March 17, 2004
Some Sanity about Outsourcing
There is no issue that has frustrated me as much in his election cycle as the so-called outsourcing “crisis” the democrats have all been harping about. These politicians have picked up on America’s anxiety about jobs and have turned it into disingenuous rhetoric which, if taken seriously, will take our country and the lives of poor people around the world in the wrong direction. All of a sudden John Kerry, whose chief merit as a politician was his support for free trade, has now turned into a so-called “fair trader”, decrying the outsourcing of American jobs. This is a dangerous and economically illiterate trend- but why does it always keep happening?
First- what is outsourcing, really? Well a poignant example came from Colin Powell’s visit to India- the Indians questioned him about the American rhetoric on about outsourcing, since many Indians survive on the tech jobs that American companies send over there. Thankfully, Powell assured India, in language heartening to hear from a modern political figure, that America would not take away the jobs away from Indians who can do them more efficiently (in terms of cost for service provided) than Americans, and who need the jobs a whole heck of a lot more. Outsourcing is simply moving jobs from people who them less efficiently to those that do them more efficiently. The people who will get the jobs are the poor people in other nations.
Almost all seriously economists agree that free trade is good for both countries engaged in it, but free trade is continually under attack in nearly every nation. Why is that? Well, the labor unions and workers in general are a powerfully organized special interest group, and they can buy influence with politicians through money and votes. Meanwhile the two groups hurt most by anti-free trade policies do not have such a voice- consumers and foreign workers.
Under a protectionist trade policy, consumers basically subsidize the jobs of those who can no longer efficiently provide their services- as Milton Friedman points out in his brilliant concise defense of free trade (a MUST read), if they aren’t working productively and we have to basically “pay” to keep them in their jobs, we might as well hire them to just dig ditches in the desert. Also keep in mind that if goods are cheaper, who exactly benefits most from this? of course, the poor who need to watch every dollar. The problem is consumers are an overbroad group and the benefits to them from more efficient labor are so defuse that they rarely get organized enough to stop the power and organization skill of the workers groups. So while they make up a majority of the people, consumers lose in the political battle.
The second group that is harmed by stopping “outsourcing” is foreign workers. Imagine the situation of being a tech-support person in India- your standard of living is embracing compared to even “poverty” in America, you are willing and able to do a job as well as an American but for a lower rate, and you hear that special interest groups have pressured Congress to pass yet another protectionist measure which basically insures that you will not get that tech support job- moreover, the American taxpayers and consumers are actually going to PAY the tech support person in America (through higher prices) to take that job away from you!! Of course you have no voice in American politics to stop this nonsense, but you suffer the result of the injustice. Liberals who claim to care about human suffering and poverty in other nations should be appalled that the party has adopted this Pat Buchanan-like rhetoric of ignoring the people in other in countries who want, need and, yes, deserve these jobs (because they are willing to do them at a lower rate). On any calculus of bettering the lives of the poor around the world, outsourcing is a good thing.
Yet, the problem remains. Workers who cannot deal with the fact that their job is no longer required under the principles of freedom and free exchange refuse to accept this result and decide to use their political power to retain their jobs by force, protectionism and spitting in the face of people in other countries who are literally dying to perform these same jobs, at the same proficiency, for a much better rate. Fear of change is always prevalent, as people are conservative by nature- but our economy and job market will move beyond the jobs we export and will find new efficient ways to create better goods, better products and better jobs- meanwhile the people in other nations will be able to earn a decent living while benefiting us by making the goods we buy cheaper. This can all happen if the politicians don’t get to the economy and the free market first. We should be “outsourcing” principles of free trade, voluntary exchange and freedom, not xenophobia and Pat Buchanan-like isolationism which makes neither economic, political nor moral sense.
(P.S. I urge you all to read the Friedman article I linked to above for a much fuller treatment of this issue- it also gives a quick response to the most common complaints about free trade).
Great article Misha. I just wish corporations wouldn’t cry foul when Americans decide they want to buy cheaper drugs in Canada. Free trade and free markets only seem like a good idea when the corporations have the freedom. Once the average citizen decides they want to outsource their local drug company cries for regulation ring out over ther land and the Bush administration snaps to attention.
Posted by: William Flynn at March 17, 2004 09:01 PMMilton Friedman is horse’s patoot. His theory is purist in nature like Einstein’s theory of relativity. And like Einstein’s theory of relativity it fails to account for a host of anomalies in the REAL world, like quarks and sub-atomic creation and disappearance of mass without energy - mass conversion. Friedman’s theory is fine for a society of robots who have no feelings, are not injured directly and physically by short term blips in the economic, ever spiralling upward, ever expanding GDP and growth. In the real world, his theory has a host of flaws.
But, then there are those who failing to understand the beauty and grace of Friedman’s theory as well as its shortcomings and pitfalls, turn it into a religion, blindly accepting the validity and value of the theory whether it works in the real world or not. Present company excepted, of course.
Posted by: David R Remer at March 17, 2004 09:09 PMMisha, that is one take, but, not mine. Karl Rove is not the one making policy decisions, he is making campaign and poll decisions. The Conservative wing of the party has not hidden their belief that social programs are bad for business and bad for the economy. They know better than to just come out propose legislation to outright end the programs, it would be political suicide and they know it. Why? Because the majority of Americans believe a safety net provided by a society that consumes work lives and jobs like it does any other commodity, is a great thing since they either have no, or very little, control over the economy nationally or globally.
This wing of the Republican party intends to deprive American citizens of these obstacles to a purist economic theory and maximum business potential. And they intend to do it in the only way they possibly can, through deficits and debt that preempt the program’s existence, all in the name of national defense and global military presence and control. They are already trying to blame the deficits on 9/11 and the recession which is absurd and accounts for only about 6% of the deficit as I reported and linked in a recent article.
I know your rational mind does not want to accept such devious and surreptitious agendas by conservatives with whom you hold some common values with, but, the facts must be explained in a rational way, and fiscal conservatives opposing revenues while increasing deficits makes no sense wihout a hidden agenda.
Posted by: David R. Remer at March 17, 2004 10:00 PMRight on. It’s simply irrational to expect the populace to support costly labor when cheaper, better labor is available. Put in “voter-speak”, would you vote to “protect the jobs” of a handful of people, or for lower prices at Walmart?
I just wish corporations wouldn’t cry foul when Americans decide they want to buy cheaper drugs in Canada.
William — you have it exactly backward. The reason drugs are cheaper in Canada is not because some corporation makes them cheaper over there. They’re cheaper because the Candadian government legislated it, and the drug companies would rather sell for a low price than not at all. Similar laws are in effect in Europe and many other part of the world. Drug development is one of the most capital-intensive endeavors in the modern world, and the cost of R&D has to be recovered with high drug prices. In effect, US consumers are footing the bill of pharmaceutical research for the rest of the world.
Milton Friedman is horse’s patoot. His theory is purist in nature like Einstein’s theory of relativity.
Now, now, David. Let’s not go calling people names, especially when our humble minds can’t yet appreciate the enormity of their intellects.
But in another respect, you’ve hit the nail on the head. Feelings are just that — feelings. They don’t change reality. When you can’t make a rational argument against free trade, you fall back on feeling. Unfortunately, feelings don’t keep the world moving. Someone has to pay the price for those “feelings”. And what right do you have to make demands of others when you “feel” bad?
Making outsourcing a sentimental issue is not going to help. What’s going to help is recognizing reality, and moving to adapt to it.
Posted by: Vivek at March 17, 2004 10:52 PMVivek, I am building my own house with my own two hands and learning capacity. Almost done by the way. I mostly maintain and repair my own vehicles. I used to, and will again, grow most of my own vegetables and some fruits. I have five acres so I could raise my own catfish or other meats if I ate them regularly. Having graduated from college, I am capable of home-schooling my daughter.
In other words, I am somewhat and could be totally self-sufficient on my 5 acres in Texas. But, you know, this society won’t sell me homeowner’s insurance at a reasonable rate because I am building the house myself. Doesn’t matter that I offered to pay for a qualified inspector to come in and check the plumbing and wiring specs before sheetrocking the walls. I engineered the home for hurricanes though I live nowhere near them, and designed it myself. It is over-engineered, meaning it is built better and stronger than commercial homes of comparable size, damned more energy efficient too. But I am punished for being self-sufficient.
I can’t get a builder’s loan because I am not a licensed general contractor paying fees to the association. I can’t get a mortgage because no bank will make the loan without homeowner’s insurance.
I maintain my vehicles better and safer than about 40% of vehicles on the road today, but, I still have to pay for inspection. If I homeschool, I still have to pay property taxes.
Now, if my society is going to prevent and punish me for trying to be self-sufficient, then this society damn well owes me a job making a living wage, reasonable transportation to get to jobs from my country home, and unemployment insurance if the company or the Congress can’t keep their budgetary and business acts together. And I if I invest my savings into the stock market and a series of sheisters create a market instability on a regular basis and I end up with barely more than inflation for my savings, this society owes me what I need to turn my savings into a humane retirement when I am no longer able to work.
Thank you for demonstrating how cold and heartless the right can be about human beings with feelings, cares and concerns. Guess you think 9/11 was just a footnote in history, I mean, what good are feelings, right? Unbelieveable.
Posted by: David R. Remer at March 18, 2004 12:08 AMI can’t get a builder’s loan because I am not a licensed general contractor paying fees to the association. I can’t get a mortgage because no bank will make the loan without homeowner’s insurance.
You should consider becoming a Republican David. You’re describing a classic example of government regulation ‘making your life better’, and you’re grumbling about it. You don’t think that once there’s a precedent for a government agency to ‘protect you’ from yourself that it stays where you put it? Banks and Insurance companies have to follow guidelines and devation from guidelines carries a cost.
Capitalism is much better at providing variety and more choices. Face it Dave you’re a victim of your own ideology.
I maintain my vehicles better and safer than about 40% of vehicles on the road today, but, I still have to pay for inspection. If I homeschool, I still have to pay property taxes.
*Gasp* You’re not happy to pay taxes?
Now, if my society is going to prevent and punish me for trying to be self-sufficient, then this society damn well owes me a job making a living wage, reasonable transportation to get to jobs from my country home, and unemployment insurance if the company or the Congress can’t keep their budgetary and business acts together. And I if I invest my savings into the stock market and a series of sheisters create a market instability on a regular basis and I end up with barely more than inflation for my savings, this society owes me what I need to turn my savings into a humane retirement when I am no longer able to work.
Oooh. Yeah, the whole “you owe me” phrase is definately not a republican trait. I commend you for being self sufficent. Maybe you owe it to yourself to be self sufficient, David. Maybe it is it’s own reward. Not to mention that you are teaching your daughter great traits.
Seriously though I feel the same way sometimes. I wonder why things don’t always come easy. It’s because everything requires work. When you break down life to it’s simplest parts you find that the curse of Adam is our lot.
“Cursed is the ground because of you; through painful toil you will eat of it all the days of your life. 18 It will produce thorns and thistles for you, and you will eat the plants of the field. -Genesis 3:17-18
It takes toil to wrest life from the ground, it takes toil to dig up the iron we need for tools, it takes toil to live.
History is a history of how working alone gets you a subsistance living. Working together adds an exponential bonus to what is possible. This is what people are missing from the equation of outsourcing and capitalism. If we work alone we actually have less. Working together, each doing those things at which we are the most productive, we can all have so much more.
A job is just a task that needs to be done, like plowing a field and planting the seed. If vietnamese farmers can farm shrimp cheaper and easier than shimp boats in the US can troll them, why duplicate the effort? At higher cost?
There is no lack of things to do in this world. It is not because someone hasn’t given you a job or has taken away your job spitefully. It is that we refuse to see the opportunity all around us. Opportunity to help your fellow man.
Posted by: Eric Simonson at March 18, 2004 01:10 AMEric -
Vietnamese farmers can harvest shrimp cheaper than they can be trolled in the sea because we’ve overfished to such an extent that there aren’t enough left in the wild. (My cousin was in the shrimping business until the lack of shrimp caused a major shift in life.)
And Dave can’t get insurance or a bank loan because those limiting regulations are there to protect the financial interest of the builders and bankers, most of whom are Republicans. Like most Republicans, they think a free market is great for the other guy’s business, not theirs.
I also think that a closer look at the drug industry would indicate that the oligopoly and cartelization on the supply side has more to do with high prices than R&D. The restriction on Medicare from negotiating lower prices for consumers is just one more example of Republican duplicity. Explain to me exactly what’s wrong with the largest payer attempting to negotiate lower prices.
Posted by: fatbear at March 18, 2004 02:03 PMMisha,
You have totally missed the ball on this issue; your argument is so full of holes, and misconceptions, that it’s hard to know where to begin to address them.
Speaking as a “non-productive, and non-cost effective” tech worker who has been laid off twice in the last four years because of outsourcing, I think I can speak to this issue from the prospective of one who has lived through the genius of ill-conceived and executed free-trade policies.
“Outsourcing is simply moving jobs from people who them less efficiently to those that do them more efficiently.”
WRONG! It’s about greed pure and simple! Outsourcing is a bid by corporations to lower the cost of doing business by lowering labor costs, period! The American worker has long been regarded as the most productive on the planet bar none. I am very “efficient” at my job and worth every penny I am paid. I, like most tech worker put a lot of time and money into the continuance of our education to stay fresh in the ever changing waters of high technology. Salary should not be the sole criterion used to measure the worth of a worker!
Efficient; ever call tech support in India and try to actually get service? I have, and it is not fun? Just recently I called HP tech support to get a part replaced, a process that should have taken 24 hours took 36 because the “efficient” Indian tech support person didn’t understand the USPS system of ZIP codes and sent my part to another state, which then had to be reshipped. End result: my server was down for three days instead of one resulting in a loss of productivity. And this is far from my first experience with your so-called “efficient” Indian tech support people.
“Imagine the situation of being a tech-support person in India- your standard of living is embracing compared to even “poverty” in America, you are willing and able to do a job as well as an American but for a lower rate, and you hear that special interest groups have pressured Congress to pass yet another protectionist measure which basically insures that you will not get that tech support job-“
America and Americans are not responsible for the standard of living in India or any other nation, that is what they have a government for; to promote the general welfare of the nation and her peoples. No one in India or China, or Mexico deserves a job any more than I do, and they certainly do not deserve it at the expense of the American worker and society! And while you concern yourself with the standard of living of India, America’s is in decline. How many white collar high paying jobs do you think we can outsource before it start effecting our standard of living in a very serious way. Jobs from Walmart will not support the current American standard of living; those making minimum wage cannot afford 150,000+ houses, and 25,000 cars.
Spoken like a true conservative…
lets hit these points one at a time:
1. “I am very “efficient” at my job and worth every penny I am paid. I, like most tech worker put a lot of time and money into the continuance of our education to stay fresh in the ever changing waters of high technology. Salary should not be the sole criterion used to measure the worth of a worker! “
Thats exactly the problem- a person NOT worth every dollar if the company can get someone else to do as good a job as you for less (obviously, you, personally, ARE worth the money you make- and i know that by the fact that your company pays you). Why does anyone DESERVE the job over a person in India who can do it just as well as? Americans are not higher order of people who have a god-given right to the jobs they want at the rates they want them. Salary is the criteria by which your productivity at a job is measured. period.
“Just recently I called HP tech support to get a part replaced, a process that should have taken 24 hours took 36 because the “efficient” Indian tech support person didn’t understand the USPS system of ZIP codes and sent my part to another state, which then had to be reshipped. End result: my server was down for three days instead of one resulting in a loss of productivity. And this is far from my first experience with your so-called “efficient” Indian tech support people.”
If that is really the case, then the free market will correct for it. There is no reason a company would subject its customers to poor services if they couldnt make up for it through other ways (say, you pay less for your computer). I have had nothing but wonderful experiences with people in India helping me with my crappy Dell computer.
“America and Americans are not responsible for the standard of living in India or any other nation, that is what they have a government for”
American companies are not responsible for giving you or any other person a job. They are responsible for: (1) providing products that people want to purchase at rates they are willing to pay, (2) making money for their shareholders; (3) not harming the environment. Why, exactly, should the American government force american tax payers and consumers to keep jobs that the market does not demand in america? once again, I will repeate that if we arent goign to have supply and demand decide who gets jobs, we might as well pay people to go dig holes in the desert and then pay them the wage they magically “deserve” because they are Americans.
“No one in India or China, or Mexico deserves a job any more than I do, and they certainly do not deserve it at the expense of the American worker and society!” “
no one in america deserves a job just because they are american. if a company decides that someone in India would do the job better or at a lower rather or both than an american, the government should not use force to stop them.
“And while you concern yourself with the standard of living of India, America’s is in decline. How many white collar high paying jobs do you think we can outsource before it start effecting our standard of living in a very serious way. “
I am concenred with the standard of living in people in other countries- especially when there are companies here would WANT to give them jobs and the only thing stopping them is heavy-handed government policy. Free trade has helped America become the most prosperous nation in the world- and more free trade will get us even greater prosperity. Protectionism is the result of fear and short-time horizons, it will not increase America’s prosperity, it will just force American consumers and tax payers to sustain the jobs of a small portion of our population while screwing over people in other countries.
V. Edward makes the points strongly. Just one other point: at what time does the trend make it impossible for the US to continue training future workers in the outsourced fields? Do we really want our core competencies to be solely subject to the kindness of strangers?
Posted by: fatbear at March 18, 2004 04:32 PMMisha,
I am sure you are familiar with the term “Good Corporate Citizen.” I believe, based on the founding principles of this country, one of the functions of any corporation as part of this society, sheltering under the protection of American law, is to provide jobs for the community. We are first and foremost a country, a society come together for a common purpose with a common set of principles. If we carry your mindset to its logical conclusion, we should let the free market empty America of all its high paying jobs under the color of the “free-market,” and consequences be damned.
Corporations as citizens under the law owe this society a duty of care, just as we as citizens owe a duty of care to each other. Is my stance idealistic perhaps? I urge you again to once again read to digest the Preamble to the Constitution’ it is governments job to promote the general welfare; what does that mean to you?
The fallacy that the free market knows all, and should be allowed to do what it will has been found to be unwise and detrimental to society again and again throughout American history. The pure free-market economy without regulation does not work for all; indeed it doesn’t work for the vast majority. Social Darwinism is an archaic, dispassionate, fundamentally flawed principle that has no place in a Christian society.
One last word: we should as critical thinkers come up with a solution to this problem that not only embraces free-market philosophies (which I believe in as long as it is regulated) but compassion and basic human rights as well. I believe a good solution should involve not only the American government, but also the (General Agreement on Trade & Tariffs/World Trade Organization) GATT/WTO, the U.N., the World Bank, the European Union, and the governments of developing nations, coming together to raise the standard of living of the exploited through multi-lateral action. More later…
David- I am a little confused here. I thought you contended that you did not care about the living standard in India, and only cared about American workers. I am glad that is not the case. To the extent that you actually believe that and believe in a “christian” society (i am not religious, so i will assume that means helping yoru fellow man), you should be ALL for exporting jobs from americans who need them less to people in third world countries who need them DESPERATELY. if you think about it in either justice terms or utilitarian terms, its a rather clean calculus for those in poor countries getting the jobs
As for your refense to the preamble, I will only point that the majority of americans are FAR better off from outsourcings. basically, when you stop outsourcing through government intervention you help out a few (the workers who lose their jobs) in order to screw over the many (the consumers and tax payers). So if you want to increase prosperity and common wellfar, you should be FOR free trade.
Posted by: Misha Tseytlin at March 18, 2004 09:53 PMfatbear,
It’s a good thing those vietnamese are farming them then, huh? Now we won’t have to be ecologically rapacious anymore. Maybe your cousin or whatever can let the shrimp population grow back now.
Look, whatever happened to the liberal idea of redistributing income? I mean your all for it when liberals are in control of the money. Here it is. Real, worldwide, redistribution of income. From the rich to the poor. You should be happy. Ecstatic in fact.
Marx’s dream come true. And all a result of capitalism and Republicans.
You’re welcome.
Posted by: Eric Simonson at March 19, 2004 12:54 AMMarx’s dream come true. And all a result of capitalism and Republicans.
ROTFL. That was a good one.
Corporations as citizens under the law owe this society a duty of care, just as we as citizens owe a duty of care to each other.
Damn. It’s not enough that Walmart with it’s low prices is far more of a “social equalizer” than any social policy pushed by the left. Now they have to “care” too??!! Don’t know ‘bout you, but given a choice between corporate care and low prices, I’ll take the latter!
Social Darwinism is an archaic, dispassionate, fundamentally flawed principle
Hmmmm… too bad. The ones who survive Darwinistic evolution favor it, and the ones that can’t don’t have a say in it. ;-)
But seriously —- what exactly is the fundamental flaw? Darwinism works on so many levels and is so perfect that only nature could have come up with it.
So who supports and cares and makes sacrifices for all these Darwinistically-challenged (there’s a PC term for uncompetitive) people? What right do they have to demand and expect such support and sacrifice? Compassion and charity is fine, but it’s a bit much it’s righteously demanded, no?
Posted by: Vivek at March 19, 2004 03:36 AMMisha—
“As for your refense (sic) to the preamble (sic), I will only point that the majority of Americans (sic) are FAR better off from outsourcings. Basically (sic), when you stop outsourcing through government intervention you help out a few (the workers who lose their jobs) in order to screw over the many (the consumers and tax payers). So if you want to increase prosperity and common wellfar (sic), you should be FOR free trade.”
It is clear from your responses that you do not understand the Preamble to our Constitution, or the document for that matter; therefore quoting it would be a waste of time. The generalize statements you make on this issue, beg a reality check, so we have to agree to disagree. I will however read the article you recommended by Milton and Rose Friedman, and detail my thoughts via this forum.
thank you for reading the article, I will head over and read your response. I will respectfully disagree with you that I “do not understand” our founding document. In fact, just last year, I wrote my thesis on the framing of the constitution- have read many volumes of papers, newspapers, letters, and the entire debates (3 times)- I have probably read more than any non-professor I know on the constitution. I spent the better half of one school year doing nothing but trying to understand the foundations of our country, so while I disagree with your conclusions, please do not tell me that somehow this means i “do not understand”. If you want a copy of my thesis, I would be more than happy to email it to you.
Posted by: Misha Tseytlin at March 19, 2004 11:26 AM
