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Paul Samuelson Challenges Outsourcing
Noryungi writes "Paul A. Samuelson, Nobel Laureate in Economics, a professor at MIT challenges the outsourcing of jobs (retinal scan login required) to India and China. Choice quote: To put things in simplified terms, he explained in the interview, being able to purchase groceries 20 percent cheaper at Wal-Mart does not necessarily make up for the wage losses."
And here is the Reg-Free link.
In the future please use the NY Times Blog Link Generator when linking to the soul suckers.
(retinal scan login required)
Is this really necessary anymore? How many people DON'T know about bugmenot? Hell, there is even a firefox extension to plop it straight into your browser!
Good quote, too many chars. Seriously, the slashdot 120 char limit sucks!
The western world as a whole is sadly losing more and more of it's technilogical, educational, economincal, and advantages by succumbing to the short-sighted benefits of outsourcing.
What does America produce anymore? What does any other Western country produce? Food? Consumers? It is Very depressing watching this trend. It's more depressing watching my father-in-law, a damn hard working family man lose his job just because he's getting older to some unskilled person outside of my country.
I could go on, but I'm not trying to start a flame..
"It's not stealing if you don't get caught!"
Instead of all this whining and bitching about outsourcing, wouldn't it just be easier to actualy justify your pay? After all, what logical person is going to pay for something when they can get the exact same thing for half as much?
...stop making decisions in your purchasing habits based solely on price (aka Wal*Mart shopping), and encourage those around you to do the same. Support a heterogenous shopping environment where quality, service, support AND price are all factors in the purchasing decision, rather than the first three being secondary considerations.
The corporate mentality of cutting costs to increase revenue and profits is a reaction to the market's demand for lower prices, not the other way around. My $.02.
What does it mean to wake out of a dream
and be wearing someone else's shorts?
BNL, Born on a Pirate Ship (1998)
Love those pickles
Walmart, by itself, can combat inflation. However, at what cost?
It's easy to understand that buying cheap or from out of town or out of state causes problems with your local economy, so outsourcing (effectivly buying some things from overseas), causes problems.
But the general public will never pick up on this. They are the 5 year olds that are offered 1 oreo now or 2 in 30 minutes and they take the 1 oreo now. That's how the American public will function, and continue to function unless the media drills it into them that it's a Bad Thing and they see the tangible difference in their pocketbooks in a reasonable amount of time.
This is the kind of crappy document that makes me think there is a future for our planet. No really.
.ca) ... but it is ludicrous to think that companies will do things for a Greater Good. What will they do? They will want to make as much money as possible and who can blame them?
... saaaame thing ...
This is always good to have someone say it is better for our own good to have as many jobs as we can in our own country (I'm from
So we have outsourcing of our running shoes in these paradise islands where the only escape is 6 months of hard unpaid labor. Who think that this will NOT be the case for everything else, including computers?
In Quebec, we have doctors and graduates quitting the place for bigger bucks elsewhere in the country. Everyone says it's best not to but who to blame them when you can get 400K US per year elsewhere and 100K CDN in here.
Same thing
I love thinkers.
I was reading the english translation of a Japanese business plan (Orient Watch Compant), and the Japanese word for 'outsourcing' was translated into English as "Hollowing-out."
It's an interesting viewpoint: The English word 'outsourcing' imploys that it's just a business transaction - while the Japanese translator used a phrase that has connotations of taking out the core of a business and discarding it.
Perhaps - there's some truth in that idea.
Moneyed corporations, non-working 'poor' and criminal prisoners are turning productive citizens into tax-slaves.
It seems outsourcing costs money and resources as well as saving some. Language, time zone, cultural differences and geographic distances all contribute to the costs. But the resources used to overcome such obstacles are seldom recorded separately, and so do not show up --- leaving the management believing that they have saved money that they have not, in fact, saved.
But it is just a gut feeling.
Religion is regarded by the common people as true, by the wise as false, and by rulers as useful.
I read that as rectalscan. I didn't know they were sufficiently unique.
Norman Cook's Ode to Sl
They've been saying this in California for awhile
Wow, that's unbiased right there.
The man is in his late 80s. He's been a professor at MIT for ~60 years. He's written the book (now in it's 100000th edition) that is the standard for economics.
Of course the man is biased.
The baby boomers retirement income is all invested in 401k's. Social security sure can handle that generations retirement needs if their 401k's aren't flush. They're allowing todays companies to buy cheap labor to accomplish this goal.
Tomorrows economy will be servicing the baby boomers with income from their 401k's, and developing IP.
If you think their is trouble now, what happens when social security can't pay what's owed 20 years from now, and the 401k's are valueless.
09 F9 11 02 9D 74 E3 5B - D8 41 56 C5 63 56 88 C0 45 5F E1 04 22 CA 29 C4 93 3F 95 05 2B 79 2A B2
"The problem with the US economy is that there are not enough highly skilled people willing to work for minimum wage."
Expect Freedom.
Actually, he said that if you believe that shipping wages elsewhere won't reduce the wages here, then you believe in the tooth fairy. He's not against international trade, which he claims is another thing entirely.
I'm still wrestling with how it actually does compare.
Javascript + Nintendo DSi = DSiCade
Let's not forget that Dell brought back one of its call centers from India due to excessive customer complaints. I've also read that the lower cost of labor overseas is often outweighed by lack of individual action, time zone differences and culturally-caused communication problems. I've heard from several people in ATSI (a telecommunications association) that some clients came back after getting really poor results from offshoring.
Simply put, offshoring is not as clear-cut as everyone makes it out to be once you take in a lot of intangebles. I don't worry too much about it because, sooner or later, the inflation in wages will make offshoring too expensive to consider. It's already made India much less attractive as the one-time costs are taking longer to recoup.
There is a difference between "insightful" and "inciteful" other than spelling.
Precisely what everyone's been arguing for in over the last 20 years..
So, like, maybe it's *not* the best way to run an country...
I don't know why there's all this confusion about outsourcing, since it's really very simple: Right now, the US (and other developed countries) have an economic advantage. By definition advantage means "we're better off than some others," in this case, non-developed and developing nations. If we want a "global economy," that necessarily means evening everything out, and losing our advantage.
You can either have everybody equal, or "us" better off than "them." It should be obvious that you can't have it both ways!
"[Regarding the 'cloud,'] ownership was what made America different than Russia." -- Woz
The reason why so many people have accepted as blind faith the axiom that free trade is automatically good is that the Big Money has funded more economists, columnists, talk radio hosts, etc. This vast Big Money media has for decades used words and slanted, biased, flawed studies to create a worldview friendly to "free" trade, regressive taxes, and an ever-smalled social safety net, along with increased illegal and legal immigration.
Samuelson is a reminder that there are lots of economists who think free trade is a scam. But the average American rarely hears from them. Why?
After 3 decades, the Big Money media machine owns many of the ideas in your brain, and owns the public debate. They bought the public debate with 2 billion dollars of foundations and think tanks. See more about the Tentacles of Rage from Harpers magazine article this month.
eat shiat and bark at the moon
According to the article, economist Jagdish Bhagwati (a former student of Samuelson) agrees with the theory but says it is not all that significant in practice. Speaking of the labor force that can compete with Americans for high-value IT jobs, he says:
"You have a lot of people, but that doesn't mean they are qualified. That sort of thinking is really generalizing based on the kind of Indian and Chinese people who manage to make it to Silicon Valley."
This may be true now, but Samuelson's argument is about whether the past benefits of global trade will inevitably continue. This has nothing to do with the current state of affairs. When you look at the structural issues, it does seem likely that outsourcing of high-value jobs is here to stay. There will probably be some slowing of the trend eventually -- it's easy for the Chinese economy to grow quickly, because it's "underutilized." But as their economy matures, it will slow down. Of course, by then, they will have taken many more American jobs.
The other issue is that even where there is no direct competition, the low cost of Chinese and Indian skilled labor can depress American wage growth indirectly. Even if your job cannot be outsourced, a general wage pressure is present, and employers will use the *threat* of outsourcing to press employees for more work.
"The Wal-Mart You Don't Knowm l
The giant retailer's low prices often come with a high cost. Wal-Mart's relentless pressure can crush the companies it does business with and force them to send jobs overseas. Are we shopping our way straight to the unemployment line?" : http://www.fastcompany.com/magazine/77/walmart.ht
Suddenly, globalization cheerleaders are saying that businesses HAVE to be allowed to ship jobs off to overseas countries because if they can manufacture their widgets for pennies on the dollar, that results in lower product prices and more consumer spending, etc etc.
And nevermind all the people that get laid off in the process.
So why the assumption that suddenly companies have to be able to shaft their workers if they want to stay competitive? Virtually all the history of manufacturing in the world is the history of innovative PROCESSES. From the printing press, to Henry Ford's assembly line, to Wal-Mart's inventory tracking. One company comes up with a really great new way of doing business, other companies in other fields pick up on it, and everybody REALLY wins.
It seems to me that allowing companies to outsource and offshore and cut wages whenever they please is a cheat. It's a bandage. No one learns anything, no new processes are invented, there is no ACTUAL progress.
There's just a competition to see who can stream the most money into the most poor countries, often, at the same time, propping up repressive governments *cough*china*cough* that are responsible for the huge poverty (and ergo, low manufacturing costs) in the first place.
For this reason, I have no problem with so-called "protectionist" policies at all. Instead of allowing business to take the quick, easy, and ultimately destructive path, they have to actually INNOVATE - as they have so many times in the past - and come up with new ways of doing business. THAT, to my mind, is putting your faith in business.
Otherwise it's just allowing them to find creative new ways to reinvent feudalism.
Bush: He's Liberal in all the wrong ways.
If you read the whole article, you'll see this isn't true. He won his Nobel Prize for his work showing how internationalization can help make a rich country. He notes that until now, globalization has helped us, rather than hurt us. He just tries to make the qualification that globalization doesn't *necessarily* always lead to benefits, as most economists believe.
His statement is quite a bit mroe subtle than you can put in "simplified terms." Basically, his point is that while the traditional theories of comparative advantage hold, it is possible that certain types of trade can cause you to loose your comparative advantage.
Makes sense, but I'll reserve judgement until the majority of economists have had a chance to weigh in on it.
A deep unwavering belief is a sure sign you're missing something...
His argument is flawed for three reasons, one moral, one selfish, one pramatic.
1) Why is an American job better than an Indian (or other foreign country job). From a global perspective, the best outcome is a maximization of jobs and real wages. Sure Indian programmers get paid $10/hr (well I do too and I work in the US in IT but that's beside the point), but $10 buys more in India.
2) Trade is bi-directional If we were to restrict outsourcing of labor, other countries will may complain to the WTO resulting in sanctions. Even thinking as a completely selfish nation, I do not think the sanctions would be worth the slight boost to productivity.
3) Some companies need outsourcing to survive Numerous company CEOs have reported that without being able to outsource some of their IT section, their company would've gone under. In essense, the company outsources maybe 300 lower skill IT jobs to save 1000 higher skill IT jobs in the US.
-- Political fascism requires a Fuhrer.
However, having seen two-tiered workforces in action, I can tell you from both sides that it is not a viable long-term strategy from a Company's perspective. Contract/outsourced employees just do not care enough to reach for excellence, and they have no reason to. Why would anyone give 110% to a Company that is willing to accept 80% (or 70 or 60) effort, as evinced by their willingness to tier their workforce in the first place.
Finally, I feel bad for people just starting in IT in a soft job market, where there are fewer and fewer entry level positions. The same companies that are screaming for senior level talent refuse to develop it here.
I, for one, welcome the challenge of outsourcing. If there is an Indian (or Filipino or Russian) engineer out there willing to work for 20% of my pay, then I just have to be 6 times better. Get close to the customer, master your craft, continuously improve and do not become complacent. If done properly, your lieklihood of being outsourced becomes slim to none.
First of all brilliant article by Prof. Samuelson. I've long recognized that the assumptions used by the pro-outsourcers to be flawed, the Keysian model that assumes a free flow of labor, and capital, that does not account for immigration laws, environental impact, and tax structure. A recent survey indicates that companies who use outsourcing are only saving around 20 to 40 percent, if they save money at all. This is roughly equivalent to the de-facto tax breaks obtained by outsourcing in avoiding payroll taxes. In other words the only reason anyone on average saves money outsourcing is because they avoid US payroll taxes. One would think that the current administration would be concerned about the loss of tax revenue, instead they have proclaimed that outsourcing is all good, and the lack of tax revenue is irrelevant because according to the VP 'deficits don't matter'. The good news is the outsourcing problem could be easily addressed by repealing the tax break, and forcing companies to pay taxes on outsourced labor. At least Senator Kerry claims he will address the outsourcing issue, if he is sincere, I'm sure there are things that can be done to change the tax structure to at least improve the situation. We can all go out on Nov 2 and vote to fire the current administration who financial recklessness threatens us all, and who's mantra seems to be 'Outsourcing is always good' and 'deficits don't matter'. M
To put things in simplified terms... He doesn't believe in a globalized economy
Umm... no. That would be a stupid thing and Samuelson isn't stupid.
What he actually says is that under certain conditions outsourcing can lead to a net economic loss for the USA. This net economic loss could come about through the US losing its innovation edge as information and know-how spreads around the globe.
Note that this is a very close relative of one of standard arguments against open source: free software, often developed overseas, harm American companies because they don't have any technological edge any more.
IMHO globalization is inevitable. If the US attempts to climb into a dark closet and close the door on the rest of the world, the rest of the world will soon be a richer, freer, and more technologically advanced than the US.
Kaa
Kaa's Law: In any sufficiently large group of people most are idiots.
Highly skilled?
Are you kidding? So far, my exposure to outsourced crap has been just that, crap. Not worth the beans we paid for it.
We could hire bums off the street ( fresh out from giving blood and buying booze ) to code better than some of the stuff flowing out of india right now.
Mod me down with all of your hatred and your journey towards the dark side will be complete!
America [US] is becoming land of the mediocre by the decree of our own government.
/. .
"No child left behind" means no child gets ahead. Sure there are exceptions, but my wife who is a teacher has to teach to the lowest common denominator. It frustrates her because due to "social promotion" she has 7th graders who can't read/write at a 4th grade level. Now imagine being an above average student in that class where the teacher has to talk "down" to and teach to the "slowest" kids. Due to budget cuts (hey, tax cuts don't come for free), after school clubs and honor level classes are being trimmed if not entirely cut so many of the "smart" kids are being taught at a 4th grade level/pace since there are no classes/teachers for them. No wonder they lose interest in school and just start reading
"Look Lois, the two symbols of the Republican Party: an elephant, and a fat white guy who is threatened by change."
You mean it doesn't matter how cheap you can make something, if someone doesn't have a job to purchase it they WON'T?!?
DEAR GOD! What will we do about an economy now?!?
The outsourcing of high-paying jobs (heck, even low-paying jobs) does nothing but "appear" to help the economy in the short term because people still have savings to purchase goods at "reduced prices." But once that money dries up, it doesn't matter if that laptop is $4000 or $40 because people will be spending their money on catfood to survive.
Ugh... really... we need to move AWAY from a consumer-driven economy.
Diplomacy is the art of saying, "Nice doggie!" until you can find a rock.
Look, we're just the unlucky ones who are caught between waves. America leads the world in general technology advancement. When the rest of the world catches up, we let them do that job and move on to something bigger. It happened with textiles, it happened with machining, it happened with electronics. Now it's happening with knowledge work.
Screaming bloody murder about outsourcing is just saying you want progress to stop. You don't want the rest of the world to catch up, you want to stay in your sweet spot and not have to learn any new skills. I for one don't want our current state of technology to be the end of all progress. Think. Invent. Expand. Let the other countries do the repetitive programming and design jobs.
I believe this in spite of having been unable to find a permanent engineering job for two years. It just that no good thing lasts forever, so you start looking for the next good thing.
Did you notice that the people who finally speak out for/against a policy generally wait until they are no longer impacted by it?
Today the globalization hounds must beat the drum that globalization is good. Innovaton is lost and companies cannot figure out how to make a product or service more valuable so they make the cost of providing it cheaper.
In 1820 transitions occurred over time. To become a "global player" it took literally decades to move an industry to that level. During that time the industry workers transitioned. In current examples, the transition will occur in less than a decade. With Y2k,and the internet we built the infrastructure to make transition nearly immediate.
Now, add countries that would like the US work, but do not share US values. For example, India while more than outsourcing jobs, runs one of the most protectionist regimes in the world. Try, as a non-Indian to start a business and you will be kept out at the government, economic, and even social level.
The idea that we should not protect ourselves against such countries is ludicrous. This is like saying we should not stop terrorists because, by us not being terrorists they can see the benefits and will become outstanding citizens. (What drugs are these people taking?)
In the end, we are replacing 65K+ jobs with 30k+ jobs. Samuelson is correct ""If you don't believe that changes the average wages in America, then you believe in the tooth fairy," It does not take an economist to figure out that with only half the wages, the impact is on the entire economy. Two income families that bought two cars, can only afford one, or certainly not two new cars. Home buyers that had combined incomes of 130k, now have 70k to use as their financial base.
In their paper, Mr. Bhagwati and his co-authors write that such an assessment of the education systems of India and China "almost borders on the ludicrous." In an interview, Mr. Bhagwati said, "You have a lot of people, but that doesn't mean they are qualified.
The problem is that management doesn't seem to care if they're qualified or not. If they can save a buck (or many bucks in this case) they seem to overlook the qualifications.
Some of the jobs being offshored would have lots of requirements stated in explicit detail if advertised here in the US (such that it would be virtually impossible to find anyone who has all of the required skills) , but when they're sent to India those requirements tend to get overlooked... "You've got a BSCS from Bangalore Uni - you're hired!"
The thinking on management's part seems to be that they can make up for lack of technical skills by throwing more (cheap by US standards) bodies at the problem.
Eventually they'll realize that this doesn't work (and anecdotal evidence suggests that this is already beginning to happen).
The West certainly hasn't lost any of it's skills or expertise. It's developing countries that have, well, developed! The West may have blazed the trail for our current world economy, for good or for bad, but it was only a matter of time before other countries started catching up. Unless artificial market restrictions are employed this trend will see the wealth of the world spread out over more and more nations rather than concentrated in just a few. While it may suck for the West, it's good for the majority of people in the world.
The only question is, how do we deal with this? Do we throw our hands up in the air, say we had a good run, and walk quietly off into the sunset? Do we impose artificial trade restrictions that turn us into hypocrites? (Yes, this is the current tactic. It's already being done. Free trade is great so long as you're more free than the rest.) Our best bet is probably to try to compete better by improving our education system and finding new ways to encourage research. (Read: Overhaul the cumbersome copyright/patent system so you don't need a team of 20 lawyers and a fat bankroll for bribes in order to invent something remotely useful.) So long as we're ahead on the tech curve we'll get business. Unfortunately, other countries can do this too and they just happen to have a lot more people than we do.
Yep. It sucks to be the West right now, but it does give one hope for all the backwards shitholes on the planet. How you feel about all this depends entirely on how selfish you are I suppose. Ask not for whom the bell tolls and all that.
For the last few centuries the west has been living off the cheap labour of the rest of the world. But now increasing parts of the rest of the world seem to be breaking free and are able to earn enough to live with some dignity. Whether or not this change is of our choice, this will force us to live like truly civilised people, not like feudal lords who've come up with the clever trick of hiding their slaves on the other side of the world so that we can more easily pretend we live in a world of freedom and plenty.
In soviet russia stale jokes recycle you!
I think Marx said that a capitalist is a person who will sell you the rope with which to hang him.
Outsourcing also inevitably results in skill erosion here in the US and skill development overseas. For example, if you outsource a software job by lobbing a requirements spec over the wall, just reading that requirements spec gives the vendor a better idea of the sorts of skills and ideas needed to do it themselves next time.
So, the split incentives of capitalism may result in general losses in economic value. That's why the economy is regulated. (Samuelson did not prescribe protectionism, and I don't think that's the right answer in low-skill areas, but perhaps educational subsidies and R&D credits, etc.)
if minimum wage were all that were offered, there would be :) but then of course the company that pays minimum + epsilon would snatch all the talent. answer: corporate salary cap, just like in sports.
You are certainly correct, but I do disagree that complete globalization will be for the better of the united states. I think that the USA will have to be brought down to the level of the rest of the world before globalization is finished. It is inevitable that over time our profits will slowly trickle out into cheaper workers. The proliferation of degrees across the world means there is a significantly bigger job market that Americans can't currently compete in because of cost of living in the states.
My Best analogy for true globalization is osmosis or diffusion. Currently America has an extremely high concentration of money. Without some way to keep that money in the states, the money will diffuse out across the world to the point where we are at a more equal distribution.
There simply isn't the need for highly skilled workers across the entire world to make the impending situation possible. If every country across the world had the same distribution of labor jobs, and highly skilled jobs as is the case in the united states, then things might work out so that an even distribution of money would be positive for all. Currently, we are simply over saturating the markets with labor. Everyone is competing for the jobs that make products for the United States. Everyone is trying to get our money. We have the biggest pot of money and so thats where the market is. If current trends continue then there will be true diffusion.
This is only mildly good for everyone else. They will all have slightly more money, but there will come a poitn where everyone is equal and there will no longer be this enormous pot to draw from. Whats worse is recession. Currently, everything in the United States is horribly inflated. What costs a dollar here costs significantly less in the countries that want our business. To be globalized and competitive we nee dto change that. We will never be able to inflate the rest of the world to be equal with us, instead, we must completely deflate the US economy to be equal with the rest of the world. It wouldn't work, and hence, recessions happen. The amusing part is that the economies of the rest of the world would go down with a US economy collapse. Its all rather amusing, and its bound to topple. I don't think there is much anyone can do to stop it short of a world-wide effort to equalify the global system, which will also never happen. So, everyone sit back and watch the show, and hope it holds off long enough for you to be out of the mix.
It's also possible that irreversible damage will have been done, by the time a majority of economists realize this. That is, assuming they don't have agendas of their own.
...Mr. Bhagwati, Mr. Panagariya, and Mr. Srinivasan are optimistic about offshoring to India.
My unemployed IT friends; Mr. Smith, Mr. Schultz, and Mrs. Mackey; do not share in their optimism.
I'd like to type out how bad I think this internationalization stuff is for the US economy as I sit here in a cafe sipping columbian coffee made in an italian coffee maker poured into a chinese mug, while typing on a japanese laptop connected to a tiwanese access point. Oh, I just forgot, I left my norwegian cellphone in my german car in the parking lot. Be right back!
-- Greg
Slashdot, would a spell-checker for posting be too much to ask? It's not rocket science!
Why not allow people to move whereever they want, and force the corporations to stay inside national borders? Wouldn't this be a more sensible approach to "globalization"? Instead we allow corporations to move wherever they want, and lock people up inside borders.
Is the idea of a person even a concept in your theory of economics? Or, in your theory, are people invisible, with the focus on profits, raw materials in one end, and manufactured goods on the other side? It's something to think about, when a theory allows for certain things to remain invisible, it tells you a lot about what the creator of that theory thinks is important. That's why our economy is said to be in a "recovery" while most people continue to do worse. Our economists don't have a concept for people in their theory, the measurement is of profits. So, if profits are up, but lots of people are starving, then it's still a recovery. This should give you insight into what classical economics is all about. It's a theory designed to decrease one's understanding of what is really going on.
Take a look at how they view corporate workplaces. According to them, raw materials go in, and consumable goods come out. They fail to notice that people go in, and people come out. People come in energized, they go out, exhausted. They might come in with two arms, and come out, perhaps with one. Economies transform people, and mold and shape them. They might come in humble, and ready to help the world, and go out the other side, a jaded, arrogant CEO. The problem is, if our concept of economic institutions doesn't measure the effects of those institutions on people, the air, the envionrment, etc., then our theory will hide all of the negative effects of corporations. Not to mention, that if we fail to take into account all of the effects of our production institutions, then prices will be grossly distored.
What exactly does a globalized economy mean, when people aren't allowed to usurp barriers that corporations can pass through like thin air? Can we call that a globalized economy?
Any place where the price of real estate consistently outpaces income is setting itself up for cost disadvantages. This has long been true in the coastal metro areas of the USA, and is now happening in non-metro areas, such as San Luis Obispo.
In 1969, my parents sold a nearly new 3 bedroom house in rural New York state and bought a new 4 bedroom house in a San Diego, CA, suburb for the same price. In both cases he could, as a high school graduate of no academic distinction who held a factory foreman's job, obtain a loan of about 2.5 times his gross pay. His commute to work was about 1/2 hour.
In 2002, in the Bay Area, with a tech masters degree, I'm limited in choice to a one bedroom condo with an 80 minute commute. Homes are available, but only to those with astonishing credit who are willing to live with the fear that comes with a 2% down payment and 'creative' financing.
Spiraling land values should be regarded as a crime, because they force startups to locate away from research universities.
The clearance system sounds logical. It is not. It is completely arbitrary. -- John Bolton
The Soviet Union was a police state that overspent on the military and secret police, with political hacks running agriculture and civilian production. It could be argued that their problems were more political than economic.
The clearance system sounds logical. It is not. It is completely arbitrary. -- John Bolton
Ultimately, you could be better off in the USA, even if it does depress wages by moving jobs overseas as long as the cost of living goes down more than the wages get depressed. That could be a net good.
Basically the argument comes down to that of altruism. If you think that helping everyone helps you, then globalization is good, if you think you will be better off by hoarding or protecting your assets from others, then it is a threat.
IANAE(conomist), so I may have missed some of Samuelson's nuances. But he is just seeming to point out to some of the rah-rah outsourcers that there may be some negative consequnces to the one doing the outsourcing.
History. If all these economists really knew so much about the economy they would put their money where their mouth is and invest in the market and make lots of money.
But they don't.
Hell, they can not even agree on how the stock market works or what started the great depression.
It ain't science, it just random guessing with lots of numbers and computers to make it look fancy.
The economic theory, which is perfectly sound, says that yes, wages will drop here, but prices will drop too. In the end it should be a wash.
The political reality is that companies use their clout with the government to create firewalls between countries so they can price their goods differentially in each country. Witness the FDA getting hot and bothered by people importing their drugs from Canada, and of course our long time favorite here, DMCA and DVD regionalization. The result is some people get the benefits of globalization and the benefits of protectionism combined; others get the costs of each combined.
It's just goes to prove what my old uncle Ivan, who was a cynic first and radical second, used to say. "Kid, nobody believes in capitalism. Nobody believes in socialism. It's socialism for me, capitalism for you!"
Post may contain irony: discontinue use if experiencing mood swings, nausea or elevated blood pressure.
I will RTFA after work hours, when I have time. However, most of the discussions and comments regarding outsourcing and regional specialization miss what I find to be an essential point.
Human beings have diverse sets of abilities, let alone inclinations, that support our complex social structures. Not everyone can do everything themselves, especially as society has grown more complex, and so we've developed individual specializations that allow complex social structures to be supported, with all the benefits these supply. Doctors can be such good doctors because they don't have to tailor all their own clothes, let alone grow and harvest the cotton, sheep, and oil wells they come from.
And this is not just reflected in the "elite" we all envy. There are extroverts who want to be face to face 24/7, and introverts who would like a private office, or to work by themselves out in a field. There are those who are extremely verbal, and those who are extremely visual. Those who are a whiz with a contract, and those who can keep even the most decrepit machine "alive" almost by intuition.
As we shift jobs over national boundaries and overseas, we disrupt the balance of work within a society. The jobs move, but the people are not free to follow them. Further, we essentially sell out the rights of people performing those jobs by moving them to locations where those rights don't exist. We've all heard about the labor practices in China and many other countries where manufacturing has grown. Even if a U.S. manufacturing working could move there, there would be strong disincentives.
With all this talk of "retraining", I become frustrated. Even were it to be effectively supported, not everyone is cut out to be the banker or lawyer that some think this country should become full of. 30 years ago, we needed a lot of manufacturing capability here, and people who enjoyed doing that. 50 years ago, the family farm was still a mainstay of society.
These aren't just a matter of training. They are also a matter of basic personality (whatever the details of defining such). And such things don't just change overnight, or in the span of one generation. There are people of a different mindset borne into this society who, by our very laws, deserve a place within it.
It's on the collective backs of all of us that the "elite" have become the elite. Some of them may be very gifted, in ways that are ostentatiously rewarded. But they didn't achieve this glory on their own.
And yet, we divorce ourselves of much of the infrastructure supporting those less "glorious". And we expect this to have no serious repercussions? It is a breach of social contract.
And before you say "who cares", laissez faire, or Darwin, see how long you survive when the garbage piles up into a health hazard. Or when those with no future decide that yours has been achieved at their cost. With nothing to lose, things can get very ugly. As they have in the past.
Or, see how long it is until the rest of the world realizes they don't need American bankers and American lawyers. As their social structures solidify, especially their legal codifications, ours will become superfluous.
A healthy society is one that is sustainable. What we are creating is not.
The world will get by, in the long run, but this country may become, in the meantime, a far different place, and one far less reflective of the ideals too often used as a blind in selling this shortsightedness.
Well, I think that it works like this: You get your consumer electronics made overseas and a few thousand people are displaced but millions save money. So, we feel like we came out ahead. Then you move another area of production overseas and it happens again and we feel like we came out ahead. But, if you keep this up long enough, and you aren't adding new higher-end production to our economy, eventually you turn around and see that there aren't very many decent paying jobs left here.
On the other hand, you can protect the jobs here and that will just start trade wars with other countries. Plus, it impacts everyone by raising the cost of consumer goods. We deal with the fact that not only are wages lower in many parts of the world, but so are many of the other cost of doing business. Protecting jobs in this country would likely tend to raise costs further since it would likely discourage competition for those parts of the marketplace.
And it is a problem that things are changing so much more quickly now than in the past and that requires that people be ready to shift their career more often. When cars took over from horses, blacksmiths were becoming obsolete but it took a long time and some of them transitioned into auto repair. Now, things are changing much more rapidly and the changes can be more radical.
It is a thorny problem to be sure and like most things in life, there isn't a clear good choice since it is all about trading one problem for another. I believe that one of the biggest problems in this country is the we tend to focus far to much on the short term impact of things and not make decisions based on the long run.
Just my $0.00 worth. (It's the Internet so it has to be free, right?)
If anyone really believes in outsourcing, check out this logic:
1) Forced removal of job
2) ?
3) ?
4) Profit!!!!!!
Notice how the CEO / Executive crowd are all getting their taxcuts NOW to "stimulate the economy" while you have to give up your job and retrain for a new career for some imaginary profit later (5-10 years later? It won't be tomorrow!) Note that this is through your own sweat and worry and hard work.
Greenspan and the others pushing this outsourcing believes that the country has to go trillions into debt to finance the taxcuts *now* rather than rely on the same "innovation" that is supposed to finance YOUR pocketbook.
That's why Samuelson's "toothfairy" reference is such a good one. Only in this case it's the "innovation" toothfairy that's supposed to bring the profit. If anyone believes in innovation so much, I'm sure that they won't mind giving me their car so they can "innovate" another one later?
Of course, you do realize that understanding economics has little to do with knowing which companies will be successful? That takes a business man's mind, not an economist's.
A deep unwavering belief is a sure sign you're missing something...
What's helped the USA the MOST is having access to cheap oil. Most of that other economic stuff is academic masturbation. Not all of it, but most of it. We built up our economy after WW2 with oil at 2-4$/barrel IIRC. Once our domestic oil got marginal and expensive, we switched to getting oil at cut rate prices from ridiculous dictators on the take and "royal" poobahs overseas. Everytime one of them guys get's the wise idea that they are better off charging a better price or actually using their own oil domestically-or not using the fiat FRN as the currency that is acceptable, we send in the boys with the guns and get a new poohbah in there. Either the spooks change it or the overt military changes it. Look at Saddam, as long as it was swap or oil for US petrodollars, he could do whatever he wanted to do, for years. As soon as he started to insist on Euros, WHAM! All of a sudden he's this big threat, etc,poof, new war, he's gone. One of them amazing coincidences that really isn't.
I know this doesn't address outsourcing per se, but it's the biggest factor in helping to keep millionaires as millionaires. When even relatively cheaper oil wasn't enough, they only had two choices to keep their profits up, ship off the jobs they could to much cheaper labor place, or get another source of cheap oil. Now that there really isn't any more cheap oil,no place, there's not much more they can do. They are certainly not going to go personally broke or give up their personal jetliners and multiple mansions jazz. That leaves sticking it to the middle class here domestically, and using the stock market casino scam and normal partisan politics to keep people faked out that they can get rich, too, sometime in the future, or that it's "the other party's" fault. Heck, they even sold credit as pay to people, and they bought it, people have actually switched to the notion that being in perpetual debt is somehow accumulating wealth. Just an amazing bit of propoganda and brainwashing.
It's an admirable scam, well thought out, well implemented, seems to be working well for the globalist "elite" boys. I keep wondering when Joe and Jane sixpack will notice. Most don't until they go broke, and the more well off they were, the harder it will hit them, the ole cognitive dissonance sets in. Each of them will vote for the globaist scamster skull and bonesman of their choice, and whomever gets in, Joe and Jane will just get broker, but blame it on the OTHER globalist bonesman and the OTHER globalist party.
Thinking that helping everyone helps you isn't altruism. It's just as self-interested as hoarding, except it's a different strategy.
Um, it's the economists who keep yelling at us to not run such an enormous deficit. It's the "people" who keep voting for their precious government programs that keep running up the debt.
A deep unwavering belief is a sure sign you're missing something...
The redistribution of wealth comes at a premium from base.
If the base is high, say between the US and Canada (not Mexico yet,) or across most of the EU the changes mean that "A rising tide lifts all boats." Economies progress to a higher level by building on what came before.
If the base is low, say between India and the US, the flow is the same, (economics as thermodynamics) but the changes means that you get burnt by the __rate__ of the transfer.
In effect, you have a redistribution of poverty, not one of wealth.
The current immigration policies of the US (and Canada and the EU for that matter,) albeit prejudicial, flawed and exclusionary means that the __rate__ of the transfer is occuring at a tolerable pace.
The current phenomenon of __foreign__ out-sourcing (out-sourcing ''per se'' is not is a major problem since the expense base is directly comparable and commensurate,) is the cause of all the arguments.
The comparative advantage of some labour costs is __too__ great because you're comparing Apple to oranges.
The annual GDP PER CAPITA of Malaisia or India is so much lower than the US (or Caqnada or EU,) GDP PER CAPITA that instead of conferring an advantage, (which it ''does'' do in absolute dollar terms,) it leads to a reverse flow.
The wealthy get poorer instead or the poor getting richer.
I find it amusing that our politicians, who are so concerned with competing on ''a level playng field,'' are more interested in squeezing the money to be made from the difference between the poor and the rich.
MSBPodcast.com The opinions expressed here are my own. If you don't like 'em... Think up your own stuff.
serendipity, this is on drudge right now:
5 4~ 2388909,00.html
http://www.dailynews.com/Stories/0,1413,200~209
Illiteracy shockingly high in L.A.
Half of workers unable to read
By Rachel Uranga
Staff Writer
Continued immigration and a stubborn high school dropout rate have stymied efforts to improve literacy in Los Angeles County, where more than half the working-age population can't read a simple form, a report released Wednesday found.
Alarmingly, only one in every 10 workers deemed functionally illiterate is enrolled in literacy classes and half of them drop out within three weeks, said the study by the United Way of Greater Los Angeles.
"It's an emergency situation," said Mayor James Hahn, adding that poor literacy rates could jeopardize the region's economy by driving out high-tech businesses and other industries that pay well.
In the Los Angeles region, 53 percent of workers ages 16 and older were deemed functionally illiterate, the study said.
That percentage dropped to 44 percent in the greater San Fernando Valley -- which includes Agoura Hills and Santa Clarita -- but soared to 85 percent in some pockets of the Valley.
The study measured levels of literacy across the region using data from the 2000 Census, the U.S. Department of Education and a survey of literacy programs taken from last September to January.
It classified 3.8 million Los Angeles County residents as "low-literate," meaning they could not write a note explaining a billing error, use a bus schedule or locate an intersection on a street map.
And despite hundreds of millions of dollars spent in public schools over the past decade to boost literacy rates, functional illiteracy levels have remained flat because of a steady influx of non-English-speaking immigrants and a 30 percent high school dropout rate, authors of the report said.
---and some more at the URL
But! That's not NEAR as important as customised cars, the latest pop music and videos, near-universal addiction to professional sports, wearing the latest cool fashion and being able to ace videogames! We'll show 'em! Hey, let's throw MORE tax payer money at the public schools! Hey, let's just ELIMINATE borders! Hey, MORE tax breaks for corporations to move overseas! Waitaminnit! I got it! WARS! Let's just have MORE WARS and just TAKE what we need! That should work!
... your CEOs are GIVING them away. Don't get pissed off at an Indian or Chinese IT worker, they got offered your job and they took it. What, were they going to say "no thanks, an American should have this job"? Its your countrymen that are doing this to you, not some phantom job thieves overseas.
At least Senator Kerry claims he will address the outsourcing issue, if he is sincere, I'm sure there are things that can be done to change the tax structure to at least improve the situation.
Take a look sometime at how many of the employees of Heinz and other Kerry-affiliated companies are in the United States.
Kerry Now Claims "Benedict Arnold" Line Does Not Refer To Companies Outsourcing Jobs, Saying "I Support That." Kerry: "But the Benedict Arnold line applied, you know, I called a couple of times to overzealous speechwriters and said 'look that's not what I'm saying.' Benedict Arnold does not refer to somebody who in the normal course of business is going to go overseas and take jobs overseas. That happens. I support that. I understand that." (Jerry Seib, John Harwood and Jacob Schlesinger, "Excerpts From An Interview With John Kerry, The Wall Street Journal, 5/3/04)
Kerry Previously Railed Against "Benedict Arnold" CEOs Shipping Jobs Overseas. Kerry: "My economic policy is not to export American jobs, but to reward companies for creating and keeping good jobs in America. Unlike the Bush Administration, I want to repeal every tax break and loophole that rewards any Benedict Arnold CEO or corporation for shipping American jobs overseas." (Sen. John Kerry, Statement From John Kerry In Response To President Bush's New Economic Report, 2/10/04)
Are you the host of this show?
/. are well aware no help is needed there, thanks anyway.
Can I get a mic over here?
Seriously, I like the part where we have a guy who is apparently of Indian descent saying all the manufactuing will go to China and all the high tech will go to India.
Ho ho ho. Well, we're not seeing a bit of ethnic pride there eh? I mean facts are facts and there's pretty much zero computer hardware produced in India. Now if you want to argue that chip foundries are manufacturing, I'm with ya. But when you suggest that chip foundried aren't tech, you're starting to lose me a bit. You got to be careful with the language here.
Indeed, India's big advantage is the common use of the English language as much as their tech exprtise. So, this equation of India gets tech and China gets manufacturing seems a bit of an overly creative interpretation of what's going on. I'd say it's more like China gets tech and manufacturing and India get skilled services that require extensive English skills like accounting and insurance and the like.
Some people think India will do something in software, but as we here at
Anyway, I think this misreading of the roles of India/China with reflection on the guy's ethnicity really points out something even more important which is that people are flawed and tend to believe what they want to believe. This is the most damning thing of all for the critics of Samuelson's report.
This is suggesting another possibility. As a matter of fact, by stating that, I grant him that assumption.
Now, you are attacking me, do you realize that? I am suggesting that there are scenarios where waiting to understand things fully are dangerous. I don't go as far as saying "we can't wait" which I don't really believe myself. But it is a worry, all the same. So, your entire argument hinges on this obviously being a situation where waiting could never be harmful (the only situation where my argument could be fallacious). If that is so, please tell. Seriously and honestly, I suppose it could be the case, but it isn't obvious to me, if so.
Can you say that you don't worry that this might be a case where waiting allows irreversible damage ? Intuitively, it feels to me as if it might. I can't see how exploring such a charge might be fallacious.
For God's sake, someone PLEASE mod the parent down.
You should not be saying things like that. You might disrupt the master plan.
The vast majority of people are content to be placated and manipulated for the benefit of an elite few. People are told what to want, told how to get it, and told to buy into a system which essentially keeps them enslaved to their own mediocrity. For the most part, they obey.
If you go around pointing out how these things harm them, they might start thinking for themselves, might become discontented with their lot in life, and might start disobeying their televisions. Do you realize how disastrous that would be? Don't you see the turmoil it will create? Not only will those who have maintained power for generation after generation wind up losing everything, but the people will bring upon themselves much chaos and suffering.
Be silent.
I'm not an economist either, but I do understand a few basics:
US workers unemployed by offshoring make 0, lowering the average wage.
US workers finding new employment find the glut of unemployed workers (low supply + high demand) and the low wages in India devaluing their wages. Again, the average wage is also lowered.
US workers with existing employment find their wages frozen, their benefits cut, their hours longer and more stressful (to both compensate for the extra work of downsizing, and for goofs from offshore workers), and their job security nonexistent.
The only "winners" are the CEO and his cronies whose salaries go up, their benefits go up, and laughing is heard in the vicinity of the bank. Note that few if any of these people are US IT workers, or do much work at all.
As for as cost of living goes, that depends on inflation. With high gas prices, that will be going up, up, up, and the cost of living will tag along.
So US IT workers will "win" high cost of living, low wages, debt (to make ends meet), savings and credit consumed by the unemployed, and bankruptcy.
But if it makes you feel any better, those CEOs won't make off like quite the bandits they want to be. You see, offshore workers have done a great job learning the business of offshoring US companies. So good in fact, that IBM consulting, for instance, is now having to compete for business with their own offshore workers who have formed a nice little consultant company of their own. The fun thing is, the Indian consulting company can of course, under bid IBM. Gotcha!
Unfortunately, for us IT workers in the US, that is only going to drive wages lower as companies like IBM are forced to compete with Indian consultant companies on their way to the bottom.
The only way off this nightmare escalator? Stop treating employees like costs to cut, and start treating them like your company's most valuable resource (remember Human Resources?). Then you can hire quality people, pay them what they are worth, and compete on quality. Then everyone is a "winner"!
Don't think quality works? Who survived the fall 2000 PC crash the best, with the fewest layoffs, a quick return to profitability, and billions in the bank? Apple! Apple kept their prices up, focused on quality instead of the sub $500 PC, and worked feverishly to bring out OS X to build a future. The rest of the companies slashed workers by the tens of thousands, and huddled in their storm shelters. When they came out, the only thing left standing and thriving was the Apple tree, laden with fresh, high quality, fruit.
"No one's going to die, mister. Mothra's going to come and save us."
Taiki Goto, "Mothra", December 14, 1996
(Released in Japan six days before Apple's surprise announcement of the return of Steve Jobs.)
I was looking forward to reading his explanation (especially since I disagree) but it isn't there. The article /. linked to is just a tease. It's an article about an article, with the meat apparently appearing in something "Journal of Economic Perspectives". Bah. Come back when you're ready to play.
So without any new input, I'll just jump into the flamefest, and say that as an economic "problem", outsourcing is identical to technological advancement. If a computer takes someone job, most Slashdotters would cheer. But if that replacement's name is Apu instead of Bender, suddenly people are screaming. I ask: WTF is the difference?
And outsourcing labor is not only equivalent to a tech advance -- it actually is one. Before you had comm technology so that an Indian could take a tech support call from an American, before you had transportation infrastructure that could move goods at high speed over vast distances, service and manufacturing couldn't be outsourced. But now it's possible. The tech advance is that somebody looked at a spreadsheet and said, "holy crap, we can actually do this now."
Protectionism is ludditism. Yummm.. now that's some good flamebait. :-)
As copyright owner of this comment, I authorize everyone to defeat any technological measure which limits access to it.
There's plenty of difference. If a computer takes your job, the job's still in the SAME COUNTRY. You can retrain and compete again to get the job. In offshoring, your job is now overseas. The money moved, but you're not allowed to even if you were willing to live in a country with a lower standard of living and a lower salary. ...immigration laws and all that jazz.....
It was Lenin. I think the quote was more like "the capitalists will sell us the rope with which we'll hang them".
He used to compliment the Soviet Union's growth out of feudalism, when he was justified by the economics. Before the Soviet glory days of the 1960s, his textbook explicitly called Marx "wrong" on several predictions demonstrated wrong by intervening history.
Soviet socialism was unable to sustain its unbalanced military economy on top of a giant energy hungry populace filled with ethnic and other divisions, and millions of political deaths. Other socialisms, like Germany, Canada, France, England, and most other industrialized countries, have fared quite well. Growth, citizen satisfaction and stability are all high. It's not quite the crock you'd like it to be.
--
make install -not war
The trouble is that socialism doesn't work in theory, and it's proven to not work in practice. Not to mention the social justice aspect of USING VIOLENCE to COERCE resources from one party to the benefit of another. I understand that many people have no problem using violence. I happen to think that it's wrong, and pollutes any end sought.
-russ
Don't piss off The Angry Economist