The Pope’s moral blunders on outsourcing

Religion and business rarely mix well. This shows up in the encyclical of Pope Benedict XVI. The encyclical generally supports globalization, but criticises Western companies that outsource business to developing countries.

This criticism has an unfortunate ethnic slant. The Pope echoes the wish of a white labour aristocracy in the West to snatch jobs and income away from much poorer but more competitive workers in Third World countries. That is repugnant in both economic and moral terms.

The Western argument cannot quite be called racist. Politicians and workers in the West are not all white—some are black or brown. Yet the ethnic implications of the Western protest against outsourcing cannot be ignored. The protest rarely focuses on outsourcing to white countries like Poland, Latvia or Bulgaria. It focuses overwhelmingly on outsourcing to black, brown and yellow nations.

This is mainly on economic grounds—wages are lower in Asia than in Eastern Europe, and so the scope for outsourcing is far greater. Yet the ethnic implications cannot be ignored. The mainly white labour aristocracy of the West is clamouring to get companies to shut down jobs and production in countries with black, brown and yellow workers. This means impoverishing poor workers to subsidise the labour aristocracy. Instead of being ashamed of trying to rob the poor of jobs, the labour aristocracy talks in high moral tones, as though it has a God-given right to jobs that have actually gone entirely on merit to the Third World.

For most of history, China and India were the richest countries in the world, with the most advanced technologies and best jobs. The Industrial Revolution changed that—the best jobs moved to the West, and millions of Indian textile workers were rendered unemployed by British mills. The Western labour aristocracy never complained of that shift of the best jobs from the East to the West, but cannot countenance a shift in the opposite direction.

One valid Western objection, on both economic and moral grounds, relates to the use (mainly by China) of prison labour, forced labour and child labour to produce cheap goods for export. Such exports have largely been checked, and now constitute a negligible part of outsourcing. This objection does not apply at all to India’s burgeoning exports of software or BPO, or to the shift of 80,000 IBM jobs or 35,000 Accenture jobs to India.

China has become the world’s biggest supplier of manufactured goods, while India has become a major exporter of computer software, back-office services and R&D. This has transformed the economies of the two most populous countries in the world, made them the fastest-growing in the world, and helped hundreds of millions of poor people to rise out of poverty.

You might think that the Pope would hail this as a great development for humanity. Instead he has parroted the bogus claims of the white labour aristocracy.

His encyclical says, “the so-called outsourcing of production can weaken the company’s sense of responsibility towards the stakeholders—namely the workers, the suppliers, the consumers, the natural environment, and broader society—in favour of the shareholders, who are not tied to a specific geographical area and who therefore enjoy extraordinary mobility.”

The racial implications of this leave me dumbstruck. The Pope has posed the issue as one of stakeholders versus shareholders. But are white stakeholders the only ones that matter? When IBM shifts 80,000 jobs to India, 80,000 Indian stakeholders replace American ones. Are the rights of 80,000 Indian stakeholders any less than those of the American ones they replace? When Chinese suppliers outbid American ones in supplying hardware to IBM, are the Chinese lesser stakeholders than the Americans they replace?

The Pope is simply wrong in posing outsourcing as a conflict between shareholders and stakeholders. Outsourcing merely globalizes stakeholders across the world instead of leaving them within narrow national walls. And as a believer in one world, the Pope should be encouraging this spread of stakeholders across all humanity.

Shareholders are getting globalised no less than workers, suppliers or consumers. Many shareholders of Citibank and IBM come from the Middle East, China or Japan. Are they not stakeholders on par with American ones? There is no moral imperative at all for Japanese or Arab shareholders of IBM to try and shift jobs from the Third World to the US. Yet US politicians and trade unions talk as though morality lies in US jobs alone.

In truth, it is a perversion of morality to penalise non-American workers and shareholders just to promote US jobs. Hopefully Pope Benedict will have the courage to say so in his next encyclical.

1 thought on “The Pope’s moral blunders on outsourcing”

  1. This is an old post but I would say your conclusions stop short of realizing that what hurts stakeholders in the First World may undermine emerging stakeholders in the Third World. It has nothing whatsoever to do with race or morality, only the pragmatic perspective of what is and is not sustainable. It is to the mutual benefit of all peoples and races that we realize that policy is what creates opportunity or harm, and it is political and economic policy that we must be willing to acknowledge for the problem it often is.

    This is not a zero-sum game: While there are benefits to the Third World if the process of free trade and globalization proliferates, what we have witnessed instead over the past 30 years is a case of too much, too fast to the threat of all involved. Already, the Western consumer and laborer is highly indebted and increasingly unable to support and sustain the demand for products, even at the significant cost savings of that service or product having been produced overseas in locals such as India and China.

    If this conveyor belt of reciprocal economic growth becomes imbalanced the rate at which populations in India, China and elsewhere can ascend to a middle class lifestyle — by which to support their internal businesses and economy — may be lost. This is to say, if the middle class in the West breaks down before the working class in Third World nations can generate enough wages and demand for their own goods and services, the outcome to both the First and the Third World will be that of a disastrous breakdown of global economic proportions.

    The pope may not have made a very good choice of words — or translation of his words — but he’s not wrong in that the pace of change is not sustainable. Perhaps it would help if I cited an example: Imagine going to the Red Cross or other such blood donation center. If too much blood is drawn too fast the donor will die. If the same process is done slowly, the blood donor will not only live but help someone else survive. In this way there is balance between he who gives and he who takes — he who manufactures and he who buys!

    The current climate of global economic uncertainty is a product of trade liberalization implemented in a hasty and imbalanced manner. There is no “good” or “bad” in terms of morality. The real question is that which is “realistic” and “unrealistic”. Can we, in the West and in the East and Mideast, sustain the pace of change? If that change is imbalanced and lopsided might we as workers and consumers universally sustain some form of loss or injury?

    If we do not create a sustainable path we shall not see the Chinese, Indians, Arabs and others enjoy a middle class lifestyle currently attributed so often to Americans or Europeans. If global trade is not rebalanced to become more equitable, we shall instead see governments and corporations in every part of the globe become very wealthy even as the scourge of poverty becomes prevalent among the people despite gains in productivity, mobility and technology. Surely you are not advocating for international decline?

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