Callcentering Your Way to Prosperity

How many US citizens were made redundant by this off-shoring scheme? I suspect that if moron Friedmans' job were off-shored, he might be singing a different tune.

I can't really figure out what the point of this post is. Yes, if barriers to entry drop, more call centers will open, and Kenya will experience upward pressure on wages. That is a very good thing. Also, connecting to undersea fiber-optic cables will almost certainly have positive spillover effects for the Kenyan economy. That is also a very good thing. So what's the problem here?

Are you suggesting that connecting to fiber is a massive overinvestment, because as soon as bandwidth is available, the small local talent pool will act as a brake on growth? This seems like pretty thin stuff. As long as we're idly conjecturing, might it not also be the case that over time more locals will learn English to qualify for these jobs?

That Friedman is annoying is a point on which we can all agree. But I still don't see the problem here.

SLC, your comment is morally obtuse. Of course there are legitimate issues related to trade and employment, but do you really want to be on record protesting a single Kenyan call center? Damn those Africans, always stealing good American jobs!

I had the exact opposite reaction.

If Kenya's wages (for English-speakers) rise enough to make KenCall no longer viable, that's great. It means that something else is going on and people are making money. Three cheers for that.

That said, wages would have to rise a lot if the median income is only $350 now and infrastructure is about to get cheaper.

There are a few million people in Kenya. 2% of 1 million alone would give you enough people to run quite a few call centers. Also, when citizens of the nation which receives the most FDI worldwide (remember, FDI covers a nation's current account / trade deficit and ours is huge) - and thus are the world's biggest beneficiaries of other nations' offshoring and outsourcing - don't have a leg to stand on when complaining about offshoring, outsourcing, etc. In conclusion, offshoring to the US = good, offshoring to other countries which is still less than offshoring to the US = bad.

It seems this post is slightly skeptical, if not plain old dismissive, of call centers/globalization (though it's hard to tell what MY's opinion is), but I don't see what's so bad about this. Sure, Kenyans won't be making 50k a year, but the better educated among them will be making more money than they otherwise could have. This will lead, it seems, to more Kenyans seeing the benefit of higher education, and possibly increased broadband access by way of the undersea cable.

It's not as if KenCall is the answer to all of Africa's problems, but isn't it a net good for Kenya?

I'm not sure what conclusion we should draw from this--if Kencall fails to find English-speaking Kenyans because they all find something better to do (more lucrative work as other businesses take advantage of the undersea fiber optics), would that be a bad thing for anyone other than Kencall?

I guess Kencall could lower their standards as the labor market grows tighter...

Considering how MY has come out in favor of much of the components of the package in globalization (increased trade with poorer countries, etc.) and has written that globalization will likely in the long run help the world's poor, this post really is a bit odd and needs to be clearer.

Good for that guy. He came to a great country to learn, and now he's leveraging what he learned to help make his home country (and himself) wealthier. If I had gone to Wall St for a few years and then returned to my poor, blue-collar town in Ohio and started a business that created wealth there, populists would be singing my praises. But because it's poor Kenyans getting the benefit from this, and not poor Americans, it's unfair.

What about all the auto manufacturing that now takes place in the south instead of the midwest? Companies moved plants to places like Alabama, where wages and benefits are cheaper than they were in the midwest. Do you have the same populist concerns when it's Americans in one part of the country who benefit from the loss of jobs of Americans in another part of the country?

...if that moron Friedmans' job were off-shored...

Dare to dream!

The World is Flat is one of the most godawful pieces of tripe I've ever not bothered to finish. That aside, I'm not sure what to make of his article or Matt's response to it. Perhaps if I mull it over for an F.U...

OK, there seems to be pretty close to unanimous sentiment on this one (plus one early vote for "screw the Africans"). I'm looking forward to Matt's follow-up.

What about all the auto manufacturing that now takes place in the south instead of the midwest? Companies moved plants to places like Alabama, where wages and benefits are cheaper than they were in the midwest. Do you have the same populist concerns when it's Americans in one part of the country who benefit from the loss of jobs of Americans in another part of the country?

One of the primary reasons auto companies moved to the south was to get away from unions, so, yes, I do have populist concerns about that.

Even so, moving from one part of the nation to another is not nearly as problematic as offshoring. For one thing, Southerners (as much as both they and we might sometimes regret it) are our fellow citizens. Mexicans, Chinese, Indians, and Kenyans are not. For another thing, we have a common set of federal laws that all businesses must obey. Even in the South, you can't pay below minimum wage, you have to obey OSHA laws, you can't engage in racial discrimination, you can't engage in really gross pollution, and there are at least theoretical protections for unions. None of that applies in the Third World, and indeed one reason corporations move operations to the Third World is specifically to get away from such laws. The race to the bottom must be stopped because of its effects on American workers. If that hurts Third Worlde workers, I'm sorry, but my nation comes first.

Perhaps MY's point is that Kenyans should be employed in a manner more sensitive to their unique culture: perhaps poaching elephants for ivory or something.

To me, this is about the most positive story I've read about the benighted continent of Africa in a long time. I mean, compared to Mugabe clinging to power after turning the breadbasket of Africa into a basket case, or compared to bizzare sex practices spreading AIDS, or compared to child soldiers hacking off limbs with machetes, this call center is cause for celebration.

This reminds me that as recently as 1996, call centres were The Salvation for the deindustrialised north of England. Because, y'know, those brown people would never have teh interwebs, and so we didn't need to worry about someone cheaper coming along.

Specialising in an easily substituted, price sensitive commodity: the road to riches, indeed.

I share the above commenters' general puzzlement with the point of this post, but would encourage everyone to note that over the last ten years or so, wages among India's educated class have gotten much higher as infrastructure expanded and more and more "call centers" (and other MNC presences) were opened. This has a number of effects, almost all positive:

1) These workers now make much more than they used to, although still less than an American.

2) The value of education, long under-appreciated, believe it or not, in India rises substantially.

3) Other markets with less-developed infrastructures (like Kenya) receive more investment as the wage rates there begin to appear more attractive.

The theoretical end state is that all economies eventually catch up -- only truly corrupt governments or maybe public health issues should remain as a barrier -- and the level of economic inequality evens out across the world. Whether we get there (and when) is obviously not clear, but the short term effects seem positive as well.

Um, Alex, it can be the road to riches for those with the lowest prices. Say, for Kenyans.

I worked in a call center in the Good 'Ole USA and I barely got more then $500 a month, as they would sometimes not even have me come in for work. The quality of the other phone operators was abysmal, many probably lacked highschool diplomas.

If other call center operations open up, I would imagine that the requirement to be college educated will be removed. All you have to do is be able to read, really.

"This reminds me that as recently as 1996, call centres were The Salvation for the deindustrialised north of England. Because, y'know, those brown people would never have teh interwebs, and so we didn't need to worry about someone cheaper coming along."

Let's take a look at that example. If those people lost their jobs it means that companies could operate call centers more cheaply in foreign lands. This results in lower prices for the products that utilized those call centers. If a product was two pounds before and one pound now, that means anyone who bought the product would have another pound in savings that they could spend somewhere else. Maybe those people spent those pounds on items that they previously could not afford. With the increase in demand for those now affordable products, the companies that make the now affordable products need to expand and hire new workers. They hire the workers who were laid off originally. Everyone now has jobs again, and the prices of products are cheaper, making everyone a little richer.

This is a gross oversimplification, but I think that it highlights that "outsourcing," as I understand it, creates jobs as well as destroys jobs. "Outsourcing" is not a loss of jobs, so much as a reallocation of jobs from inefficient sectors to efficient ones. Is this transition painful? Yes. Should there be government programs to ease it. Yes. Should it be stopped? No.

"For one thing, Southerners (as much as both they and we might sometimes regret it) are our fellow citizens. Mexicans, Chinese, Indians, and Kenyans are not. For another thing, we have a common set of federal laws that all businesses must obey. Even in the South, you can't pay below minimum wage, you have to obey OSHA laws, you can't engage in racial discrimination, you can't engage in really gross pollution, and there are at least theoretical protections for unions. None of that applies in the Third World, and indeed one reason corporations move operations to the Third World is specifically to get away from such laws. The race to the bottom must be stopped because of its effects on American workers. If that hurts Third Worlde workers, I'm sorry, but my nation comes first."

Fine, we stop putting FDI into other countries and other countries will do the same. We can then stop taking jobs from Germans, Brazilians, Japanese, British workers and any other workers in country where investors put money into the US. Considering we have more FDI than anyone right now, we have more to lose by losing that. How do you like that deal?

If you want to quote Friedman, just quote him, no need to pretend you have anything to add.

If you want to quote Friedman, just quote him, no need to pretend you have anything to add.
Posted by: Benny The Bull on April 4, 2007 12:36 PM

Who are you addressing? Everyone here thinks Friedman is an idiot. However, Friedman is neither the alpha nor the omega of globalization and international business. Do you have anything to add or are you just being snarky?

Sorry, I was addressing Matthew's initial post.

Tom Friedman returns to his roots

Does this mean he's living in Minneapolis again? That he's dropping the column to start acting as a foreign correspondent again (I'd really like to see this)? That's he's re-read From Beruit to Jerusalem and realized that what he says there makes his Iraq war support look even more idiotic than otherwise?

Holy mugger. First the Indians, then the Chinese, now the Kenyans are all "we don't want to be destitute anymore!" too? When is this globalization business gonna end? And are there any standards, or can any bloody country just jump on the bandwagon?

am I the only one here who is aware of the fact that the Lingua Franca of Kenya is English?

Kenya has 31 million people and the official language is English. since higher education in Kenya (an English colony until the 60's folks) is conducted in English...it follows that Kenya has 600,000 college educated English speakers.

If those people lost their jobs it means that companies could operate call centers more cheaply in foreign lands. This results in lower prices for the products that utilized those call centers.

Or, more likely, higher corporate profits for those companies, most of which go to wealthy executives and shareholders.

For what it's worth, Wikipedia says Kenya only has 2.7 million English speakers (out of a total population of 35 million). Who knows if it's reliable, of course.

Call Center employees in Kenya are earning in a month, what half their countrymen earn in a year. That's like getting paid 35 grand a month in the U.S., just for phone jockeying.

This 1996 article sort of agrees. Table 1 unhelpfully pegs the figure at somewhere between 0.7-18.4 million. But the paragraph above it says, "The Cambridge Encyclopedia of the English Language estimates English-speakers in Kenya to constitute 9 percent of the population of 25 million, or about 2.24 million people, while the BBC World Service estimates 3.4 million adult English speakers there. And a spokesman at the Kenyan embassy in Washington recently estimated that 80 percent of the nation's 23 million population knows at least some English, which would mean 18.4 million people." So the figures between 2-4 million probably refer only to people who are completely fluent. Since the total population seems to have nearly doubled since then, we're talking about maybe 4-7 million.

Golddog, you make the argument I hate.

What products are CHEAPER since NAFTA was signed?

Everything I can think of has doubled in price.

"That's like getting paid 35 grand a month in the U.S., just for phone jockeying."

Or, it is like moving to Kenya and getting $350 a month as a phone jockey, but still having a lot more than most of the people around you.

Remember the importance of multiplier effects. Those call center workers make some money, then they spend it locally, then whoever receives it spends it again...the effect on GDP of one high-value export industry (and to Kenyans, call centers are high value) is much more than just the revenue from that industry.

What products are CHEAPER since NAFTA was signed? Everything I can think of has doubled in price.

Computers are cheaper, no?

I don't know if Kenyans will be better than Indians, but hell will freeze over before I ever deal with any company again whose customer service is in India. Last mont hi had a major issue with Expedia involving massiveovercharges o my credit card for a reservation that a website glitch could not even complete. The person I talked to was utterly unable to help resolve the problem, could not transfer me to someone who could, in fact could do nothing but read pleasant shibboleths from a phrase book.
I'm not nornmally fierce tiward such people, but on this coccasion I lost it, and some guy in India hopes he never talks to me again.
(My credit card dispute department, located in the US somewhere) finally resolved the matter)
My step-mom menawhile has had a problem with a lawncare company whose foreign-based reps cannot understand that whn she tells them "cancel my service" she means she doesn't it any longer.
Companies that think they are saving money with outsourcing are penny wise and dollar foolish. Someday they will find they have lost most of their business to competitors who kept their customer service in North America.

"My step-mom menawhile has had a problem with a lawncare company whose foreign-based reps cannot understand that whn she tells them "cancel my service" she means she doesn't it any longer."

IIRC, companies often tell their companies to feign ignorance when someone tries to cancel. Why do you think they offer you every offer possible when you try to cancel?

"Companies that think they are saving money with outsourcing are penny wise and dollar foolish. Someday they will find they have lost most of their business to competitors who kept their customer service in North America."

Some companies have been shifting to having call centers in Ireland, England, etc. Often complaints fall as a result despite the fact that a surprisingly high number of Americans cannot really understand British and Irish accents (ever watch first-time American tourists in Britain? It's amusing. Hell, half the time I can't understand what some British people in my family are saying). This brings up the question: to what extent are American costumer complaints driven by real complaints and to what extent are they a product of ethnonationalism/ethnocentralism? Call center people, if everyone remembers, were not exactly the most beloved group of people when they were all Americans. They were often hated and the call center people often hated their costumers. Dealing with them in the early and mid-1990's could be a bitch. However, when you add in the nationalism component, suddenly we look on the past with rose-tinted glasses.

Luke:

May I ask you a question (besides this one)?

Are there fewer jobs in America since NAFTA was signed?

Matt:

The Ricardo/Malthus Iron Law of Wages that your model is implicitly based upon turns out not to be the way the world works in the technological age. We're luckier than that.

Steve Sailer: The Ricardo/Malthus Iron Law of Wages that your model is implicitly based upon turns out not to be the way the world works in the technological age. We're luckier than that.

Malthus's predictions were indeed invalidated by improved agricultural technology. But it was government that finally put an end to the Iron Law of Wages. From the Homestead Act to the GI Bill, the middle class in the First World has, almost without exception, been a creature of government intervention. When that intervention weakens, as we are seeing now, the economy begins to polarize into its natural state: a handful of superrich, a relatively small middle class, and a huge mass of downtrodden poor.

Don't know how many else out there do this, but I personally stop doing business with any company that I discover is using overseas call centers. (Buh-bye, Earthlink and Travelocity.) Save a buck, lose a customer forever. Business 101.

Golddog: Wages of American workers have declined relative to GDP growth & productivity growth since NAFTA was passed. And although the absolute number of jobs has increased, it hasn't kept pace with the number of new workers entering the workforce. Are American workers better off post-NAFTA? If you have any evidence that they are, please share it with us.

Don't know how many else out there do this, but I personally stop doing business with any company that I discover is using overseas call centers.

This is what my dad does too. But he is a homophobic racist who blames "dotheads" for his employment woes (he's a programmer) and refuses to even be seen by an Indian doctor so I don't know if he's much to go by. I do find it amusing though that the preferred policy prescriptions of self-styled "progressives" like yourself & pure reactionaries like my father do so often overlap.

Re: Wages of American workers have declined relative to GDP growth & productivity growth since NAFTA was passed.

The only decline came as the result of the recession of 2000-01 (which is still malingering in the Great Lakes region). In the 90s moreover (how short memories are!) workers made real gains for the first time in a generation despite NAFTA.

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