How exactly does outsourcing make us stronger?

Great Debates
121

It’s not a question of how exactly outsourcing makes us stronger, it’s a question of how not outsourcing makes us weaker.

[opinion]I’ve always told anyone who asks that the biggest threat to the US economy is the Chinese worker. If they ever stand up and form Unions, be prepared for every product in the US to triple in price.[/opinion]

But why are the Chinese making our goods in the first place? Because our Unions won’t let our workers work for as little as the Chinese are willing to work for.

This is a good thing. Well, sort of. Since a US worker gets paid so much more than a, say, Chilean worker to produce the same product, the Chilean product will be more competitive on the global market. The Chilean company sells more products, and is able to hire more workers. And since we are talking about a product that is being bought globally, we are missing out on a lot of business.

More over, since the US product is so much higher in price, the US customers will be buying this Chilean product over the same product made in the US. Soon enough, that company that is making the US version of the product is in financial trouble, and starts laying off workers.

The knee jerk reaction from the US Government has been to raise import tariffs on these types of products. This does no good whatsoever. Once the tariff is raised high enough that the US version of the product is actually cheaper than the Chilean version, then only the US will be buying its own product.

So, we are only hurting ourselves when we don’t outsource. It is bad to be isolationist in a global economy.

Outsourcing will lower the costs of doing business for US companies, therefore our products are more affordable, therefore more of them will sell on the global market. This means more money is coming into the US, and directly to that company, which will have to hire more workers to keep up with the demand. And since these companies in India are being paid a flat contractual fee, the US gets to keep all of the profits above that. More profits equals more tax revenue going into the US Government. Outsourcing is a very good thing.

122

No it wasn’t a rant. I think we need to start thinking of ourselves more than people half a world away from us. I’m tired of people who rely on faked statistics to try and buttress their arguments. I’m tired of hearing SOMETHING’ will happen because it has in the past. How about if I run out of money, can’t pay my rent and tell the landlord - trust me, I’m confident that “SOMETHING” will happen down the road that will allow me to get straight with you. Yeah, right. You wouldn’t accept that if you were the landlord, so why will you accept similar pap from economists and the government?

Depends on what you are measuring. By GDP, we are 20-25% of the world economy. By consumer spending, we are over 50%. And the consumer spending part is what is relevant because companies only make money when they sell to someone.

As I said to Pervert, I don’t honestly know how you can read all that has been written in this thread and not see that there is problem and that it looks to be getting worse <shrug>. If you don’t think there is a problem, then you have made your point. I’m not sure what else you can contribute to this debate other than to restate your opinion that there isn’t a problem and there is nothing to worry about.

123

Great. But as has been repeated here and in other similar threads ad infinitum, WHAT DO YOU DO WITH THE DISPLACED WORKERS?

124

Here’s a page with a lot of interesting links to browse through: Link

Some title excerpts:

**Unemployment creeps up the education ladder

Persistently weak job growth leads to labor force contraction

Unemployment measures understate job slack

EPI testimony on the president’s 2005 Department of Labor budget

Educated, experienced, and out of work

Weak recovery claims new victim: workers’ wages

Bush Administration backs off prediction of “average” job growth

Missing the Moving Target For Jobs

Understanding the severity of the current labor slump

Payrolls up, but growth not sufficient to boost wages**

125

Displaced workers? What displaced workers? I don’t follow. This would create more jobs in the US as the company grows due to its success. The new jobs would be higher end jobs, that would require Americans to strive to attain these jobs. They would be higher paying, and our standard of living would increase. A majority of the jobs that are leaving the US are so menial and cheap that it is more expensive to buy a robot to do the same task.

If you are referring to the fact that some workers may, in the time span of their career, manufacture toaster, then cars, then computers, and then televisions, then so be it. They will gain a new skill each place that they work.

126

Prove that the new hires will not also be outsourced. These new jobs will not benefit the USA. They will be outsourced.

Prove that a corporation cannot move its corporate headquarters somewhere with lower taxes than the USA.

It’s amazing how IT goons thought that manufacturing outsourcing was so great but now they whine about IT outsourcing. Nobody is safe, anymore.

127

Whoa, you are so far offbase that it is not even funny. It’s clear that you have not read what has gone before. Please read this whole thread including all the links from the beginning, then try this one: SDMB Link. I’m not going to rehash everything again.

128

Dogface and iamme99,

What the both of you have said has some truth. In the end, outsourcing will create a global market where a large company will have locations world wide, in half of the countries on this Earth. Some of these companies will have their Headquarters in a foreign country. There is nothing we can do to stop that.

But if we try to stop that by preventing companies from outsourcing and/or by raising import tariffs, we stand to lose a lot more than we gain. Suddenly our potential customer base went from 7 billion people to 300 million.

I happen to work for a company whose Headquarters is in the UK. The company that I work for is a PLC. We have sales offices all over the globe, including as far away as Taiwan. But my geographic area needs local sales reps to sell our products. Thus, I have a job.

iamme99, you may think that I am off base, and that is your opinion that you are entitled to. But I have my opinion, based on insider experience, which I am also entitled to. It looks like we have a fundamental difference in economic philosophy. So, I will be happy to agree to disagree.

My whole point is that if we do not join the global market by outsourcing, then we are in danger of the global market passing us by.

Whenever you speak of money, you are speaking of competition. There will always be competition when it comes to business. To try to insulate yourself from this competition through legal or tariff means you are willing to give up.

129

I am thinking of myself and I don’t want to pay you more to do what someone else is willing to do for less. Get it? It’s called freedom and I like it. I do not like the government telling me where I should spend my money. I prefer to decide that for myself. If you prefer to pay more for American made products then fine. Nobody is stopping you. But you want to hijack other people’s freedom and I have a serious problem with that. I like my freedom.

Nice rant. Unfortunately it makes no sense. But let me explain one more point to you: I do not owe you a job any more than I owe anyone in China a job. Nobody owes you a job. It is up to you to offer some skill or service people are willing to pay for. My company sells DSL microwidgets and nobody is forced to buy them. If we offer a competitive product then people buy it and we get to put a can of beans on the table. If people don’t buy them then we get to scratch our heads and figure out what we can do to get people to buy it. See, the beauty of a free market is that to get your money I have to satisfy your needs and to get to my money you have to satisfy my needs. Once you tell people how much things are worth then the concept of value is meaningless. Countries that have tried that have failed miserably. What makes you think it is a good solution?

Well, the only problem I see is people who want to do things which would mess up the economy and make things worse for everybody. If you look at the countries of the wiorld you can see that their wealth is (among other factors) quite inversely related to the intervention of the government in the economy. I do not understand why you keep insisting on proposing things which have not worked in the past and which economists agree are bad. Please show me the list of countries which became rich by closing themselves off the outside markets.

I am chewing some sweet candies right now. (Very good BTW) They are some sort of Japanese soft candies and they look like miniature fried eggs: a white base with a yellow top-center. Bought in the USA. Japanase product and label. it says “Made in Germany” “Packed in China” “Distributed by Smart Year, Hong Kong” I do not know where japan comes in. maybe they are made mainly for japan. This is a tiny 3.5 Oz package and, frankly, I have no idea how you can make the sweets in Germany, pack them in China and export them to the USA where i bought them for close to nothing. It just amazes me that the free market can be so amazingly efficient. Somehow, they figured out that the most efficient way to do this is to make it in Germany, pack it in China and then ship it to where ever and this was done by people in HongKong and other places. Make this a bit more complicated and you’ve killed the chicken because you’ve just made it impossible. I am not going to pay dollars for the candy. you have not created a job for an American, you have just killed the jobs of the people who import it.

Again: I like my freedom to decide what suits me best. You think you should be protected from overseas competition and I disagree becuse you want that at my expense. You want to take away my freedom. No thanks. I am sorry if you have difficulty finding a job but I have no more obligation to guarantee you a job than you have obligation to buy my widgets.

the only advice I can give you is to acquire skills that are in demand and save money for tough times because they will come. The notion that the covernment can take care of you is a mirage.

130

And I think you’ve nailed the problem on the head. YOU are selfish and more concerned with yourself. YOU want to pay the lowest price, regardless of how that might affect anyone else. OTOH, you’ll note that I was speaking of US, not just myself. This is all about the big picture bud, what’s good for all of us as a country, NOT just what is good for YOU or even me individually. You speak as if you think you have some sort of unlimited freedom here to do anything you want. You don’t. Government and society determine the amount of freedom that you have. As Janis Joplin sang - “Freedom is just another word for nothing left to lose”.

In this Gallup Poll, 60% of the people are dissatisfied with current conditions in the USA. 40% are directly dissatisfied with the economy and jobs situations here, up 11% in only the last 2 months. Politicians follow these polls closely and as I have said, they WILL be doing something about these problems in this election year and afterwards, regardless of who gets elected. So you better save some of that money you’re making so you can pay the higher prices and taxes to support your out-of-work compatriots who are unable to find a job. You may not like this idea, but you’re not going to have much choice other than to move somewhere else.

As to skills, I have a pretty good set, having worked in the IT industry for more than 25 years in various capacities, ranging from programming to sales. Problem is, there just aren’t enough jobs to go around, there are a lot of young people available to work longer hours for less pay at less cost to the company and as always, many companies aren’t particularly interested in hiring people who are over 40.

131

I don’t see why that’s BS. I’m not an economist, but I would hazzard to guess that over the last 100 years, the proportion of goods and services produced in America has dropped dramtically. I can remember a time when you could buy sneakers manufactured in the United States. Now, every sneaker I see is “Made in China.”

As long as I can remember, people have expressed concerned that our jobs were going overseas; that we would face massive unemployment; that we were turning into a third world country. But America has gotten wealthier and wealthier at each step. Unemployment has fluctuated but hasn’t gone through the roof.

But I do agree that it’s unfair if the bulk of the benefits go to the wealthy elite while folks in the middle class get screwed.

132

if we were the only industrialized nation the world outsourcing would be bad. we could just charge an arbitrarily high amount for goods that only we can produce, and pay our workers arbitrarily high wages.

but we have to compete with countries like Japan or Germany in the world market, and we can’t pay our workers more money than they do over there for the same job and stay competitive.

we could pay our workers less, or we could produce MORE by means of employing extra resources overseas ( which cost next to nothing ).

to fight outsourcing is to fight free trade - in the long run it will cause the economy to collapse, although it will save some jobs AT FIRST.

133

aye but thats why our economy works. when you give all the benefits of labor to the laborers you get socialism, which is nice but not good for economy.

134

vs.

I’m having trouble reconsiling these two statements. At what level does selfishness meet your standards?

135

Actually, a strong, healthy middle class is considered a hallmark of a sound economy. When you start sending all the money to the wealthy, you get kleptocracies, which are generally not rich countries. Which is not nice, not good for the economy and an all-round stupid idea.

136

You have decided you want to be “helped” by taking away other people’s freedom. If other people feel they want to help you by buying American then nothings tops them from doing it but you want to impose that as an obligation. I. OTOH, want to help everyone equally. I feel the guy in China has just as much right to my money as you do. I am sure he also has children to feed and I just cannot see why you should have priority for my money.

Besides the point that it takes away my freedom which is something that I like, futhermore, you are just not listening: your solution does not work; it woiuld just make things worse for everybody. Why don’t you just understand that? It has been tried and it failed. Tell me what countries got rich by imposing protective barriers. Please tell me. Stop waving your hands and tell me.

Yeah and 100% would like their car to double its mileage. I am sure a very high percentage of us would also like to have sex with Sharon Stone. So what? It does not mean it is possible or that we will get it.

I hate to break it to you but I live on both sides of the Atlantic and spend long periods in China. I already buy where ever things are cheapest and if the USA imposes barriers I would just be buying less stuff there. A raising of tariffs would result in less revenue from me, not more. Did you ever hear about “unintended consequences”? In any case, I am glad you feel comfort in your wishful thinking. I, OTOH, am quite sure that the politicians, whatever they say to get your vote, are not stupid and they know protective barriers would cripple the economy and they are not going to do it. Which is good for you even if you don’t know it.

So you are asking us to create artificial jobs just so you can have a job? What’s different from the government just taking our money and giving it to you? Why do you feel entitled to my money? I certainly don’t feel entitled to yours.

You are just answering my questions: Please give us examples of countries which have pospered with policies like you propose and names of recognised economists who believe yours are good ideas. please stop waving your hands for a moment and answer those simple questions.

137

That’s right, it IS about the big picture. You seem to think that giving special consideration to IT workers so they can continue to feel like it’s 1998 is better for the country. It isn’t. That’s the whole problem - everyone says that we should do what’s in the best interest of the country until it’s their turn to be inconvenienced.

The benefits don’t just go to the wealthy, they go to everyone in the form of lower prices. It means you don’t have to be a “wealthy elite” to enjoy a high standard of living. That’s the other problem is that nobody wants to live a “middle class” lifestyle. Everyone wants to live like a wealthy elite with a $50,000 SUV and a 90" plasma HDTV.

138

From what I’ve heard casually, wages in Germany are comparable to what they are here in the U.S. And they get more paid vacation per year, and they have incredible unemployment benefits.

It seems to work well enough in Sweden.

And as for socialism in general, I think citizens of a country as rich as ours are entitled to government-paid medical care and government-supported higher education. Everyone says that laid-off workers can be re-educated. (Although from what I’ve been reading here, it seems as if an IT worker being re-educated as a fry cook is “reasonable”.) Well, if we had a system in place where every citizen was entitled to a college education regardless of income, then perhaps we wouldn’t be in the position we’re in now. (FWIW, I think the government should just pay for higher education. They could use taxes for that, instead of foreign adventures. Or, they could make it a “loan” wherein part of a person’s annual tax bill is used to pay for the education. But no matter how it works, there are too many people who can’t attend a university simply because they can’t afford it. And remember: A highly-educated population is good for the country.)

139

And they have double digit unemployment..

Sorry, but your free lunch does not exist.

140

Two points here:

(1) The facts in the U.S. over the period between 1979 and 2000 is that most of the gains did go to a wealthy elite (top 1% seeing real incomes rise by 200%) with the folks at the median experiencing only modest gains of 15% in real incomes (with much of this coming during the last few years of that period and by now probably partly erased, and I believe due in the most part to more hours worked rather than higher real wages). Now, you might want to argue that the cost of living is overestimated or some such thing but it doesn’t negate the fact that there was a huge discrepancy.

(2) I do agree to some degree with your critique about everyone wanting to live beyond their means. However, I find it sort of ironic when people of a conservative / libertarian persuasion make such a critique since it seems to me like a big reason why this is the case is because of “market fundamentalism”. I.e., it is exactly the belief that the market is the primal, often only legitimate way, to satisfy the needs in our society that helps to fuel this rampant materialism. (It reminds me of the credit card companies, trying to get a stronger bankrupcy law passed on the one hand, while they encourage their customers to spend beyond their means with the other.) In fact, those of us who suggest that the market is often creating needs though advertising and such as much as it is fulfilling those needs are usually sort of pooh-poohed.