"That's a sin. That's a crime. They ought to invest here in the state of Connecticut," said Parent, representative of Machinist District 26 (See Hundreds Protest UTC Outsourcing, John M. Moran, September 11, 2003, Hartford Courant). Over the last 20 years, Parent said, some 15,000 manufacturing jobs have been lost in Connecticut at such UTC divisions as Pratt & Whitney, Hamilton Sundstrand, Sikorsky and others. Many of those jobs have been moved out of the country or to non-union locations elsewhere. The state of Connecticut has had its share of the pros and cons of the phenomenon of outsourcing for over a decade now. We may obtain a glimpse of this by reviewing developments in two of Connecticut's major companies and the state government.

A year after the protest mentioned above, the Chairman and CEO of UTC in an interview with the CIO Magazine (William J. Holstein, November 2004) stated that close to 60% of the company's sales are from outside the United States compared to 25% in the early 70s. He indicated that "There's been an even bigger shift in employment. We were 95 percent U.S. employment in the early '70s; today we're 70 percent non-U.S. employment."

On August 25, 2005 Hamilton Sundstrand, a division of UTC, inaugurated a dedicated Center of Excellence for design engineering services and product engineering services managed by Infotech Enterprises Ltd. Hyderabad which has had a five-year relationship with United Technologies, providing a variety of engineering design and related high technology services, especially in the aerospace domain, to worldwide UTC units.

GE in Fairfield, Connecticut, has always been a company with an international component in its strategy and "was one of the first multinational companies to outsource back-office work, data-center and call-center operations to a subsidiary in India. Its outsourcing operation, with a staff of 17,000, is one of the largest set up in the country by a multinational company. The company that helped start the offshore outsourcing boom is getting out of the business--partly, at least. General Electric Co. said that it would sell the majority of its stake in its Indian back-office processing business to a pair of private equity firms. Under the deal, expected to close in December, GE is selling 60% of its stake in GE Capital International Services to General Atlantic Partners and Oak Hill Capital Partners for a total of $500 million. The equity firms will each take a 30% stake in the business" (See report by John Ribeiro, November 8, 2004, IDG News Service)

But GE's presence in India involves more than mere engineering services. It has built a world class research laboratory in Bangalore as an integral part of its corporate goal of growth by innovation. General Electric does not try to conceal it and is actually very proud of it. The John F. Welch Technology Center, inaugurated in September 2000, raises the benchmark on what constitutes a world-class industrial laboratory.

In March 2004 Congresswoman Rosa L. DeLauro released a letter addressed to the then Connecticut Governor John Rowland, regarding her concerns about the growing problem of outsourcing and its effects on Connecticut's economy. Specifically she requested an executive order to suspend all state contracts with companies, including any subcontractors such companies may use, that send American jobs offshore.

On a national basis even as companies in the western hemisphere are beginning to pay some attention to ways of exploiting the sensational phenomenon of globalism/outsourcing, there is considerable discussion taking place pertaining to the demise of the whole concept. This claim and the associated logic are led by the Canadian philosopher and author John Ralston Saul with his recent book. The Collapse of Globalism traces the history of this phenomenon beginning with the robber barons in the 1920s and ending with the great depression of 1929 leading to a rise in nationalism and assorted dictatorships and culminating in Pearl Harbor. World War II ended the intensity of nationalisms and was replaced by a global view leading to the reconstruction of Europe and Japan. American companies took advantage of this construction boom. During the decades that followed outsourcing took firm hold, more recently and more noticeably with the Y2K phenomenon and the dotcom bust. As of 2004 four hundred of the Fortune 1000 companies were sending jobs overseas. However the Center for Information-Development Management claims that in a recent survey of 2000 CEOs the "interest in offshoring is waning." It is noted there that only 25% of these corporations were offshoring (See The Collapse of Globalism: What it means to Information Developers by William Hackos, Center for Information-Development Management e-newsletter, April 2004). Hence the claim of the beginning of the end of globalism and even its collapse. On the other hand the counterclaims and the associated euphoria are also evident when Tom Friedman embraces the phenomenon of outsourcing as a wonderful exchange of goods and services between India and the U.S. and cites some credible statistics to prove it (See "What Goes Around").

How do we sort out these ups and downs, claims and counterclaims? It may be helpful to step back a little bit away from this heated environment and examine a few fundamentals. Let us begin at the beginning. A society thrives in the economic sense when its structures (political, business, monetary, labor, capital, legislative, language and cultural) are all in tune to create wealth. The widely accepted path to this is innovation and to this day no shortcuts have been found to work. Unfortunately innovation is hard work and requires, among other things, a long term view of business and the ability to take risks. This, I believe, is the reason why there is no adequate discussion of creation of wealth through innovation and hence the tendency to jump on the methods of distribution of wealth, an easier subject to deal with based on two basically extreme models.

One extreme model believes that equitable distribution of wealth in a society comes about through a strong central government which can make sure that no exploitation of society at large takes place. Everyone contributes to the nation's welfare and is therefore treated equally. Excesses and ostentatious behavior are forbidden. Not only did this model fail recently in the example of the collapse of the Soviet Union but the subsequent reaction to such severe constraints and dictates has apparently led precisely to the very excesses one feared, an example of which is "the largest private Jacuzzi I have ever seen with Kremlin views" as reported by Natasha Cica in her review of Saul's book (August 13, 2005).

The other extreme model is of course the one we are familiar with and which received a boost from Ronald Regan and Margaret Thatcher in the 80s. The mantra of this model is that the marketplace is sacred and everyone benefits if the government created an environment for investment and steps aside for market forces to have a free play in which each person may have the opportunity to work hard, contribute, rise in stature and realize the American Dream. This model became the envy of the world because it does allow the human spirit to soar resulting in the unleashing of the creative juices and a case can be made that the thousands of resulting innovations over six decades did indeed increase our standard of living.

Meanwhile, it is in fact the extension of this model in order to maximize the advantages and increase value to the shareholders that helped usher in the phenomenon of outsourcing to low cost countries including Ireland, China and India, among others. Clearly this did lead to an unprecedented positive upheaval in India resulting in well paying jobs to a small group of young men and women, better infrastructure in the lucky cities with new roads and swanky air-conditioned office buildings and apartments, cars, a boom for restaurants, theatres, night clubs, malls, clothing and shoes stores and a whole variety of goods and services that imitate the western life-style without missing a beat. Not only that. Something truly remarkable happened. And that is above and beyond the ability to assign a $ value. That is the infusion of tremendous confidence among the youth.

For us here the unacceptable consequence is that it ended up as a zero-sum game. When prosperity somewhere else results in the opposite here that cannot be acceptable. We will not accept a lowering of our standard of living in this global interplay and in fact our expectation is that we become more prosperous in view of the claims made about the virtues of this business model. While we may accept loss of jobs due to change in technology as inevitable (gas station attendants, typists, checkers at grocery stores, tellers at banks, travel agents, air plane ticket agents etc.) it is not the same when corporations abandon human capital for other reasons.

Incidentally it is not always profit that motivates outsourcing. More often than not it may be driven by the need to bring costs down to challenge a competitor. The XBOX is an example of that need. See the Wall Street Journal of November 18, 2005.

That the capitalistic model has not led in 2005 to a happily-ever-after scenario in the western economies is attributed to that single human weakness known as greed. As one corporate executive after another was marched off Wall Street to serve prison terms, the vulnerability of the business model became clear and eroded confidence in the much lauded ideal of private enterprise. Nor is it over by any means. Companies are getting bigger with operations in a dozen or more countries and it is hard to define the nature of trade when a division or a subsidiary of a corporate giant "sells" components of a product to its sister division. Also the presence in low cost countries may provide these companies an opportunity to pay lower taxes there. Thus the revenues that otherwise might have flown into the U.S. treasury may not. Consequently public sector services suffer, cost of capital rises, creation of wealth is impeded and thus investment in public enterprises suffers and the middle class loses.

If the death of globalism has begun, there is now another opportunity to try a new model. Such a model may not exactly follow either of the rigid extremes discussed above but may allow values driven strong bilateral relations with a firm commitment to nurture the foundation at home through a long term view of business and investment in innovation. Such a model will succeed only with a well educated work force requiring us to pay special attention to the K-12 system in the context of science and technology. Bold political and business decisions will be essential if we wish to retain global leadership in industrial innovation.

At the individual level more vigilance is necessary to remain current with frequent education and training plans to refresh skills. As the playing field becomes more level than before resulting in severe global competition we need to modify our habits also without sacrificing our view of life or standard of living. The modifications may sometimes seem un-natural but are necessary. When gasoline prices go up to levels considered unreasonable we as individuals must reexamine our driving habits and reduce consumption. There simply is no better cure to rein in corporate greed and bring prices down. Many of our individual actions need revisiting. For example, the economist Richard Layard states that "In a poor country, a man proves to his wife that he loves her by giving her a rose, but in a rich country, he must give a dozen roses (See "Sometimes a Tax Cut for the Wealthy Can Hurt the Wealthy", Robert Frank, The New York Times, November 24, 2005). Isn't there a lesson here for us all? The feeling of love is identical in both cases. So why not we adopt and modify our habits? There must be thousands of such examples in our daily lives that may be fine tuned to continue to live as well as we did when such restraints were not needed. Neither economic model works for us. The only model that will keep us as global leaders is one that keeps us as individuals in the equation. The time to depend on experts and pundits is gone. We need to remain highly skilled and pro-active. We need to develop a balanced view of ourselves and the world. That is the challenge of the new century. I believe we can meet it.

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