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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.
...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?
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.
They've been saying this in California for awhile
"The problem with the US economy is that there are not enough highly skilled people willing to work for minimum wage."
Expect Freedom.
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
I am not ready to move to a third world country to compete.
Paying someone from India one third of my pay would give them a very good standard of living in India.
Maybe we should pay the CEO's their equivalent wages of a small business owner in a third world country?
Better yet, lets go to New Delhi and choose the first ~535 (or so) people off of the street and replace Congress with them. I am sure they will work harder and cheaper!
No really. What is wrong with making a good wage for a good job in your own country? The money my boss pays me gets spent in this country (mostly - I dont drive imports). When I spend money in my own country, it iunvigorates the LOCAL economy, which in turn, give LOCAL people mnore income and eventually spurs demand for more products so my company's CEO can make more money.
This offshoring is the filthy rich big business executive's way of quickly lining their pockets with money so they can cash out quick and retire.
They don't give a damn about the long term.
I am done ranting now...
I live the greatest adventure anyone could want. - Tosk the Hunted
- I live the greatest adventure anyone could possibly desire. - Tosk the Hunted
Try doing this in the real world, where an Indian can live on 10% of the salary of an American. It's not reasonable to expect people to somehow be able to work ten times as hard. There are limits to how hard people can work.
I agree that as Americans, we are being hypocrites by whining about our own problems if we don't at the same time address the problems of the 3rd world that we allow our corporations to exploit. Isolating ourselves, and focusing only on ourselves and our own needs is exactly what makes us so easy to exploit. There is another reason that we shouldn't allow corporations to take over 3rd world countries, it robs their citizens of the opportunities to control their own destiny. Further, the solution to this problem is not to write our congressman, and it's not inside any one country, the solutions lies in joining together with those who are being oppressed outside our country.
The problem of corporate globalization, as well as it's solution, lies outside the borders of any single nation state. It's time for us to realize this fact.
Has it occurred to you that we're losing our edge, not because outsourcing, but because we haven't been working very hard to keep it? Our education system is in shambles, our young people are complete morons, and we as a culture pretty much revile the educated and glorify the average.
Oh yes. The US education system is just god awful. Worst in the world. Terrible even! Same with the rest of the wester world! Thats why everyone wants to come over here to go to Harvard or Yale or MIT or Oxford or Stanford or even our high schools. Oh and we haven't been trying hard either. God knows NOT A SINGLE PERSON in the US innovates or starts a new company or attempts to advance technology anymore. Pfft. Way to troll!
If outsourcing is a symptom of anything its corporate greed. They can save millions by paying unintelligable people to stumble along with english over the phone and have their customers take it up the arse. It has nothing to do with education. Its economics... which I belive is what the article is about...
Matt
You have 1 Moderator Point! Use it or lose it! Is that a threat? -vapid
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
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."