Jobs In Spain Shifting To Eastern Europe

by Alicia Fraerman

(IPS) MADRID -- Controversy and protests abound in Spain when it comes to the phenomenon known as outsourcing: when local or transnational companies move their operations abroad, following the path of lowest production costs.

In Spanish it is known as "deslocalizacion", a word that is increasingly applicable in this country. The U.S. clothing company Levi Strauss made an offer to its employees Tuesday to compensate them for two plant closings in Spain, but was rejected by the trade unions.

The potential Levi Strauss relocation is just one more in a long line that have already occurred: two electronics giants, South Korea's Samsung, and the Netherlands-based Philips, and the U.S. toy manufacturer Hasbro have already moved some of their operations out of Spain.

Companies move their productive activities to places that have lower production and labor costs. Thus outsourcing becomes "insourcing" for the countries that take in the new operations, and in Spain's case, many of them are in Eastern Europe.

"This is the other face of globalization," says Eva Sanchez, secretary-general of the Barcelona branch of the trade union CGT (General Confederation of Labor). She issued a call to fight outsourcing because in just two years it has cost Spain 10,000 jobs.

According to Raghuram Rajan, chief economist at the International Monetary Fund, outsourcing is a process that "cannot be stopped because it is an intrinsic part of a dynamic economy."

Any attempt to stop it could bring with it greater threats than the ones that countries are attempting to avoid, said Rajan.

But his view is not shared by the CGT or a hundred other Spanish labor groups and non-governmental organiztions that oppose the current globalization process and have convened a demonstration in Barcelona in June to protest outsourcing and the precarious nature of employment in this country.

While the CGT and civil society groups demand that such moves abroad be penalized if they violate Spanish law, the socialist UGT and communist CCOO are calling for the European Union to enact a common policy to protect workers from the phenomenon.

These relocations of production are not marginal by any means, says Anne Miroux, head of investment analysis for the United Nations Conference on Trade and Development (UNCTAD).

Four of 10 big European companies have begun to move their service operations abroad, said Miroux All indications are that the trend is on the rise: the savings in production costs can be 20 to 40 percent, and half of the companies say they will relocate more services in the future.

Many firms, especially from English-speaking countries, contract a range of services in India, without physically relocating any operations, but taking advantage of the existing telecommunications and Internet infrastructure.

India took in $2.6 billion for such activities in the 2002-2003 period, according to the National Association of Software and Service Companies.

University professor Pedro Schwartz, a defender of neoliberal economic theory, says it would be a mistake to treat outsourcing as an evil. There are those who suffer when a factory is relocated, "but the country overall progresses thanks to outsourcing and to any elimination of unproductive employment, due to the effect of national and international competition."

In reference to the move of Spanish companies to neighboring Morocco, Schwartz says that "if in the middle term, the wages in Spain are four times what they are in Morocco, it is because Spanish labor overall is four times more productive."

Otherwise, he concludes, one would have to admit that "the corporate executives are idiots."

But the Spanish entrepreneurs do not appear to be stupid, at least judging from the results of their business dealings.

According to a report presented by the finance and investment firm Merrill Lynch and the international consultancy Capgemini, Spain is the EU country where the number of rich people is growing fastest.

In 2003, the number of Spaniards with more than a million dollars in liquid financial assets grew 18 percent, while in the rest of the EU it was 2.5 percent, and in the rest of the world 7.5 percent.

But the boom is not preventing some transnationals from leaving Spain. Levi Strauss will close two factories and lay off 453 workers, most of whom are women over 40.

The famous denim jeans company says its costs in Spain are much higher than at its factories in Eastern Europe, and has offered to compensate the workers with payments equivalent to 38 days of work for each year of employment with the firm.