global markets.

    Comment by Anil — January 5, 2007 @ 8:03 pm

  4. I agree with SANDY, back home the jobs will come.

    Comment by John Pitaloka — April 26, 2007 @ 4:10 pm

  5. Don’t even BOTHER linking to something on vdare.com — it’s guaranteed to be economic nonsense.

    Comment by Russell Nelson — October 22, 2007 @ 6:28 am

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