President Obama Reinforces Indian Stereotype?
American President Barack Obama made a famous speech after winning the Democratic presidential primary in South Carolina in 2008. In it he said “We’re up against the idea that it’s acceptable to say anything and do anything to win an election. But we know that this is exactly what’s wrong with our politics. This is why people don’t believe
what their leaders say anymore. This is why they tune out. And this election is our chance to give the American people a reason to believe”.
Democratic Party in general is always good at providing a platform for individuals and organizations that are concerned about human rights issues, immigration issues and in general issues that the poor and the needy deal with every day. But some of these issues run contrary to the beliefs of some of their major vote banks which include unionized labor (including auto workers, health care workers and teachers).
To appease his supporters President Obama again criticized American companies that outsource. In a BusinessWeek interview the President said “if you are a multinational and you are investing in India, and your workforce is in India, and your plants and equipment are in India, but your headquarters are here, you are taking deductions on all the expenses in India, but you are keeping your profits outside the United States, that just doesn’t seem entirely fair. The same is true where you have companies that have 90% of their sales in the United States, but are posting 90% of their profits overseas. You get a sense there that the accountants have been busy”. I was a taken back by his response because of a few reasons.
In business as it is politics it is never about what is fair but about what is legal. American and European companies that invest overseas are directly responsible for the massive growth of the Chinese and Indian economy. Both these countries now have a very strong, growing and a broad based economy that is not entirely dependent on American investment alone. But we cannot deny the fact that American investment including outsourcing was one of the earliest triggers that began this growth process.
As the President rightly pointed out there are many companies that have the majority of their sales in the United States but post their profits overseas. Any American company that is interested in growth will invest their profits overseas. Their income from overseas will be small initially but will increase over a period of time. Recently Coca-Cola announced that most of their 2009 growth came from India and China (Coca-Cola worldwide annual growth was 3% but it was 29% in China and 20% in India). So where should Coca-Cola post their profits?
It is important to realize that when American companies outsource or invest outside they are doing it for their own selfish reasons and not to help out the Indians or the Chinese. One of the selfish interests includes catering to their American consumer that wants everything at the lowest price possible (the public does not care where the company is headquartered or who is designing or manufacturing that product or service).
The American business environment including the tax structure, minimum wage, availability of skilled and unskilled labor and so on are not set up for delivering what the American consumers expect. Many legacy medical products and procedures cost more than cutting edge software products and services. A laptop with the latest operating system, software and processor costs less than a tooth refill. Ever wonder how this is possible?
What surprised me the most about the Presidents response was that he managed to drag India and the outsourcing element as part of his response although the question was about the American automobile industry and who should be held responsible for the delayed response to the safety concerns.
India and China have an image problem in America. India is associated with outsourcing and China is associated with cheap, low quality products. There is more outsourcing within the United States and between the United States and Canada than between United States and India. The only thing cheap about Chinese products is the price that the American consumers are willing to pay for it.
What the President said about companies doing business with India is also applicable for American companies that do business with Britain, France or Germany. By dragging India’s name President Obama is reinforcing the American stereotypical view of India. That is disappointing coming from an administration that is supposedly trying to rally all of us to reach a “higher purpose”.
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Category: News & Government
Outsourcing is a sensitive issue that politicians in US love to bring up to boost their ratings though it has been clearly shown that the negative impact (job losses) is not substantial compared to the size of the economy. If 90% of a company’s sales is in US, doesn’t the local government collect substantial sales tax? don’t they need to spend on sales which benefits the local economy? so what taxes are they losing? fed & state tax? well, employees in other countries don’t really benefit from any of US govt. programs so this should not be a big issue, in fact people on H1 and other visas pay medicare and social security taxes when they are not even eligible to collect the benefits unless they become citizen’s, has any politician ever brought that up? in terms of profits, how many of the big corporations have declared a profit in the last decade? in fact, being profitable has been out of fashion in US ever since the tech boom in the 90′s!
There may be some shady tax manipulations going on with companies that outsource but in many cases maybe that is what is keeping them based in the US otherwise they might have moved their whole bases overseas as Bill Gates and other business leaders have implied many times.
You rarely hear about American outsourcing to European countries and Canada.
i once heard, i think Omar Abdullh it was: sometimes politicians have to say things that are fit for local consumption. I think Obama has done something similar with an eye on the November elections.
But just that i thnk Obama is a lil more serious abt outsourcing that his predecessor!
Obama talks about outsourcing because American economy is tanking. It may be because of the November elections but I also think that the labor unions that support the Democrats are also applying pressure.