MOSCOW November 2 (RIA Novosti) It is well known that the state of the U.S. economy traditionally determines who wins the U.S. presidential election. However, the 2004 presidential campaign is also dominated by the war on terror and Iraq. Senator John Kerry is hoping the sluggish state of the U.S. economy and the sputtering U.S. job market will be enough to propel him to victory, whereas President Bush is banking on his image as a resolute commander-in-chief who is tough on terror.

Senator Kerry, the Democrat nominee, has the official endorsement of virtually all the unions including the two largest, the powerful AFL-CIO (American Federation of Labor - Congress of Industrial Organizations) and the SEIU (the Service Employees International Union). The reason for this support and a key part of Kerry's campaign is his pledge to protect American jobs. Specifically, both Mr. Kerry and his running mate John Edwards have promised to take a hard look at the practice of offshore outsourcing. During the vice presidential debate between Senator John Edwards and Vice President Dick Cheney, Mr. Edwards said, "The (Bush) administration says over and over that the outsourcing of millions of American jobs is good. We're against it."

Senator Kerry is hoping the issue of protecting American jobs is as salient for him as it was for Ross Perot in 1992, when the latter shocked everyone by winning a massive 19% of the vote as an Independent candidate. This was the best result for an independent since Theodore Roosevelt in 1912. Mr. Perot gained much of his support by leading a charge against Senate ratification of the North American Free Trade Association (NAFTA), designed to reduce trade barriers with Mexico and Canada. Perot championed himself as the protector of American jobs and became famous for his catchy "giant sucking sound" quip describing the figurative sound made by American jobs being "sucked" south to Mexico.

Today, on the eve of the 2004 U.S. presidential election, outsourcing has many Americans fearing some "giant sucking sounds" emanating from India, Russia, China, and other nations involved in providing offshore software development services. The Bush administration follows a clear pro-management, laissez-faire approach to the outsourcing phenomenon, while Mr. Kerry, despite repeatedly stating his opposition along the campaign trail, has recently toned down his anti-outsourcing rhetoric. In the third presidential debate, Mr. Kerry said, "Outsourcing is going to happen. What I can promise you is that I will make the playing field as fair as possible," which was a reference to the favorable tax conditions enjoyed by companies taking advantage of outsourcing.

India is well known as the pioneer and grandfather of the offshore software development industry, but lately the country has found itself increasingly often sharing the spotlight with competitors. Russia is attracting attention with its abundance of highly educated scientists, mathematicians, and programmers who are being snapped up by Russian software development outsourcing firms. These professionals are in high demand by Western firms and are the type of technology experts Western professionals and labor unions fear most.

Recognizing Russia's place as a rising star in the outsourcing industry, its long list of large American corporate clients, and the importance of labor issues in deciding the outcome of U.S. presidential elections, CNN recently came to Moscow to highlight the activities of Russia's largest software development vendor, Luxoft. The news channel's correspondent had the following to say about what he found at Luxoft, "The company bridges the communication gap using new, Western approaches. Luxoft employees regularly practice teamwork as part of a leadership program. Luxoft has inherited some of the (Soviet) scientific culture based on innovation and security. Their top security official tells me their clients' information is now probably at least as safe here as at their clients' home offices."

Luxoft CEO, Dmitry Loschinin, weighed in on the election year rhetoric that has left his customers publicity shy, "We work hand-in-hand with our customers. Our project managers and programmers work with the customers' project managers and programmers. We are an extension of our clients' organizations. Without the option to outsource, many projects would simply not fit within company budgets. Many good ideas would never come to fruition. Our services help our customers achieve greater efficiency that enables them to offer more competitive products and services."

George Georgiyev, Luxoft's vice president of sales, explained that there is more to outsourcing than many people realize. "Companies are now using outsourcing to improve work continuity. For instance, when a team of programmers in America leaves for home, a team of outsourced programmers somewhere else, such as Russian or India, continues the project. Doing this only creates jobs and companies gain a convenient around-the-clock working day at reduced rates. By making creative use of outsourcing, a company's progress need not sleep."

Domestic workers, whether in the U.S., Britain, Australia or any other country, are always vulnerable to foreigners willing to work for less. Previously, low-cost labor came to countries via immigration. History shows that outsourcing is not so new: between 1870 and 1910, 60 million Europeans, mostly young males, emigrated to the U.S., Canada, Australia and Argentina. The tremendous influx of low-cost labor boosted the labor force in the U.S. by a staggering 24%, according to Harvard economist Jeffrey Williamson and University of Essex economist Timothy Hatton. Today's outsourcing is comparatively microscopic. According to the U.S. Department of Labor, outsourcing only affects 2% of American jobs, and only 1.5% of layoffs happen because of outsourcing.

The use of technology has altered the formula by making it possible to send the work to the low-cost labor. Whether the work goes to the workers or vice versa, the result is the same: Average wages decline together with the cost of goods and services. Lower prices for goods and services are just as important to economic prosperity as are higher salaries.

American programmers' salaries have held firm based on data from 2000-2002 with adjustments made for inflation, according to Jacob Kirkegaard, a researcher at the Institute for International Economics. The number of programming jobs in the U.S. has declined by 14%, though most of this figure can be attributed to the dot-com bust than to outsourcing.

So why the uproar - why is software outsourcing being vilified as a major contributor to America's job slowdown that has predictably followed the burst of the massive hi-tech bubble? For decades, American manufacturing jobs have gone to places like Taiwan and China without much complaint. America was content to outsource many low paid manufacturing jobs and replace them with fewer but higher paid white-collar technical and management level jobs. The brouhaha over software development outsourcing stems from the alarm caused by its encroachment on the white-collar jobs that are the domain of college graduates and technology professionals. In response, many politicians conveniently scapegoat outsourcing as an international issue that explains the domestic job market's woes.

There are social and political ramifications indirectly related to economic arguments for and against outsourcing that need to be considered. During the cold war, the United States and the Soviet Union struggled against one another in an ideological battle that cannot be calculated human and financial terms. Now that the cold war is over and things have swung in the direction of market economies and democracy, developing countries like Russia, Poland, Yugoslavia, and others need the cooperation of the U.S. and western European countries to strengthen their political and social systems. The best way to do this is to stick to the very economic, social, and political principles espoused by the West during the cold war. It is ironic that Russia, the former heart of the Soviet Union, is now a democracy with a largely free market economy, a reality that 20 years ago would have been as hard to fathom as time travel. Yet instead of assisting Russia to develop a stable social environment and economy, many in the U.S. say, "Hey, not so fast, we know you want to build a middle class and to experience the good life too, but those are American jobs!" The price of protectionism could be a lot higher than the prospect of losing a relatively small number of jobs to market competitors.

Daniel W. Drezner, an assistant professor of political science at the University of Chicago has stated, "Fortunately, this alarmism is misguided. Outsourcing actually brings far more benefits than costs, both now and in the long run. If its critics succeed in provoking a new wave of American protectionism, the consequences will be disastrous -- for the U.S. economy and for the American workers they claim to defend."

Economists are almost unanimous that outsourcing is a positive result of free markets and not something signaling the end of good jobs in America. "Outsourcing is an emerging way of doing business that helps keep U.S. companies competitive. Data show that outsourcing is not a threat either to our economy or our workforce - in fact, it results in stronger productivity growth and new, higher-paying jobs," noted John J. Castellani, the Business Roundtable president, in a July 20 speech.

Irrespective of the political rhetoric fueled by the run for the White House or anxieties associated with the shifts and transformations that naturally occur in market economies, outsourcing is a global economic reality because it offers clear benefits to both the mature economies that use it and to the developing economies that offer it. Fortune 500 companies on down take advantage of offshore outsourcing because it helps them to compete better. As long as this is true, companies like Russia's Luxoft will be there to meet the demand.