The week’s edition of the Economist is a rather good one. It is a publication which although generally on the side of the angels, often infuriates me with its statist meta-contextual inconsistencies. Likewise they are at their worst when describing broader civil liberties issues, particularly self-defence. That said it is a magazine which is often a bloody good read.
The leader article is called The new jobs migration and discusses a subject dear to my heart: free trade and outsourcing.
The fact that foreign competition now impinges on services as well as manufacturing raises no new issues of principle whatever. If a car can be made more cheaply in Mexico, it should be. If a telephone enquiry can be processed more cheaply in India, it should be. All such transactions raise real incomes on both sides, as resources are advantageously redeployed, with added investment and growth in the exporting country, and lower prices in the importing country. Yes, trade is a positive-sum game. (Adam Smith did think of that.)
Great stuff. When people argue that they just want to ‘protect American (or British/French/Japanese) jobs’, what they are really demanding is that force be used to ensure that other people’s purchasing power within their own nation not be allowed to grow because of their own sectional interests.
When people look at cases of folks loosing their jobs in the USA or UK because an Indian or Philippine call centre can do it cheaper, and then call for this to stop, they are not looking beyond the first causal link of costs and benefits. Moreover, they are ignoring that we live in an extended and (largely) capitalist society which is extraordinarily good at dealing with such problems when the ‘invisible hand’ is free to work its ‘magic’. Some people are losing their jobs, ergo, this is bad and must be stopped… this rather like concluding as the world seems intuitively to be flat, therefore it must be flat. By this logic all labour saving devices should have been declared ’employment destroying devices’ and banned long ago.
There is also another splendid article in the United States section called The Great Hollowing-out Myth which roundly rubbishes the notion that outsourcing damages the US (or other) economy and overall employment prospects (alas that article is available only via on-line subscription or in the print version):
Contrary to what John Edwards, John Kerry and George Bush seem to think, outsourcing actually sustains American jobs
[…]
Yes, individuals will be hurt in the process, and the focus on public policy should be directed towards providing a safety net for them, as well as ensuring that Americans have education to match jobs being created. By contrast, regarding globalisation as the enemy, as Mr Edwards does often and Messrs Kerry and Bush both do by default, is a much greater threat to America’s economic health that any Indian software programmer.
Run, do not walk, to your nearest newsstand.
The only issue I’ve had is not so much loss of jobs but loss of industries. There is some talk (and I’m not sure just what to believe) that certain important industries (and talents) are leaving the shores of the US (can’t speak for the UK) that might be needed in cases of national defense. There is also the notion that the US is acting now as a feeder of resources and an importer of finished goods, which precisely the role that third world countries used to occupy. But certainly products should be made where it is economically advantageous to do so. But in the long run, after the economies grow and enjoy the benefits of market forces, the ever attendant reallocators will emerge, and the price advantages will disappear. But we might as well import the cheap (though hopefully uncoerced) labor while we can, and hope that in cases of national protection we can invigorate the necessary industries if necessary, and leave ‘collective’ tendencies until then.
The argument of “national defence” has been allways used as a pretext for agricultural subsidies (“we need to mainatin an agricultural sector, to feed us in an emergency”), and for corporate welfare (we need to mainatain a national armament industry).
Well, they are pretexts. Those benefitting from subsidies will use any pretext.
Nothing serves better national defence that being rich, and that is aceived by free trade, and ufettered economic activity.
The justification for the infamous wool and mohair subsidies was that the US Army need a domestic source of wool for their uniforms. When was the last time you saw a wool uniform? US Army uniforms have been made out of synthetic materials for decades, but the subsidies are still in place.
Oh, Europe is definitely flat.
Jacob:
You say “Nothing serves better national defence tha[n]being rich,..”
That is totally absurd!
The notion that the US is acting now as a feeder of resources and an importer of finished goods is a myth. According to the latest US Commerce Dept statistics, manufactured goods account for 88 percent of total US exports, non-manufactured goods just 12 percent. In addition, the US share of world manufactured exports has increased from 12 percent in 1990 to 14 percent in 2000.
Perhaps unsurprisingly, there appears to be little comment in the US about investment from the countries to which US companies are outsourcing. One example of that is Chinese investment in the US textile sector. Huh? Yeah, okay, it’s peanuts compared to investment or outsourcing coming the other way, but how long will it be before Chinese companies become major players in some sectors: employing Americans, contracting work out to Americans, exporting goods made in America to global markets? Perhaps I’m an optimist, but I don’t think it will be all that long.
Apologies in advance for linking to my own website, but it seemed the easiest way to do it.
Thanks for the great link re: European Commission’s Corporate Social Responsibility concept. This is truly scary reading…some of the “suggestions” are straight out from modern-day-Communist Manifesto such as “if an operation is profitable, outsourcing should not be an option. Redundancies should be used only viewed as last resort, that all other solutions should be exhaused first.”
Wow. I wonder which planet these muppets are living in? They have just deviced a receipt for economic disaster – effectively outlawing any increases in productivity or efficiency. Of all the stupid things I have seen to come out from Brussels (and there are plenty) , this ranks high up there in the altar of economic incompetence.
Much as I agree with your principles you need to understand that there are people who naturally will find it difficult to follow you.
Suppose you are a person of a certain age (perhaps over 50) who works in a technical discipline, maybe a networking/IT type person.
When their job moves to China or India, as it will in a year or two, they know they will never, ever, get another job (if you don’t believe that assertion, try sending off a few CV’s like that and see what happens), and being made redundant at that sort of age means that their pension, if any, when they eventually get it ten or twelve or fifteen years later – or maybe later still given modern demographic issues – will just about pay the paper bill if they’re lucky.
These people are never going to agree with you that outsourcing is a gain. Incomes will rise? Yes, but WHOSE incomes? Not theirs. Never.
If you turn a large fraction of the law-abiding hardworking taxpaying population into embittered old has-beens who need financial support, it doesn’t matter how wonderfully correct your libertarian principles are, it is going to cause trouble.
Of course, I don’t have a solution.
When their job moves to China or India, as it will in a year or two, they know they will never, ever, get another job
Job opportunities are destroyed by Tax and Regulation, not by industrious Indians & Chinese.
Andrew,
Certainly many people will not see the bigger picture (see the title of the article) but it is not a ‘libertarian principle’ that capitalist free trade creates jobs, it is just an observation of reality. You do not have to be a libertarian to see the truth of that as both the theoretical understandings and empirical evidence are beyond reasonable dispute.
Freed from political constrains, markets create new and hitherto unexpected jobs as capital is freed up for other uses (for example freed up by things like outsourcing and other forms of process enhancement). The alternative is a more rigid jobs market which for a while may ‘save’ some existing jobs but at the cost of making the company less profitable and thereby less able to generate wealth…and consequently raising the cost of job creation elsewhere in the economy as well. Stasis is not good for employment.
The Economist is an antisemitic rag, and should not be supported under any circumstances. I don’t care how interesting they may be on other issues.
I wouldn’t read the Nazi Baseball Prospectus, or the White Power Party TV Guide. I won’t read the Economist either.
Spoons:
Examples of antisemitism by the Economist please.
Subscribe – and sign up for the email alerts – you get some of the good stuff as well as other bits sent directly to you – and all for significantly less money than the newstand.
Yes, an excellent article.
I believe that in certain circles, not being a rabid cheerleader for Arik and his wall makes you a White Power Nazi; I’m guessing this is the Economist’s transgression in Spoons’ eyes.
John J. Coupal:
‘”Nothing serves better national defence than being rich,..”
That is totally absurd!”
Not totally !
You need to be rich to buy all the gadgetry that is needed for national defense: missiles, airplanes, sattelites, precission ammo, radars, etc. Poor countries will simply not be able to finance all those goodies, which don’t come cheap.
Being rich is a precondition for having a first rate defence, but not a sufficient condition. You can be rich and defenseless, if you refuse to invest in defence what it takes (like the EU or Saudi Arabia).
There are other factors: motivation, morale, etc. but wealth (or some wealth) is an essential ingredigent of defense.
Richard,
Here are a couple links re: the Economist and anti-semitism. The freeper link is a reprint of a Jerusalem Post editorial on the subject (free republic was the only place I could still find it free online).
http://www.freerepublic.com/focus/news/711016/posts
http://world.std.com/~camera/docs/cmr72/econ72.html
l
John B,
I suspect that this is falling on deaf ears, but if not, I’d recommend this Steven Plaut column for an explanation of why views like those expressed by the Economist are antisemitic. Plaut wasn’t talking about the Economist, specifically, but what he says applies.
With that, I’ll end my hijacking of this thread.
John Coupal,
The wealth of the US is what made it able to defeat the USSR in the cold war. That wealth was created by capitalism, their poverty by communism.
Andrew,
Im not sure that its true that those people lose their jobs forever. They may have to take a lesser position, at least for a while, or even something in a different feild that requires less skill. This makes things harder on them specifically, but their cost of living will also be down. I dont agree at all that they would become dependent on others for support.
Free trade is utter bunkum and I haven’t seen anyone actually prove it otherwise. What I have seen is a lot of wishful thinking, supposition and quoting long dead economists. Frankly I think most, if not all, modern living economist have their heads located in their aft apertures so quoting a dead one isn’t very impressive.
Fact is that when there are pressures to make product or service more profitable, the question is either to cut costs or to improve the product/service. With outsourcing/offshoring the answer is to cut wage costs and move the work offshore. Without outsourcing/offshoring the answer is to invest in R&D and discover/exploit new technologies to automate and reduce costs that way.
In the first example jobs are permanently lost.
In the second example jobs are lost, but new jobs are created.
See the difference? Frankly I expect that by the end of this year the entire concept of “free trade” and “global economy” will be fully discredited.
ed, you know so little about economics that I think you will be hard pressed to find anyone here who will give you the time for your much needed real world economics lesson. If you cannot see the correlation between which nations have the highest GDP per capita and which nations are economically most free, then you really need to get yourself an education. Rule one of getting into a gunfight is ‘have a gun’. You are unarmed.
Frankly I expect that by the end of this year the entire concept of “free trade” and “global economy” will be fully discredited.
Oh no! Take to the hills everyone. We’ve been rumbled!
Seriously? The entire concept? So how exactly is having a growing number of Indians and Chinese improve their living standards and purchasing power dramatically going to discredit free trade? …Oh, I know. Those sneaky foreigners. They’ll take all that money and refuse to buy any goods or services from the West, causing a worldwide recession. All by Christmas.
Hmmm. So have I been humbled?
Ok then. Indians and Chinese become a little more affluent. You’re saying that they will now suddenly start purchasing American products and services?
Just *exactly* what products and services are you talking about? Products and services that are currently being outsourced? So you’re telling me that Indians are going to buy an American product … manufactured in India? And pay American prices? Doesn’t that sound a bit ridiculous?
So let’s use company ABCD as an example.
1. Product manufacturing is in India.
2. Warehousing is located in each major country.
3. Shipping is administered from India.
4. MRP and manufacturing control is in India.
5. IT services is in India.
6. HR is located in India due to lower costs and the major proportion of employees are located in India.
7. Engineering is in India, again lower costs.
8. Accounting is in India, lower costs.
9. Clerical staff is located in India, lower costs.
10. Most executives are located in India though the corporate office is located in Maryland.
So, other than a few warehouses here in America, just how American is company ABCD? And just why, and how, would this operational company actually benefit America or any Americans? It is true that ABCD would pay federal taxes but the amount of employment would be almost nil. Additionally most of any subcontracting, the lifeblood of small companies, would take place in India where the majority of all operations are taking place. In fact in such a scenario it’s seems unlikely that ABCD would even continue the fiction that it’s an American company and would move completely offshore to escape paying federal taxes.
So why EXACTLY is this scenario to be hoped for?
Be inclusive. Provide painful detail. That’s the major problem I have with “free traders”. When asked for detail they suddenly don’t have any time to post. I’ve made the same exact points on a number of different blogs and in not one single instance has anyone actually come up with any detail whatsoever. Instead there are homilies about Ricardo and nosense about “cyclical events”. Ricardo especially is annoying as the second part of the argument is never acknowledged. The bit about global trade exerting a downward pressure on wages. Since the average wage level of the world is a short step up from poverty, this is the end result of global trade.
Sounds yummmy.
The simple fact is that we’re approaching a situation that has not existed before. In no other instance has a nation’s industries disappeared as is happening now. A decade ago you same people were telling everyone that manufacturing was overrated and that America could do well with a service oriented economy. Well? The service economy is moving overseas. What what kind of economy do we have now?
Detail detail detail. Either you have the answers or you don’t. If you don’t have the answers then don’t pretend that you do.
Hell. There’s always porn. I suppose that could be the next great industry.
First, on subsidies necessary for national defence reasons. As I see it, the best answer to this is to remove such subsidy power (and all other as well) from the normal political process, and leave them to the various defense agencies. The subsidies would then be payed out of their general budgets, and presumably would be more likely to actually involve things that are important for national defence.
On ed’s lack of contact with reality:
Widgets produced by the ‘nonAmerican’ company ABCD are less expensive than before. Widget consumers can now either buy more (increasing their wealth) or buy the same and have more disposable income to spend on other goods and services, say eating out at restaurants (again increasing their wealth). Restaurants or other firms are better off now that widget consumer can get widgets cheaper from ABCD.
If more widgets are consumed, that means more warehouses here in the US to store them, more trucks to transport them, more business for the warehousers and truckers. All of this regardless of whether or not you consider ABCD an American or an Indian or a Chinese company.
In addition, the dollars that ABCD acquires by selling widgets to Americans must eventually be used to buy American goods, as more dollars accumulate overseas, the exchange rate becomes more favorable to American exports (the ones still in America, obviously), so foreign demand increases for those goods which America has an relative advantage in producing.
On global trade exerting a downward pressure on wages. This may be true in the short-run, but if so, it is also the case that global trade exerts downward pressure on prices. Thus while wages may be nominally lower, purchasing power will not necessarily go down, and on the large-scale, purchasing power (for Americans and Chinese and Indians) will go up as goods and services are provided more efficiently.
The approaching situation has existed before, businesses in Vermont have relocated to Texas, businesses in California have relocated to Virginia, interstate trade has occured all across America, to the benefit of the general population.
Your argument against global free-trade is fundamentally an argument against all trade. If you accept the basis of your views, then you should be living a completely self-sufficient existence and engage in absolutely no trade whatsoever.
I suggest if you want some more detail, go look at some stuff at http://www.mises.org. They have lots of free information for those like yourself who seem to lack it.
Ed,
I was going to answer you, but bil. took my answer, and probably said it better. I would only add this: Loss of a job to overseas labor may indeed be similar to loss of a job due to machine labor. We no longer employ reapers with scythes. One guy in an airconditioned combine can out-harvest more reapers than you can imagine. Those reapers are now out of a job, permanently. So they go do something else. A new technology is invented that requires labor, be it skilled or unskilled, and life goes on. I can not tell you in detail what the next new technology will be, because I havent invented it yet, but I can point to a myriad of past examples of people whining about lost jobs due to technology or outsourcing, wherein doom and gloom claimers pronounced the end of the economy in the US, and yet something came along that not only saved the economy, but spurred it to far better reaches. That something was not random, it was not evolution, it was the mind of man creating. It was an idea and someone with the guts to try it. There are always going to be new ideas, new industries, and new jobs. If some poor guy lost his job, I sympathise, but to assume that he will never be able to find work is foolishness and shows utter contempt for history.
I work in the IT field. I see that there are fewer jobs than there used to be posted on the mainboards. I also see the rif-raf that called themselves skilled having to work a little harder. I see higher quality workers rising to the top. I see those with real brilliance in the field creating new technology, not doing support services. I see those that used to do support services finding other things to do, such as working in active support instead of phone support, which is a higher paid field. I see the communications field blossoming and merging with the computer field to create a whole new sector of jobs that are not yet being outsourced. If they do, by then we will be on to something else. Humans have an amazing ability to overcome obstacles, as evidenced by the fact that we are the dominant species in spite of inferior physical abilities and nearly dormant instincts. A little thing like globalization isnt going to destroy us, that goes for details or the big picture. Have a little faith in yourself Ed, your a human being jsut like the rest of us, you can make it on your own.
Spoons: the link to the Free Republic article shows that the Economist is not admirer of the Israeli government, but how does that make them anti-Jewish? If they make critical remarks about Putin, I mean lots of critical remarks, does that makes them anti-Russian? Also, have the Economist been running lots of articles critical of Jews and Jewish institutions who are not associated with Israel? If they have been doing that, I will start to revise my views and suspect that they might indeed be anti-Jewish.
Yet as it stands, disparaging Israel or opposing Zionism is not the same as being anti-Jewish, just as disparaging the policies of the government of Britain or Northern Irish Unionist movement does not automatically make a person anti-British or even anti-Protestant.
bil took my answer too.
The only thing I’ll say is that ed obviously didn’t read the economist article. To rectify that fact :
“Outsourcing (or “offshoring”) has been going on for centuries, but still accounts for a tiny proportion of the jobs constantly being created and destroyed within America’s economy. Even at the best of times, the American economy has a tremendous rate of “churn”—over 2m jobs a month. In all, the process creates many more jobs than it destroys: 24m more during the 1990s. The process allocates resources—money and people—to where they can be most productive, helped by competition, including from outsourcing, that lowers prices. In the long run, higher productivity is the only way to create higher standards of living across an economy.”
and this:
“Churning, they point out, has being going on in the American jobs market for years, and “the creation of new jobs always overwhelms the destruction of old jobs by a huge margin.” Between 1980 and 2002, America’s population grew by 23.9%. The number of employed Americans, on the other hand, grew by 37.4%. Today, 138.6m Americans are in work, a near-record, both in absolute terms and as a proportion of the population ”
“And what of China? Still piffling. Certainly, China competes with some labour-intensive American industries that have long been in decline, such as textiles and stuffed toys. In the mid-west, metal-furniture makers and small tool-and-die foundries face growing competition. Yet most Chinese imports are of consumer goods, competing with imports from other poor countries, whereas America’s manufactures are chiefly capital goods. Even at their peak in 2001, the number of all “trade-related” layoffs represented a mere 0.6% of American unemployment.”
and this:
“As for the Indian threat, “offshoring” is certainly having an effect on some white-collar jobs that have hitherto been safe from foreign competition. But how big is it, really? The best-known report, by Forrester Research, a consultancy, guesses that 3.3m American service-industry jobs will have gone overseas by 2015—barely noticeable when you think about the 7m-8m lost every quarter through job-churning. And the bulk of these exports will not be the high-flying jobs of IT consultants, but the mind-numbing functions of code-writing.”
You wanted facts, you get facts.
The fact is that the numbers of job “going overseas” is really a very tiny number, less than the normal job turnover during any period.
“The simple fact is that we’re approaching a situation that has not existed before. In no other instance has a nation’s industries disappeared as is happening now.”
Wrong again. This same situation has been repeated throughout the history of civilization. Greece, Rome, Egypt, Renaissance Europe, you name it. This subject has been revisited thousands of times by thousands of countries. Long dead economists like Adam Smith and David Ricardo dealt with these issues 200 years ago because they were exactly the same back then, and before. I’m sure there were even people in theri times that awore that “this time is different”.
For somebody obcessed with facts and details, you don’t seem to have very many, and the ones you do have are wrong.
I’m in agreement with Perry on the Israel question; it’s also worth pointing out that (unlike Spoons’s straw-antiZionists), very few of the people who criticise Israel outside the lunatic Indymedia fringe disagree with its right to exist.
Most of Israel’s liberal critics hold it to harsher standards than its neighbours. Whether this is justifiable (because Israel has been capable of meeting Western norms of civilised behaviour in the past) or inverted racism that’s condecending towards Arabs, is another question. It sure as hell ain’t antisemitism, however.
Re Ed: like all the Presidential candidates, including the incumbent, he’s another argument for making economics compulsory study in high school.
(hmm, just realised where I’m posting. If you’d like to mentally add “in preparation for the abolition of state high schools and state compulsion in all forms”, that’s fine by me).
It’s also perfectly possible to criticize Israel’s right to exist (though The Economist doesn’t do this) without being anti-semitic, provided your arguments don’t hinge on its Jewishness per se.
Some examples:
1. Nation-states are a vile Hegelian construction (as our own dear EU) and all such polities are to be decried. Israel was founded as a state embodying a fictional Jewish nation, so it has no right to exist per se.
2. Nation-states are OK, indeed they are the only form of state really recognised by the doctrine of national self-determination. However Israel is religiously defined and modern Hebrew an invented language, so there isn’t a nation to have a state.
3. It’s fine in most respects, but it is in the wrong place.
4. (One I actually like.) States are facts. We can approve of their policies or not. But it is nonsense to impute rights and wills to them. No state has a right to exist.
“Most of Israel’s liberal critics hold it to harsher standards than its neighbours. Whether this is justifiable (because Israel has been capable of meeting Western norms of civilised behaviour in the past) or inverted racism that’s condecending towards Arabs, is another question. It sure as hell ain’t antisemitism, however.”
It sure as hell is. When you savagely criticize the most modest self-defense efforts of Israel, but are unable to manage a word of condemnation for the murders that make such efforts necessary, that’s antisemitism. There’s no other word for it.
Nonsense. If I hold you to higher standards of behaviour than a moronic ten-year-old, this isn’t anti-Spoons-ism. Are you seriously claiming that it is?
And again, if you think Israel’s critics don’t condemn suicide bombers, you’re simply wrong.
Hmm.
1. “As I see it, the best answer to this is to remove such subsidy power (and all other as well) from the normal political process, and leave them to the various defense agencies.”
Do you imagine that this would remove the element of political chicanery from the process? Need I mention the Bradley Fighting Vehicle, a program that took 2 decades and cost $11 BILLION to develop? Or the Crusader artillery vehicle which cost billions more, and wasn’t even deployed? Are you serious about this?
Frankly I don’t see what benefit there is of moving it into the responsibility of defense agencies.
2. “On ed’s lack of contact with reality: Widgets produced …”
Amusing but you don’t actually address the point I made. My point is, again, how does moving ABCD’s operations to India benefit America?
“If more widgets are consumed, that means more warehouses here in the US to store them, more trucks to transport them, more business for the warehousers and truckers.”
So this is a positive development? I’m supposed to be pleased that a couple dozen low wage jobs are created as compensation for the export of hundreds of higer wage jobs? I don’t know if you understand this but warehouse workers don’t get paid all that much and truckers hardly more. Additionally, I need to point this out, NAFTA allows for *Mexican* truckers to take over business in America. Which means those truckers you are alluding to are most likely to be Mexicans, not Americans.
Looks like a very poor trade IMHO.
3. “In addition, the dollars that ABCD acquires by selling widgets to Americans must eventually be used to buy American goods…”
Ummm. Exactly why? If most manufactured goods are made overseas then what products are being purchased from America? If most services are being outsourced to India, then what services are being purchased from America? Where in this process are people buying from America? So what if the dollar becomes cheaper? If the majority of manufactured products and services have been shipped overseas, then why would people, and how would people, purchase from America, and thereby provide an inflow of cash into the American economy?
This is the specific point I wanted answered, which you didn’t do. If clothing is made in Malaysia, then the purchases will be made from Malaysia. If software is written in India, then purchases will be made from India. So what is America actually producing that will provide an inflow of money?
4. “so foreign demand increases for those goods which America has an relative advantage in producing…”
I want to remind you that I’m the one asking the questions, not the one answering them. So here again is the question. What would we produce? As I see it now there are definite downsides to moving operations overseas. However that is changing rapidly as people overseas gain more experience in providing goods and services into this outsourced system. True there is a certain amount of “friction” created by cross cultural and language barriers, but these will ease rapidly and, at some point in the near future, the cost and struggles of conducting these operations will ease immensely.
Which means the process of outsourcing will *acclerate*. So what products do you envsion America producing that will provide for the inflow of cash? And if you don’t know or aren’t sure, what does that say about your position?
5. “On global trade exerting a downward pressure on wages. This may be true in the short-run, but if so, it is also the case that global trade exerts downward pressure on prices.”
Which, in a world without the cost of basic living standards and various levels of taxation, wouldn’t be all that bad. If the cost of living, housing, food, insurance, transportation, schooling and etc, were substantially low then incomes could be correspondingly low. However that’s a fool’s paradise because it simply couldn’t exist in America. Basic costs are *enormous* and largely fixed. Property taxes alone, in New Jersey as an example, can exceed $6k per year in moderately decent neighborhoods alone. Higher value towns have correspondingly higher valuations. Is it your suggestion then that the American middle class should resign itself to living in tenements? Not much of an argument btw.
Then there’s the term “short-run”. A marvelously indeterminate phrase with no connection to any reality. Short-run could mean a decade. It could mean the next century as the combined populations of India, China and southeast Asia amounts to *half* the global population. It would take an enormous amount of wealth and time for that population to have it’s standard of living raised to the extent where moving industries to America becomes attractive.
Additionally I need to point out that in order for such a movement to become viable would require the reversal of fortunes. So in effect your argument, in favor of “free trade”, requires the impoverishing of America.
Good Show!
6. “The approaching situation has existed before, businesses in Vermont have relocated to Texas…”
Neat-O. Except that you simply neglect to mention the other parts of that same argument. That there is also the free flow of workers along with the work. That the average living standard, and regulatory requirements are largely the same. That there is a far greater leveling of the playing field within America than between America and India/China.
Nothing like using an irrelevant example to “prove” a point eh?
7. “Your argument against global free-trade is fundamentally an argument against all trade…”
Incorrect. My argument is that “free trade” is not free at all. Nor is it as much of a benefit as is being pushed. So far I remain unconvinced that “free trade” isn’t possibly THE most distasteful theory in existence. And that’s saying something.
8. “I suggest if you want some more detail, go look at some stuff at http://www.mises.org. …”
And I suggest you look at the current employment figures. I much favor reality over theory. From what I’ve seen reality is much harder to refute than some half-cocked theory.
9. “Loss of a job to overseas labor may indeed be similar to loss of a job due to machine labor.”
Incorrect. Loss of a job to automation or machine labor doesn’t imply a permanent loss of jobs. However exporting jobs overseas *does imply the permanent loss of jobs. With automation those displaced from their current obsolete work can attempt to retrain into positions where they now produce the machinery, repair the machinery or operate the machinery. Or they can be hired to work at producing parts for that machinery.
In such ways is work transformed from one aspect into another.
However when industries are exported to other countries, they are permanently lost. Any gains from automation now occur elsewhere. Any transformations no longer benefit domestic populations. After all the same price conciousness that pushed the exportation in the first place would also govern any advances and transformations later on.
10. “but I can point to a myriad of past examples of people whining about lost jobs due to technology or outsourcing…”
Ok then, I’ll bite. You show me an example of benefit coming from *outsourcing*. The technology bit I explained above, but I don’t have an example of a positive result from outsourcing. Sooooooo.
Tell me, show me. And no mucking about.
11. “I work in the IT field….”
Same here. I’ve been developing for 26+ years and what I see worries me. The primary worry is that there is building up a gap between junior level positions and senior ones. What happens to future junior programmers when there aren’t any jobs that will allow them to gain the necessary credentials to advance upwards? What happens when the only properly credentialled senior level people are *only* found in India because that’s where all the available work is?
So what happens when you retire? Where will the next generation come from when there aren’t any real opportunities? It’s not like you really can do a world-class mission critical enterprise system in your garage.
12. “I see the communications field blossoming and merging with the computer field to create a whole new sector of jobs that are not yet being outsourced….”
Ay! There’s the rub.
The process of outsourcing is accelerating, which I’ve said before, which puts an extraordinary amount of pressure on anyone trying to make a career. So how long before it gets outsourced? Three years? Five years? Then what?
Frankly I’m entirely unconvinced by your argument. I could pick apart each sentence but I think that would be a waste of time. I’ve written my concerns about the IT field and I think they are good ones. I view outsourcing as the Devil’s Bargin. It gives a reasonably decent career for those who have advanced to senior level positions but it condemns that group to eventual extinction.
13. “Humans have an amazing ability to overcome obstacles, as evidenced by the fact that we are the dominant species …”
I find it interesting that you used the generic “humans” rather than Americans. I see your point. Humans will survive and prosper, even if they aren’t Americans.
14. “You wanted facts, you get facts. …”
The fact is that oursourcing is not that great a problem *now*. The problem, as I see it, is that the process is *accelerating* and that there is virtually no end point in sight. I cannot state this in any other way. It might be small now, but there is no logical, financial or business reason for it to stop, subside or slow down. Every single success in outsourcing induces additional attempts and each additional attempt is another stake into the heart of the American dream.
Frankly the fact is that those studies and reports are entirely suspect. I have never seen a single instance where an economist, pulling predictions out of his ass, hasn’t been shown to be utterly wrong. If you have an example where an economist has made an accurate prediction **11 years into the future** then I want to see it.
Until then I’ll stick to my personal belief that economists are arseholes who talk fast but know little.
15. “Wrong again. This same situation has been repeated throughout the history of civilization. …”
Really? There has been episodes in history whereby every single industry has the potential for being shipped out to another country? I seriously doubt it. Those examples have no correlation to today. But if you do think that this is true, then provide *detail*. I.e. provide an explicitly detailed example of a nation or city-state that had prospered after having had at least 50% of it’s businesses shipped to another place. An example where just one product or service was shipped is irrelevant. It must be at least half because that’s the situation that is facing America today.
Or else just give me examples and I’ll dissect them. Go ahead. I dare you. I double dog dare you. With cherries on top.
16. “Re Ed: like all the Presidential candidates, including the incumbent, he’s another argument for making economics compulsory study in high school.”
*shrug* thanks for the insult. I could respond in kind by calling you a “hairless monkey gasbag”, but that would be demeaning myself. Instead I’ll point out that nobody has provided either a refutation of my main points or *detail* on why I’m wrong. I’ve gotten homilies and little else.
Well?
Ed: Great posts!!!! I’m sick of snarky Social Darwinists on this blog, I read it sometimes when I want to get my blood boiling. I read that said that wages would never improve overall because costs would always cycle to the lowest wage paying country. So as soon as a country is availiable for investment and capitalists want to invest in it, work will go there. This will be a never ending cycle and wages will never go up. WE will end up with a class of uberglobalized elites, and the rest of us will be subject to whatever they want. Governments will have no effect on them because they will move wherever it is most convenient. Knowing human nature, and looking at world history, this scenario seems as likely to me as the one you are promoting. Capitalism will only work for a moral people. Laying off workers right before retirement, holding workers hostage to the price of everything and the value of nothing, landed us Mr. Marx and all the problems of communism. People should come before profits. You argue that the market will fix everything, but I am not that hopeful of human nature. It seems to me that people only do things for others many times when they are being watched. All I see here with these ideas is 19th century redux on a global scale.
It is really, I mean, really, simple. Lower costs of production mean cheaper good for purchasers (i.e Americans) and more capital freed for alternative uses, which means more jobs. And the idea everything is outsourcable is daft. Social Darwinism has nothing to do with anything.
“Andrew, Im not sure that its true that those people lose their jobs forever. They may have to take a lesser position, at least for a while, or even something in a different feild that requires less skill. This makes things harder on them specifically, but their cost of living will also be down. ”
The cost of education, housing, and medical care is not following the cost of less regulated products and services downward.
Given this, the true answer to outsourcing is to deregulate those industries and get relentlessly cheaper and better products out of them. Then even former IT guys who are busy retraining for new fields will easily stay afloat.
“Suppose you are a person of a certain age (perhaps over 50) who works in a technical discipline, maybe a networking/IT type person.”
Well, then your kids are most likely grown and you are no longer required to support them. Going back to school and retraining is even more feasible than it would be for a 25-30 year old with small children.
Let them go out and retrain!!! Let them eat cake!!!! Let the IT worker get laid off, lose his home, run up his credit cards, the market will deliver. Why build sewers? Who cares if those pesky people get plague,etc. Who cares if they get laid off. We need to increase our own wealth by destroying the middle class in developed nations. It is their own fault for training for the wrong profession. Give them TV’s and 24 hour cable, it will make them happy!!!!!!!!! It is the new opiate of the masses.
Hmmm.
1. “Lower costs of production mean cheaper good for purchasers (i.e Americans) …”
But to purchase requires that the buyer has money to effect the purchase. My point is that there hasn’t been any examples given that would show an inflow of cash into America.
2. “and more capital freed for alternative uses, which means more jobs. … ”
But capital goes only where there is a return on that investment. So the capital needed to build a factory will only go where a factory can be built. If all widgets are made in India, because competition between companies requires the same cost cutting measures, then a widget producing factory proposal for Maryland won’t gain any capital investment will it?
Capital by itself means nothing. It is simply potential, much like a charged battery. For it to have an effect requires a viable path for that capital to flow, along with a return flow back to that battery of potential capital.
I.e No return, no investment. So why would people invest capital in America and, if they would, where?
3. “And the idea everything is outsourcable is daft.”
But I didn’t say that *everything* could be outsourced. What I am saying is that a LOT can be outsourced. There is a portion of the economy that is based on domestic operations that, I assume, cannot change. When you get your plumbing fixed or your car, you need someone local to do the job. But other than that, most white collar jobs can be outsourced.
One person, in another thread, posited that lawyers couldn’t be outsourced. I disagreed in that the lawyers actually arguing a case couldn’t be outsourced. But all the research staff and para-legals could be outsourced as long as there were competent, educated and cost-effective people/ways could be found. If it costs 1/3rd or 1/4th to hire a single legal researcher in India, then wouldn’t legal firms do that?
And I agree that an RN nurse that actually comes to your hospital bed couldn’t be outsourced, a lot of lab staff could be outsourced. In fact much of the MRI analysis now happens in the Phillipines. Much to my surprise.
*shrug*. So what high wage white collar jobs couldn’t possibly outsourced? Well? Any ideas? From what I see there aren’t a lot of white collar jobs that couldn’t be outsourced. What makes the list are those that are for very small companies, for whom outsourcing might not be economically viable *yet*, or for positions that require a first-person attendance.
But that’s hardly reassuring. Especially the “yet” part.
…
Note: I want to be convinced. I want someone to show me, in as explicit a fashion, that I’m completely wrong. I don’t want to worry what kind of profession or career my neices will have available when it’s time for them to go to college. But from my perspective, it’s a vanishing small array of choices.
They won’t show you because you can’t. The idea about capital flowing always to the cheapest market is a good one. The “free market” religion is about to get a big shake up. I hope these guys are ready for the political instability and poverty that their corporate ponzi scheme will cause. Prove us wrong. Good job Ed. They are Social Darwinists. Ever heard the term “useful iodits? ” In my opinion, that doesn’t apply to Ed and myself.
1. “Do you imagine that this would remove the element of political chicanery from the process?…”
-No, I do not, which is why I didn’t say that.
The examples you mention are different from industry subsidies that I was talking about.
“Frankly I don’t see what benefit there is of moving it into the responsibility of defense agencies.”
-Your inability to see something does not mean it is not there.
2. “how does moving ABCD’s operations to India benefit America?”
-Perhaps you missed the first line: Widgets are cheaper for Americans. I would call that beneficial, as last time I checked, most people prefer the things they want to cost less. Do you not see lower prices for Americans as beneficial?
The money previously spent on the higher cost widgets are now spent on other things, which is beneficial for those industries, some of which will be American. You seem to think that every single one of ‘those industries’ will be outsourced. That is an absurd contention. I would like to see you prove that every single dollar of increased disposable income (resulting from cheaper widgets) would be spent on overseas goods and services, as you seem to be assuming this.
3&4.“Exactly why?” – Well you can’t use dollars to buy something priced in Euros. You can trade your dollars for Euros, but that presumes someone with Euros values dollars. What value does the dollar have, if not to buy goods and services denominated in dollars?
“If most manufactured goods are made overseas then what products are being purchased from America?”
-The ones being made in America, which are now a much better value to foreigners because the dollar has fallen in value. If you think that production of ALL goods and services will be outsourced, I would ask you to prove this, as it makes absolutely no sense to anyone with even a rudimentary recognition of the dynamics of reality represented in the discipline of economics.
“So what if the dollar becomes cheaper? If the majority of manufactured products and services have been shipped overseas, then why would people, and how would people, purchase from America, and thereby provide an inflow of cash into the American economy?”
– First, a majority of the population of the world lives outside of America, it is not unreasonable to expect that the majority of manufacturing and services will occur there as well. As the dollar becomes cheaper then there is less and less cost savings to be realized by outsourcing, and less of it will happen. There will also be more global demand for the now cheaper American goods and services (because only SOME goods and services will be outsourced/move).
“So what is America actually producing that will provide an inflow of money?”
-Whatever Americans have a relative advantage in producing. I am not an entreprenuer, I am not omniscient, and I cannot see into the future to tell you exactly which products and services these would be. The inability of most people to accurately predict the exact form of new technology or production processes does not mean that they will not occur. The experience of history does however show that new jobs and services are constantly being created by semi-free markets.
As an example of something I would say America has an advantage of producing now is cheezy pop music and bad but popular action films. With higher incomes overseas, such industries would likely do well, both in receiving the extra disposable income of the now wealthier average American, as well as receiving the business of the now wealthier average Indian or Chinese. You may pick at my example all you want, but that doesn’t undermine the argument that there will be some things that America can produce more efficiently than the rest of the world, regardless of any single individual’s ability to predict exactly what those goods and services are.
“Which means the process of outsourcing will *acclerate*. “
-The process may accelerate from the current rate, but as outsourcing soaks up the labor supply of these foreign countries, their local wages will rise, as some Americans become unemployed, there will be downward pressure on wages here, thus the incentive to outsource decreases, and the process slows or reverses. This is the basic feedback involved in systems as they move towards new equilibria. To extrapolate an ever accelerating rate of outsourcing is absurd.
5.”Basic costs are *enormous* and largely fixed”
-Well if everything is outsourced, why do you think the basic costs wouldn’t go down?
The downward pressure on prices would result in higher real income, thus even if the cost of basic living standards is fixed (which I would ask you to prove), the population will have more disposable income, and hence be better off.
And yes, taxes are insanely high, cause unemployment, and inflate the price of everything, as well as driving business overseas. Maybe fighting high taxes would be a better idea than whining about allowing people to freely trade with other people.
“It would take an enormous amount of wealth and time for that population to have it’s standard of living raised to the extent where moving industries to America becomes attractive.”
-It would if that were the only factor. However there are other factors such as the exchange rate, mentioned earlier, and the fact that as foreign living standards rise, so does global demand for goods and services. As demand grows, much of the untapped capacity in foreign countries will go towards meeting this local demand, instead of displacing some ‘American’ jobs. America will also benefit by servicing some of this growing foreign demand, most likely in high margin areas such as providing high-order capital goods.
6.”you simply neglect to mention the other parts of that same argument. That there is also the free flow of workers along with the work.”
-There are always costs to movement, otherwise there would be a uniform unemployment rate across America.
-Capital mobility and labor mobility are flip sides of the same coin, if you have one, you don’t really need the other, though having both allows for faster wealth creation.
There has been a pretty large flow of Indians and Chinese into America due to capital immobility (‘stealing American jobs! and depressing our wages!’), I am surrounded by them where I work. As capital is free to move across borders, there will be less incentive for labor to move to where the capital is, the results will be about the same. The lower immigration rates will help to keep American wages up.
As the wealth-creation process speeds up due to ‘outsourcing’ leveling will indeed occur, with higher living standards in India and China. You seem to incorrectly presume this is a zero-sum situation, their gain is our loss. Historical experience indicates that the worse scenario for America is a slightly lower rate of growth for us, with a vastly higher rate in India and China, but slightly slower growth is not ‘impoverishment’, nor is it guaranteed.
7.”My argument is that “free trade” is not free at all.”
It seemed to me your argument was that outsourcing is bad for Americans. But I am interested in what your definitions of “free trade” and ‘free’ are. I do agree that things like NAFTA are stupid, and not really free trade. But I would be interested in hearing why you don’t think people should be able to voluntarily do business with whomever they want to, on terms agreeable to both parties.
“So far I remain unconvinced that “free trade” isn’t possibly THE most distasteful theory in existence.”
-You should check out socialist theory, it has resulted in the murder and impovrishment of more people than anything else the world has seen. It is much worse than allowing people the freedom to trade as they will.
8. Historically speaking, our current employment figures are not bad. Definitely much better than in Europe, where they, like you, have much disdain for free trade.
Thanks bil, but do not kid yourself this guy going to make the mental leap to reality. Given his amazing lack of comprehension of how the real world works, I would never have bothered with such a times consuming reply. The guy understands nothing about business or economics. Have you noticed how ed seems to have a strange nervous tick? *shrug*
It is interesting how wanting a labour market which is both more likely to lead to wealth producing jobs and less vulnerable to ‘structural’ unemployment makes me a ‘Social Darwinist’ to some untutored eyes. Strange.
It also makes me wonder if some people’s understanding of Darwin extends to more than having heard the phrase ‘survival of the fittest’.
But then one thing blogging has taught me is that about half of all comments left will just be reactions to ‘trigger words’ rather than relevant critique.
Snide,
Yea, I know it is probably a hopeless cause. But I myself am a recovered socialist (one of my high school teachers called me ‘comrade’ regularly), and I have seen statist people eventually come to see the error of their views after much much argumentation, though it typically takes lots of time and has a low rate of return.
But really, I work for the state, so I have to do something during the day to look busy. And arguing against authoritarians is probably the best use of the tax dollars that go to my wage anyway.
Perry,
It does seem odd that many people can’t make the distinction between economy and society; or to see that an economic system based upon the recognition and acceptance of self-interest doesn’t preclude ‘altruistic’ or charitable activity.
darn it bil., you took my answer again. Oh well, at least someone at the state is using my tax dollars wisely. Education of people like Ed and Hi is a far better return (despite the discussion of low return) than most other state functions.
bil. –
Are you by any chance Bil Abbott? If so I think we may have met some years back.
Well.
It’s certainly true that anytime someone tries to have a reasonable discussion some jackasses just have to jump on in. It would be better if they provided something other than proof that some people do in fact have their brains in their ass but that might be asking for too much. It’s always a delight when idiots start thinking that the thread is about theory when it’s clearly not. Basic economic theory is something that most people, including myself, know very well. What isn’t so obvious is how theory differs from reality. If Snide The Arsehole were to perhaps think about it, it might even become obvious to him.
Well. Maybe not. I think that perhaps Snide The Arsehole is a bit too far along for that.
bil I’ll have a response for you in a few hours. Right now I’ve got a couple deadlines that I have to beat so it’s not possible to do a complete response, so I’ll wait until I can do one. However I’ll point out a few salient items just to “prime the pump” so to speak.
Here’s a clue. I know the economic theory as well as you do. However reality is far different from theory and what I was looking for was a description of how those theories worked in reality, not just as theory.
A prime example is the fact that China has pegged it’s currency to the dollar. In this way it would be impossible for the dollar to devalue enough to make outsourcing to China not attractive. Additionally the Chinese government does it’s best to prop up the dollar in order to keep the flow of investment attractive. China holds the largest single investment in T-Bills and American government debt, well over $1 trillion and climbing rapidly, to support the dollar from falling too far.
In such a situation how would it be possible for domestic manufacturing, or operations in general, to become attractive when the same relationship is maintained regardless of what valuation the dollar has? In a situation where the Chinese government has the option of dumping all of it’s debt holdings, and thereby severely damage the debt structure that props up the American government, could the government act to decouple these currencies?
Another point is that Indian computer science and engineering schools are heavily subsidized. The annual tutition cost for a student was, until 1991, $10 per year. After 1991 it rose to the staggeringly high amount of $500 per year. In this situation how is possible for American students to compete for jobs, taking into account the minimum salary requirements that higher debt load demands, and how many new engineers can India create to depress overall wages and continue making outsourcing attractive?
Now, to be f-ing explicit since nobody seems to be able to figure this shit out, I want a detailed description of how this crap will work in REALITY. Jesus Christ! Even Communism works in theory. Just about any half-assed concept works in theory. It’s when that theory must be applied in reality that things become unhinged.
Here it is again: I want a detailed description of how this economic theory will work in reality. How could American operations become fiscally attractive when the Chinese are acting to prop up the dollar, and prevent a true devaluation, AND have pegged the renimbi to the dollar itself, so that it devalues right along with the dollar?
And I want a further exploration of the whole “Indian labor is finite” meme with respect to the absurd differences in education subsidies and availability.
Is this f-ing clear enough? Frankly I’d prefer a reasonable discussion, where people act like they’re f-ing human beings and not walking turds, but if I can’t have the former, then I’ll participate in the latter.
Ed and Bill your fighting two different wars. Economically it makes more sense for free trade but as an American (like ed) I believe keep the work here. Bill and all the likes. Why don’t you do the right thing and empty out your savings and give it to some poor kid in China so that maybe he’ll buy something off the company you work for. That way you can keep your job. Wouldn’t want you to have to start your own hair cutting business.
The fact chapman and Ed cannot see how the US has massively benefited from free-ish trade and how protectionism hurts Americans is a marvel.
That Ed and chapman cannot see how the amazingly adaptive US economy leads the world in very large measure because it is less regulated is an even larger marvel.
That Ed distains ‘mere’ theory suggests he does not understand that everything we know is ‘just’ a theory and all we do is choose our critical preference for what seems to be the best theory (and some theories are very good indeed). That such things strike Ed as apropos nothing is not that surprising (well, it certainly strikes me as the best theory as to what ed will think).
It does go some way to explain why he cannot grasp that not only has he been answered but roundly refuted; because he will only accept answers that at least acknowledge the legitimacy of his meta-context or underpinning axioms and other answers need not apply (the fact I use such airy fairy terms will ‘prove’ to some I cannot possibly be talking about the real world). My guess is that unless someone pulls up a dump truck full of something tangible, and leave a huge pile it on Ed’s lawn, he is unlikely to think it has anything useful to contribute to understanding reality. I am snarky enough to think repetition is unlikely to bring enlightenment so I would be very surprised if anyone (even the worthy bil) takes the time to try at any length, but I could be wrong. I know I am being a bit rude here but that is how I see it.
As someone who has both run businesses in the USA and UK with varying degrees of success, and been otherwise involved in business in all manner of other countries, the notion US businesses are going to outsource vast chunks of the US labour market into oblivion by moving ever more functions into other often more regulated Second and Third World economies verges on mind boggling. Certain sectors may (will) get clobbered, but this is not an economy-wide earthquake! That said, more regulations (such as trying to prevent outsourcing) will prove as effective as rent controls (i.e. they will actually have the opposite effect). More regulations make outsourcing more attractive, not less. Try actually doing a complex multifaceted business in the developing world and you would quickly see why the US is such a vast magnet for overseas investment, and for as long as those huge pools of overseas money continue to be able to operate with a lighter touch from The Deadening Hand, this will continue to be the case.
If I was a betting man, I would put money on certain sorts of jobs going to India (and elsewhere) regardless, even if the most draconian laws realistically imaginable try to prevent it in the US or EU. Many jobs are almost completely fungible (such as most coding) and once a certain competency becomes globally widespread enough, there is simply nothing any state can do about it unless it wishes to pull up the drawbridge and become North Korea. There is very little ‘theory’ needed to see the truth of that.
I am in the process of setting up one IT related business and have plans for another down the road… some applets will get written in the First World because that is where I have certain highly specialised contacts, but any ‘bulk’ coding for these will be done almost entirely in the Second World, where I have contacts with a codehaus who can probably do all I need for a great deal less than one in the USA or UK. As the market for what I do is global, there is simply nothing any government can do to change that business decision… though they can induce me to move even more aspects of the business overseas if they continue to raise the costs in my cost/convenience decision-making process. This process is inevitable regardless of how many disgruntled US software writer vote for politicos who promise them protectionist measures to protect them from the big bad real world. Ed and chapman will not like the feeling of helplessness this probably brings and thus may conclude it cannot possibly be true.
Happily the US and UK workforces are far from helpless as their comparative advantages do not come from politics and ‘protection’. Productive folks in the First World are not without their attractions vis a vis folks in India or the Slovak Republic, and thus the idea this will mean nothing but burger-flipping jobs in Peoria, Perth and Peterborough (which in any case would be filled by third world immigrants) are thankfully baseless. There is a hell of a lot of business to be done in the First World and that does mean jobs. It may (and will) mean different jobs and it also means some people are indeed going to go the way of buggy whip craftsmen, but don’t blame me, it is that ‘reality’ thing again. This is not ‘social darwinism’ because the people involved do not become extinct, only their jobs do, and unlike dogs, old people can indeed be taught new tricks. Another jobs do come along, provided dynamic decision making and capital reallocation is actually allowed to provide them.
Oh, and socialism does not even work in theory… there are about 150 years worth of sundry works which have been pointing that out. Try reading some Bastiat: start with ‘the petition of the candlemakers’.
akira888– am I really that obvious? Where have we met?
ed, as Perry points out, everything is theory. Our models of reality are not reality. Theories are imperfect mappings of aspects of reality. You have a theory that most American jobs will go overseas and none will replace them. This is a variation of an old theory that has been discredited long ago and in many instances. In addition to being superior from a moral perspective, the theories I have been arguing have offered better explanatory and predictive power than yours, that is how theories work in reality.
I do not see how some of my explicit examples fail to demonstrate how reality is mirrored in certain theories.
If I were to relate a theory that said when a person on earth throws a ball up in the air, it will fall to the ground, would you argue against my position that a ball thrown in the air by a person on earth will fall to the ground by saying that I failed to describe how the ball fell to the floor in reality, and not just as a theory?
China’s currency peg, and our current fiat money regime are important issues. But the fact that interfering with free-markets has negative results does not justify further interferences (which will have further negative results). China’s policies can not be continued forever, and the result of their current actions will likely be great harm to their economy, which may very well reduce the outsourcing pressure you fear. Indian education subsidies have similar results (and your expression of Indian education costs in USD suggests you are not as familiar with economic theory as I, as does your contention that Communism works in theory (check out Mises’ Economic Calculation in the Socialist Commonwealth) too).
I am afraid that if my given examples and arguments have failed to show that your theory is inferior, I don’t have much to offer at this time, as I too have some work I should not be neglecting.
chapman – ‘keep the work here’ Employment is not a commodity, it is an emergent functional relationship.
If protectionist policies designed to ‘keep the work here’ are beneficial, then why have so many countries which heavily adopted such policies done so poorly, while relatively more-free-trade policy adopting countries have done so well?
ok, I know Perry, that I am probably beating a dead horse, but at the moment its still fun for me, so here goes.
First of all ed, if technology does not permanently displace jobs like outsourcing does, why are there so few in previously labor intensive industries? Wheat harvesters did not all get jobs building and maintaining combines, or mining the materials, or anything even related to farming. We dont spend a lot of labor resources on farming anymore, because we dont need to. This has freed us up to pursue other industries altogether. And we have.
Secondly, a benefit that has come from outsourcing is that I can buy cheaper shoes and clothes than ever before. So much for “If clothing is made in Malaysia, then the purchases will be made from Malaysia.” Since we dont need to have our labor force making T-shirts and shoes, we are able to pursue other technologies, precisely as we did when we no longer had to have a massive chunk of labor involved in the production of food. If you believe that technology is static and that there will be no new industry in the US, then theres nothing I can do for you, because not only is that typical zero-sum backwards thinking, it is a total disregard for the last 200 years of history in this country.
I am going to have to ask you to give me the same detail of precisely how things will work that you are asking of me. Tell the exact benefits and reprocussions of protectionism. Tell me what the restriction of trade and the outlawing or heavy taxing of outsourcing will do to this economy. When you try to regulate a market, you only slow it down. That is what has been proven historicly. So the burden of proof lies with you ed, in the same detail you are asking for (because I need an example, I dont know that I fully understand what the heck you actually want when you say detail) how exactly does the restriction of outsourcing help this country, and give me a comprehensive and realistic projection of the effects on this economy, the global economy, and labor in general. Explain to me how advancement in technology might be helped or hurt, cause I, for one, am not convinced that restriction of trade has helped anyone in the past, nor how it could possibly help anyone in the future.
Also, just a side note. The currency market does not necessarily affect local purchasing power. For example, certain foods in Mexico are relatively cheaper than those foods here. The fluxuations between the dollar and the peso do not greatly affect this, the availability of the product does. On a more local level, housing close to the city costs more than housing in more rural areas, this is based, not on the value of the dollar, but on the availability and demand of the product. The fact that the Chinese and US currencies are linked is not relevant to the cost of software that is being produced at a lower cost. Certain products will drop in price regardless of the relative value of currency. Curreny is a medium of exchange, prices are not set by currency. Prices are set based on the cost to the producer and the value to the buyer. If all current currencies were to collapse, there would still be trade and a standardised medium of exchange would again eventually emerge.
The cost of education will be irrelevant as well, if there are no IT jobs to be had due to outsourcing, people will be learning a new technology, and since college courses tend to be a bit behind the latest technology, it may well be that the innovators that move into that new tech will be hired based on ability, skill, and experience, not on their degree. Just like IT was during the boom, kids were getting hired with little schooling and less experience just to fill the need, especially since the schools were not up to the task at the time. Furthermore, subsidizing by governments is one of the many things that adversely affects the markets, no matter what the subsidy is for. If there are any adverse afects due to this sort of action by other countries, it will be the result of government interference, not the free market.
Hmmm.
Ok. So it’s now 03/08/2004. The job report for Feb is that the economy has added only 21k jobs. Temp employment is up higher than permanent employment, which means that these temps also have no benefits or even vacation in most cases.
So……
Well? How about it? You’ve spent plenty of time denigrating me. And yet I can explain why this economy is in this situation, and you cannot.
So how about it. Explain, using your pro-outsourcing theories, why this economy isn’t producing jobs.
Speaking as a business owner… regulation is the reason. I would have to be out of my tiny mind to add people to the company payroll when the extra costs imposed by the state, in terms of direct costs and regulatory burden, make it so much more beneficial to either outsource or hire people as independent contractors or temps.
The irony is I would actually like to hire people directly but that is now such a nightmare of taxes and red tape, I would not even consider it. The state is simply making regular full times jobs such a pain to implement that people like me are just not willing to create any more of them, which is bloody annoying. It is really that simple.