Dr Jeff Cornwall

I got into an interesting discussion yesterday with a friend of mine about whether outsourcing and globalization were good or bad. He wasn’t sure which side of the political debate about this he stood on, but seemed to be sure that at some point he would need to pick a side. The truth is that this should not be viewed as a simple debate of the morality of outsourcing and globalization, as they are both morally neutral economic tools. The morality comes from how they are used and toward what ends.
For example, assume we are looking at a small manufacturing business that has been making a profit acceptable for the owner for several years. He has been proud of the jobs he provides and has been an active member of his community. The prospects look good for the future of his business. However, a consultant comes in and as part of his recommendations points out that if the entrepreneur were to outsource the manufacturing of his business to Mexico, he could easily triple his profitability. I would argue that in this case such an outsourcing decision, while within his rights in a free market, would be ethically questionable. He had defined his own success as much more than his profits, which met his personal goals, and outsourcing would ignore the employees and community who helped him reach his success in the first place.
Harbus Online (from the Harvard Business School) offers an example of and ethically good application of outsourcing. They tell the story of Digital Divide Data, which operates a digitization business in Cambodia.
“To outsourcing experts and globalization critics, DDD is simply one more company looking to take advantage of cost arbitrage between the world’s haves and have-nots. But…DDD represents a new breed of international social enterprise that melds the merits of the private sector with the morality of non-profits.”
What makes DDD different?
“‘Profits generated from data entry services are funneled into scholarships, healthcare and continued training,’ Tim notes. ‘The problem with most non-profit organizations is that they require annual grant funding. At DDD we aim for a double bottom line – the first is to be operationally self-sustainable, which funds the second, the direct, tangible improvement of disadvantaged people’s lives and the communities they live in.'”
To those who try to define outsourcing as being inherently evil, DDD would be just another company taking away jobs. How sad that a company that is pursuing good ends using good means would be cast within such a net.
Does this mean that we should pass legislation to define “good” or “bad” outsourcing as many are demanding these days. I would argue that we should not. However, does this mean that business should then blindly engage in outsourcing and globalization without considering the moral consequences? Of course not. In fact, if business behaves this way, with total disregard of the moral and ethical consequences of such decisions, they are just asking for government to eventually step in.
The choice is not simply one of free markets or government controls. There is a third dimension made up of moral and ethical criteria that should be shaped by our culture. Sadly, we seem to keep trying to insulate our culture from the moral virtues which should be at its core. In business, just as in government, we have moved to defining ethics in a purely legalistic manner. That is a sure ticket to more government involvement in the day-to-day aspects of our economic lives. The challenge is to integrate our shared moral traditions into our business decision making rather than simply default to government bureaucrats and lawyers.
Thanks to Paul Chenoweth for passing along the Harvard article.