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Patriotism and Globalization: How International Commerce Helps All Workers

Posted by Eric Taussig Oct 25, 2018 4:49:02 PM   Topics:

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Sophists around Washington are now seeking to revive historically discredited notions of economic nationalism. “We reject the ideology of globalism,” our president told the United Nations General Assembly last month, “and we embrace the doctrine of patriotism.”

Branding either globalization or patriotism as an ideology is intellectually problematic; posing them as antithetical forces is troubling. Such ideas are born from the faulty notion that wealth is a zero-sum game in which one country’s gain must come from another’s loss.

Nothing could be further from the truth.

It is key amidst the shrillness of our current national politics to remind ourselves of just how globalization benefits us all. When new groups of people are made more economically productive, their participation in the economy allows them to engage in the virtuous cycle of economic growth that is powered by the production and consumption of goods and services. This is true whether these new groups are comprised of disadvantaged people inside our own national boundaries or if they are comprised of people in distantly interconnected lands.

Photo of earth, set in space, covered in lines and dots to represent how the whole world is connected by technology.

The Effects of Globalization Are Overwhelmingly Positive

The fruits of globalization have been inadequately shared, to be sure, but that same globalization has been a smashing success in terms of overall wealth creation. There are few measures of human prosperity that have not improved in line with the creation of the global security and trading systems that followed WWII. My favorite way to visualize this is through the Max Roser charts that illustrate how education, extreme poverty, and health have all improved over the last decades for tremendous numbers of people around the world.

A close up of a map
Description generated with high confidenceWhile income disparity at home is now obfuscating the benefits, and while many wealthy Americans perceive a sense of loss as their wealth increases at a slower rate relative to the rest of the world, it is important to communicate how global integration broadly helps the United States.

Take, for example, the offshoring of administrative service jobs. These are the very jobs that Prialto focuses on outsourcing to our overseas workers. A McKinsey Global Institute study shows that this work not only benefits the country to which it is outsourced, but it also increases wealth back home. For every dollar offshored, according to the study, $1.45 is created (more on this below).[1]

This same study found that for every dollar spent offshore, offshore service providers buy an additional $0.05 of goods from the US economy. I see this in action every time I visit our offshore facilities and am asked to fill my suitcase with purchases from Oregon, to deliver to our offshore workers.

The BPO Industry Fights Poverty

With this in mind, we should celebrate the success that business process outsourcing (BPO) has had in elevating economies in Asia and Latin America. 

Since the BPO industry rose to prominence in the Philippines, for example, there has been as much as a 70 percent reduction in poverty, based on that country’s income standards. Data also shows that during the same period there has been as much as a 23.5 percent increase in the number of households belonging to the country’s middle-income bracket.

We see this first hand at Prialto’s growing service center in Manila: our workers who call themselves productivity assistants (PAs) support their families, send their kids to school, volunteer with local charities, and buy surplus goods like motorcycles, smart phones and craft coffee from local vendors.

There are three key ways that the BPO industry fights poverty:

  1. Generating jobs where there were few
  2. Providing living wages
  3. Catalyzing industrialization in developing economies

Generating Increasingly Meaningful Jobs Where There Were Few

According to the Philippine Department of Labor and Employment, BPO is the largest source of job growth in that country. As of 2018, the Philippines has 13 percent of the global BPO market, with over 1.2 million people currently working in the industry. That number is expected to rise to 1.8 million by 2022.

Prialto seeks to make these jobs more meaningful and empowering for workers than they might otherwise be at other firms. “Meaningful” means work in which they learn real, practical business skills. It also means an authentic environment in which we honor both the local culture and our individual workers. Our PAs use their real names—not fake American ones as they use at many large offshore call centers. It also means we shun the hyper-transactional work common at service centers that provide customer service for computer and credit card companies, and we embrace developing mutually beneficial relationships among professionals from distant lands.

Our PAs are educated on business networking using social media and know that they are free agents of their own work. Creating meaningful jobs also means that we are public and proud to let people know that our workers are both in the United States and offshore.

As in Asia, BPO jobs are also expanding rapidly in Central and South America. As of 2017, the average annual growth rate of the industry was 9.3 percent.

We are proud that Prialto is at least a modest part of this growth with our decade-old service center in Guatemala City.

 

Providing Living Wages

The average BPO job in the Philippines pays 1.5 to 2 times the minimum wage. Those earnings are transformative because they give people access to things such as:

  • Healthcare
  • Safer housing options
  • Consistently sufficient income to provide for families

These are springboard benefits. Once obtained, individuals enjoy the safety necessary to unleash their full creative energy. It’s estimated that the earnings of one BPO professional can keep a family of three to four out of poverty.

This would all be worth celebrating, even if one erroneously concludes that these benefits accrue only for the Philippines. As Alex Tabarock explained in a 2015 Atlantic article, “No defensible moral framework regards foreigners as less deserving of rights than people born in the right place at the right time.”

However, support for global services requires no sense of altruism among people in rich countries.

Nor, as the springboard benefits outlined above make clear, does it deserve any negative angst by those concerned about the welfare laborers in poor countries.

A sense of enlightened self-interest should compel support for offshore BPO among both those concerned most about offshore worker welfare and those concerned mainly about their own neighbors.

 

The Sublime Beauty of Comparative Advantage

Remember that $1.45 of new wealth that is created by the $1.00 of outsourced labor? Well, the United States enjoys $1.12 of that $1.45, an amazing economic return for a gigantic economy that typically grows between 2 to 4 percent and something around which a patriot can certainly celebrate.

Meanwhile, the country to which the labor is outsourced enjoys $0.33. That may seem like an unfairly small fraction of the overall $1.45, However, that $0.33 has a positively outsized effect: in the Philippines, for example, whose economy is a mere 1.6 percent the size of the United States, that $0.33 is a whopping 23 percent of the overall value being created. In other words, that $0.33 probably has a positive impact on the local Philippine economy that exceeds what $20 would do in the United States. And, when you consider that it unlocks the springboard benefits described above, the impact could be exponentially greater.

 

Catalyzing Industrialization

Some scholars believe mass outsourcing is a catalyst for industrialization in developing economies since it provides resources that are key for economic growth, including:

  • Job skills training
  • Capital for infrastructure
  • A bridge into the world economy
  • Opportunities for intelligent, skilled workers, especially as automation takes over the more basic tasks

In Kenya and other parts of Africa, some leaders see outsourcing as their countries’ tickets to becoming economically independent. As result, they have invested in bringing higher quality, more-widespread internet to their countries. In addition to making it easier for Western companies to set up service centers, the internet expansion has also bolstered their economies by helping local businesses grow more rapidly.

Likewise, BPO centers themselves have a positive impact on local economies. Since employees earn more than their countries’ typical wages, they are able to spend more on local goods and services. As local merchants become more profitable, the economy strengthens and becomes more robust.

 

Be Skeptical of Self-Anointed Patriots

Given that the globalization of services creates both greater domestic wealth in the United States and increased wealth and opportunity abroad, it is important to question those who seek to generate a fear of globalization at home. 

The answer is, of course, complicated and multifaceted. But part of the answer lies in the fact that incumbent wealth and power does not benefit from growth as much as it benefits those who have traditionally had little. Time and again, the newly wealthy and the emerging middle class have put pressure on governments to increase transparency and individual liberties. Old money and incumbent power find these changes challenging and often counter them by working to pit the less fortunate against each other to avoid having to make uncomfortable changes.

A nationalism that seeks to juxtapose itself against globalization is simply playing the time-honored trick of dividing less fortunate populations by national lines instead of by economic classes within national boundaries. Policy makers who understand all this simply need to better champion a fairer distribution of the new wealth so that the spoilers don’t use trickery to blind voters from the overall wealth creation.

If being patriotic means championing new wealth and opportunity within our own country, then globalists in the United States must be some of our most patriotic citizens. Those who spread the misguided fears of globalization, on the other hand, should be seen for what they are: tricksters working to aggrandize their own political power at the expense of the very people they claim to support. And if championing opportunity for workers in poor countries means helping such workers to earn the wealth they need to self-advocate, then globalists are also their greatest champions.

In brief, there is no conflict between globalization and patriotism. Nor is their any inherent friction between domestic and overseas service workers. Those on the fringes of our politics who would have us believe otherwise are just hoarders who prefer to grab an increasingly large portion of a static pie instead of innovators wishing to unleash our maximum creative energy to grow opportunity for us all.

[1] Offshoring: Is it a Win-Win Game, McKinsey Global Institute, August 2003.

About the Author: Eric Taussig is Prialto's founder/ CEO. He speaks and writes about the future of work, global workforce, and employee happiness issues. His ideas have been featured on National Public Radio and in places like Huffington Post, Entrepreneur Magazine and Inc. Magazine.

 
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