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Outsourcing creates jobs at both ends! Over on the Adam Smith Institute blog, there is another article on why outsourcing ends up actually creates job in the country doing the outsourcing. The author makes the obvious statement that:
Machine diggers took the jobs of workmen with spades. At the time, there were people who objected. But on that basis, should we create jobs by replacing each man with a spade with 50 men using teaspoons? Despite specific jobs being lost, the total number of jobs has increased.
Quite! This seems an emotive subject for those who fear their jobs will end up in India but as the comments on this blog have demonstrated when we have discussed outsourcing in the past, it is hard to make a convincing argument that outsourcing is anything other than a positive thing for an advanced western economy.
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This post is right on the money, but I dont see a direct connection to arguments regarding outsourcing. To me this papears to be a very simple truth regarding the virtue of human progess and chiding the worthless statist peons who wish to obstruct it.
Perry, not just the Western economy! Everyone’s boat goes up when more people are taking home money from employment. That means that more Indians can indulge their inexplicable taste for Coca-Cola, for example, and renting Ealing Brothers comedies. The Chinese are busy cruising the aisles of Carrefours, which has FOUR hypermarkets there. I know four in a giant country isn’t that many, but it’s four more than could have been contemplated in the China of 20 years ago.
Free trade benefits all. There should be no restrictions. The World Trade Association, which has an interest in keeping its role warm and vital, should go.
Indeed Verity, but I mention ‘advanced western economy’ because that is where the bleating comes from!
Yes, Perry, you are right. I have never heard an Indian or a Sri Lankan or a Chinese whining because their economy was being subverted by Western outsourcers.
Perry, check out a recent article by Brink Lindsey for Reason mag (a quick Google brings it up); it completely crushes the usual bs about outsourcing from the protectionists. Probably the best single article on the issue I have yet come across.
I find it depressing that one has to keep pointing out the obvious: outsourcing is just another facet of capitalism’s genius to wring the greatest use out of scarce resources for which there are competing ends.
First Perry, now Verity – it must be the weather.
Free trade benefits all. There should be no restrictions. The World Trade Association, which has an interest in keeping its role warm and vital, should go.
Hear, hear.
Verity: Yes, Perry, you are right. I have never heard an Indian or a Sri Lankan or a Chinese whining because their economy was being subverted by Western outsourcers.
Never underestimate the limits of human stupidity.
…so you really believe the WTO is working to *obstruct* free trade? Evidence please.
‘Tranzi’ bashing is very popular round here & it’s far too easy to make a generalisation like that & get a round of applause. Actual evidence would be nice, not “well it’d be in their interest”, ignoring the fact that if they *were* actually working to stymie free trade & got caught out, the whole organisation would be for the chop, and the fact that you’re assuming all the WTO’s staff are utterly morally compromised & have no interest in facilitating free trade.
I know all these things are plausible in enraged anti-liberal world, but the few people I’ve met who worked for the WTO genuinely believed in free trade as a positive influence & were contemptuous of those who couldn’t see the reasoning behind this. Bouncing the blame for national governments’ reluctance to relax protectionist controls onto the WTO seems kinda dumb; as stupid as the ‘anti-globalisation’ protesters who also targetted the organisation. The real power in this case lies with national governments; they’re the ones who are stalling.
The “well, they have an interest in trade restrictions” argument vis-a-vis the WTO is as dumb as saying the police have an interest in continued crime, or pest control have an interest in ensuring there’s a healthy rat breeding population. You’re right; there might be some benefit in both those things, & i’m sure a *few* dishonest folk in all domains may think & act like that, but most people do not. For that matter, the CIA have an interest in continued terrorism; keeps them in a jobb, as does the ‘military industrial complex’. There’s no difference between your paranoid reasoning & that of other raving conspiracy theorists.
Actually, A_t, The police do have an interest in continued crime, which is why they put a lot of energy into not deterring it, and definitely not trying to wipe it out.
I didn’t make myself clear over the WTO and people have rightly jumped on me. I didn’t intend to calumny the people who work at this organisation, especially as I don’t know any of them. I meant, this organisation should not exist. There should be no organisation governing trade between nations. It should be 100% up to the nations themselves. The ones who are smart enough to grasp that free trade benefits everyone will prosper. The dumb ones, who think protectionism is somehow going to increase their national wealth, get to absorb the negative impact.
I am aware that my hero, the United States, indulges in occasional protectionism, and I think this is stupid, insular and short-sighted. I cannot think of an instance where putting the shackles on free trade has benefitted the US. The steel tariffs were ridiculous and caused consumers to stop buying American cars because the price of steel made them more expensive than the foreign competition. Duh.
Hmm… Verity, I’m still not convinced; I understand your argument about the police etc., but I seriously don’t believe any more than a small minority of policemen are consciously letting crime slide so they remain in demand. This assumes the majority of people are jobsworths who gain no satisfaction from doing their job well; something I’ve not found to be true in my working life so far.
& WTO-wise, maybe you’re right, but membership is purely voluntary; if a nation feels it’s reaping no benefit from WTO membership it’s free to withdraw, & the body hardly “governs” world trade; it merely provides a forum within which discussions can take place, & attempts to facilitate negociations in order to make trade freer, as well as providing an agreed framework for retribution against nations which go against previously agreed free trade agreements.
If it didn’t exist, I’m pretty confident you’d get a collection of yearly conferences where trade representatives could meet (& doubtless sign treaties agreeing penalties should either party default), and research bodies producing reports instead. You could argue that these would serve our countries better, as this would introduce an element of competition & choice into the service provided, but I don’t believe there would really be much difference; for a start, there are plenty of these competitors already. If they were far superior, i think the WTO would be suffering mass withdrawal. As is, even Switzerland was a member, well before it joined the UN, suggesting some benefits may be gained from membership.
“outsourcing is… a positive thing for an advanced western economy.”
Absolutely.
But it’s a highly negative thing if you’re one of the victims.
You young folk wouldn’t know about this, of course, but wait till you’re fifty-odd, and have a mortgage and kids at Uni, and suddenly one day “Poof” your job’s in India for sixpence an hour and you can go and work as a security guard. If they don’t think you’re too old.
Andrew-That’s why financial planning is so important. One must maintain adequate savings in case of emergencies, and not expect that the good times will last forever.
In addition, high university fees should be partly borne by the person being educated, instead of the kid going on a ‘parent scholarship’, as it is commonly known in my country. Tell the kids to take a bank loan. A government scholarship in exchange for 4 years of backbreaking servitude after graduation(what I did). Or something. Teach them to be financially responsible for themselves.
TWG
A-t
All that is ever required is to abolish your own tariffs and subsidies. There is neither any need nor any point in making it conditional upon others dong likewise (which is the whole raison d’etre of the WTO).
Abolish the WTO and you’ll soon discover that there really is no such thing as ‘free trade’. The powerful countries (US, Europe, China etc) would do bilateral deals (as the US has already started doing, following the collapse of talks at Cancun), strongarming the weaker countries into accepting even shittier terms of trade than they have today.
It’s ridiculous to think that, in the absence of any regulation, everybody will play nicely. Maintaining the conditions for ‘free trade’ and ‘free markets’ requires an enormous effort by governments and other regulatory bodies – and that’s an irony that ‘economic liberals’ seem to miss.
Cydonia, maybe in idealised libertarioland that’s how it would work, but in the real world, governments are scared to relax their tarifs unless others do likewise. Further, the slightest hint of free trade causing mass unemployment in key voting demographics would put the tarifs straight back up (hmm.. steel anyone?). These agreements help to discourage such short-termist decisions on the part of national governments. This helps that process along. As I said above, agreements such as this would exist whether or not the WTO did.
There’s nothing in any of the WTO regulations stopping a government from utterly deregulating trade if they wish to. Again your beef lies principally with national govt’s, not the WTO. All the WTO’s doing is trying to make trade as free as possible given a non-ideal situation, where many governments are either unconvinced by the benefits of free trade or fearful of it for their own reasons.
A_t – governments who fear free trade are more than welcome to stay outside in the cold.
Andrew Duffin, yes there are consequences, and I am truly sorry that someone doing a good job loses it because it can be done just as well by someone working overseas for perhaps 20% of the employment costs. If Britain genuinely had full employment and not just fanciful figures conjured up by the frenzied brains of Herr Blair’s handmaidens, such a person would be able to find alternative employment.
It just is not possible to guarantee people employment for life, as the Japanese have found out.
Ironic? No, hilarious. Governments prevent free trade by enforcing national regulations and so, you say, without governments you cannot have free trade. Brilliant. Ensure the brain is in gear before touching the mouse.
Trade occurs between people and companies, not between states, regardless of what states would have you think, so for free trade to exist, all a government has to do is get the f**k out of the way and let it happen. The WTO is at best ameliorating the situation of un-free trade but that does not mean the WTO is responsible for enabling free trade. It all comes down to how much states are allowed to get in the way and destroy wealth and the WTO is just an association of STATES, not traders.
I wouldn’t say that our masters are in Washington or the EU rather they are the nameless, unelected, shadowy figures in the WTO.
It is amazing to me how someone could be so upset about the EU and miss the authoritarian qualities of the WTO. It takes a lot of mental gymnastics.
If you share Szegedhead’s views, then surely you’ve got to agree that in the presence of states, the WTO is better for economic freedom than no WTO?
And states don’t appear to be going away any time soon…
[Of minor interest compared to the very interesting discussion above,] the example given in the Adam Smith blog entry comes from this encounter: “Jordan described a U.S. businessman visiting China a few years ago. The American came upon a team of 100 workers building a dam with shovels. Shovels. He commented to a local official that, with an earth-moving machine, a single worker could build the dam in an afternoon. The official replied, “Yes, but think of all the unemployment that would create.” “Oh,” said the businessman, “I thought you were building a dam. If it’s jobs you want to create, then take away their shovels and give them spoons.””
Szegedhead,
Do you really believe that in the absence of regulation ‘free trade’ will occur naturally, as if it were a state of nature? Get real – take away the rules and immediately there will be monoplies, cartels and the strong bullying the weak into submission. Free trade as you envision it is a text book theory, not a practical reality: economic activity doesn’t happen in a vacuum, and you can’t wish away the influence of politics and power. Protectionism comes naturally, ‘free trade’ has to be enforced.
Freedom to trade is absence of regulation. Whether individuals trade or not is their decision.
Absence of monopolies and cartels are not qualifications of free trade.
That is government regulation.
It has been increasing year on year in all regions of the globe.
Damn right.
“It [free trade] has been increasing year on year in all regions of the globe.”
And why? Because it is forced upon the world (via the WTO, GATS etc) through regualtions, not because of a decrease in regulation.
TWG – Financial Planning? Hogwash. Financial planning uses your current job as the source of income to project future earnings and savings. Emergency funds are cash to cover 6 – 12 months expenses. For Andrew – and alot of others like him – the basis of their income, their savings and their future has been tossed out. His training, experience and career are over. His emergency is now permanent. What do you do, Mr. Wobbly, that makes you think your job is safe?
Verity – “… because it can be done just as well by someone working overseas …” Ever called an Indian call centre and spent thirty minutes explaining, re-explaining, and re-re-explaining your problem to a succession of people who understand neither the language you are using nor the problem you are explaining only to be finally told your entire site will have to stay down until the person looking at the problem gets back from their break? How is that doing a better job? Medical imaging analysis is also being shipped offshore; whom do you want to read your MRI?
It’s not just personal finance and work ethics. Do any of you realize the amount of power being transferred to India? Systems design. Systems access. Source code. Update ability. Passwords. Right now, a handful of Indian consulting firms could, through intent or inattention, completely and absolutely shutdown the major financial companies in the United States. I’m sure the situation is the same in the UK and the EuroZone.
Today India is our friend. Friendships, like careers, can suddenly end.