Ethics of Outsourcing

Mankind has come a long way from clustered, isolated, self-sufficient early civilizations to the present time of globalization-driven advanced societies. We have learned new things, forgotten old skills, and invented new words and technology, or in many cases we have redefined old words.

Ethics is one such word that bugs us at times, as the old generally accepted definition is continuously clashing with what's seen all around or reported because of the unprecedented rise in the income divide both between and within countries, and with the growing acceptance of the “market knows best” principle.

David Ricardo came out with comparative advantage theory in competitive economies between Portugal and England, and showed how Portugal could be better off producing wine using all its resources, whereas Britain would be better placed in utilizing all its assets in producing clothes, in a two-product production and trade scenario. There was no debate of ethics then; it was pure economics leading to comparative advantages and then to absolute advantages.

However, if we look at the “oldest profession” of mankind, that of prostitution, a consensus has yet to emerge about its ethical rightness. Market forces apparently being stronger than administrative forces, irrespective of whether in a conservative or liberal society, prostitution has been there since ancient times.

Simple logic fail us in uniformly defining ethics, which increasingly is at odds with our internally evolving definitions within a changing society. One can argue that when one can trade (or use) his brain (take knowledge workers) or labor (physical worker), why should not some use their body (sexual workers) to earn a living? Society has not been able to apply such simple logic in justifying prostitution uniformly; however those who did not agree about its rightness could not control its spread, and thereby made the lives of those sexual workers difficult by harassing them on some pretext or other.

Society feels sex in married life is not wrong because through marriage, we form a union. It's a legally and socially accepted partnership where sex is no longer outsourced, but rather a self-sufficient body called a married couple is formed to take care of that need.

Modern times have brought more ways for a person to use their body for commerce. CNN some time back showed rapidly rising cases in India where mothers rent their wombs to would-be parents from developed nations for a fee. There have been reports of increased demand for wet nurses in China. In-spite of communist policies, the income divide now allows the rich to practice what emperors used to do. An eight-times salary difference for people who live on less than $1 or 2 a day is too much to resist. And before that there were stories of sweatshops in China to gain its manufacturing competitiveness, which any citizen from and developing world have seen stories on umpteen times. There's the case of child labor (also used by upper class people as maids) in India, which has been banned by law, but still is widely practiced by many Indians due to the benefits it brings.

The question that confuses many of us is how many of these are ethical and how many are not. The root cause of all these are the rising income divide. There's nothing intrinsically wrong with that, as long as no one lives in abject poverty where they can be expected to do anything for money.
Unfortunately a great number of people in the world today live still in abject poverty. Nearly half the world lives on less than two dollars a day. A recent report by the Helsinki-based World Institute for Development Economics Research showed that the richest 1 percent own 40 percent of global wealth, and the richest 10 percent owning 85 percent, whereas the bottom 50 percent barely manage 1 percent. One of the authors of the report, James Davies, a professor of economics at the University of Western Ontario, stated, "Income inequality has been rising for the past 20-25 years and we think that is true for inequality in the distribution of wealth."

With the vast majority of the poor, it's not a question of accumulating wealth; it's rather a question of surviving with a full stomach this day, the next day, and the day after. This was shown in a piece on CNN on Dec. 12 about the plight of poor people of Congo involved in the diamond trade. For some, the diamond is a precious jewel; for others it brings them a loaf of bread for their family by extracting it from the ground.

So is renting a womb ethical? Is hiring wet nurses ethical? Is hiring child labor ethical? There can't be any black and white answers to these queries. Government -- more so government of third world nations -- at most make policies that they can't implement. Banning child labor is a glaring example of that in India. It's still prevalent across all cities, towns, and villages. We just observe this and wonder what should we do to be responsible citizens to free India from this phenomena called child labor -- be it in a roadside restaurant or in a brick-making unit or as domestic help.

The simple fact is that the parents of the unfortunate child in most cases are happy, as the child is ensured of two square meals, and thereby increases the chances of survival for the rest of the family members. In India, there still is no legal norm on family planning. It's still is voluntary; however voluntary refers to people who have a choice. In India, people with larger family sizes come from the lowest strata of society, who don't have much of a choice.

Considering the gray nature of the problem, we can't take a unilateral position. For any parent who can't have kids of their own due to health reason, for mothers' who can't feed their new-born baby because of some medical problems, one won't question their ethics that much. However when it's done for money, at some point of time we need to answer that question.

Otherwise, unlike in the example of Portugal and England following Ricardo's theory, in the future society may be divided between lactating mothers and baby-bearing mothers, but no absolute advantage will be gained as only a very few limited privileged ones will benefit.

It would be unfair to touch upon few more prominent cases of outsourcing in the present global economy that offer an opportunity for few, but come at the cost of job losses for others. This is the case with IT/services outsourcing (BPO) from India and manufacturing outsourcing from China and many other export-driven economies. We aren't sure how far it can go because it has potential to reach all frontiers of the economy. What we see now could be the tip of the iceberg; however the pain it causes can already be felt in certain sets of economic data in affected economies.

Are business organizations ethically correct in outsourcing? Ask this question and you are bound to get more than two answers: one from affected employees in the developed world; one from the developing world where that new job may be getting created; and more from shareholders, economists, policymakers, etc.

We again hope that market forces would help us reaching equilibrium here too. However the way the income divide is growing, this does not look likely in the near future.

From outsourcing emerged the theory of core competency. And any theory in management and business is bound to be replaced by new theories that changing times demand. The idea of core competence resulted in the present superpower, which has been the defense outsourcing partner for countries like Japan, South Korea and a few others. So the root of outsourcing is ubiquitous, and it affects all strata of people.

The question is, will the market again determine what's ethical and not in these rounds of market-forces driven outsourcing? Or is it us who should try and define the line beyond which as a society we should know where to stop?