Bush has said that outsourcing is good for the economy. As I understand it, outsourcing results in cheaper goods and cheaper goods means that more people will buy them from the domestic companies that import them.
As you know, many of us lost our jobs when the Indian company Tata took over some functions. That’s good for the company, because the Indian workers cost less than American workers. This allows the company to offer its products at a more competitive price.
But…
I had to take a job that paid half of what I was making before, and now I’ve been laid off from that job. When I was making $45,000 (plus some investments) I poured most of that back into the economy. I ate out nearly every day. I bought consumer items, many of them expensive. I paid more taxes. Now I don’t. Now I spend as little money as possible. It seems to me that I am contributing thousands and thousands off dollars less to the economy every year. I’m guessing there are hundreds of thousands (or perhaps a million) people in this country that are, like me, contributing less to the economy and to the country by buying less and paying less in taxes because of their lower earnings.
Does the outsourcing of jobs, resulting in less expensive consumer items and services, make up for the loss of money being contributed to the economy by those people whose jobs were outsourced?
How does this work?
(I was going to post this in GQ, but I can see it turning into a debate.)
Supposedly, there were going to be huge new numbers of jobs from the (putative) burst of economic growth.
It ain’t happened, & it ain’t gonna happen.
The whole argument really boils down to the idea that rich people want 99% of the pie, & if they do things that make the pie smaller, like gutting America’s national economy & pawning our future like a stolen VCR, well, that’s just fine with them. :smack:
My impression is that for Mr. Bush’s economists, it’s seen to benefit the economy by increasing the profit margins of the larger companies who are spending less for the same amount of “labor” (in the economic sense).
The problem with this idea lies in the Iberian Lesson – money does not equal wealth. Spain and Portugal imported large amounts of gold and silver (=money) during the Age of Exploration and the colonial era that followed. But they did not increase their wealth, as Britain, France, and the Netherlands did.
From my personal perspective, I’m contributing about $20,000 or more less to the economy and the country than I did when I had my job. Others would have it that my situation is an ‘acceptable loss’, as it were. Enough of our government believes that outsourcing is good for the country. I may be blinded by my personal situation. What am I not seeing?
…we can outsource our university professors and politicians! Think about it, instead of paying a US senator $200,000 /year, you could get a cut-rate indian politician for $30,000! The same with those economics professors who tell us how good outsourcing is! Why pay lester Thurow $350,000/year, when you can get a chinese or indian economics professor for a lot less!
Yeah, outsourcing is great-when its for somebody else’s job! :smack:
I believe the philosophical differences lies in the thought that what is good for large companies is good for the country. If large american companies can increase their profits by outsourcing, then those improved profits strengthen the country. They allow America to be more competitive on the world stage, and mean that in the end, America will prevail.
I don’t buy this at all. I think it makes the rich richer, but weakens the country as a whole.
I see outsourcing occupying the same niche in business as mechanization. Without getting into the emotional aspects of it, they both accomplish similar tasks.
Take a process that is costly and labor intensive. Replace the current workers with a different labor source that provides the same output for less cost. Whether the alternate labor source is a person in India or a welding robot, the outcome is the same. Local workers are laid off, the company continues on with a lower cost structure.
Perhaps it feels different because the alternate labor source is a person rather than a machine, but the net effect on the economy should be pretty similar.
Large companies that make more money and are taxed less have more valuable stock and may pay higher dividends. It also means higher salaries for those at the top of the company. Thus we have an increase in the wealth of those near the top. They are taxed less.
The very rich, when not taxed, invest in new companies to become richer. After all companies can operate at low expense in this new set up and keep more of the profit, which of course means investments pay off better. New companies allow for more jobs. Some will be outsourced but some won’t be.
Add to this individuals who are of middle income who invest well and those who are willing to take a gamble, gather backers, and so on and you see an economy driven by building companies that exploit available money and a desire to make more money in a system that is designed to pay out well to winners. Eventually the labor type jobs will move away entirely, but ownership in companies and jobs that are not outsourced remain.
This is the only thing I can think of as their conception of how it will work.
Nope. The lesson is that you can’t just dig up gold from the ground and expect it to bring you power and influence. You gain power and influence by controlling trade. Outsourcing is more akin to what the British and Dutch did-- set up extensive trade networks and leverage the competative advantage of different nations.
The only way to prevent outsourcing is to set up trade barriers or depress wages. It simply is not possible for a rich nation to compete with a poor one for low wage, labor intesive jobs.
I should have previewed. This would be true, EXCEPT that there is no machine economy. When you outsource you give another country more wealth at the expense of your own citizens. In addition when you purchase machines to do work you supply money to a company that must constantly develop new machines to replace older ones and thus stay competitive. When you outsource jobs you provide incentive to make human labor cheaper than other options for jobs. This may in some cases produce automated oversees plants that use machines and run cheaper than American factories. In other cases, and in ones where there is no machine to do the job, it just encourages methods of making sure that labor in the nation does not become more expensive.
JM:The only way to prevent outsourcing is to set up trade barriers or depress wages. It simply is not possible for a rich nation to compete with a poor one for low wage, labor intesive jobs.
This sounds like an argument that outsourcing is inevitable, but I think what the OP is looking for is an argument about why outsourcing should be perceived as good for the economy. Never mind for the moment the question of whether it would be possible to avoid it even if we wanted to—the question here is, why should we consider it a good thing?
It’s not quite that simple. You have to keep in mind that there is no way to prevent lower wage countries from competing with American companies in the world market. The US can produce all the $500 VCRs it wants, but where is it going to sell them when foreign companies are offereing the same product for $100 (or less)?
Outsourcing is simply one tool that companies can use to control costs. If you remove that tool, you put American companies at a competitive disadvantage. I don’t really see it so much as a question of whether or not outsourcing is good, but that the alternatives are worse.
Buy a Japanese robot and it’s exactly the same. Money goes to a foreign company and American jobs are lost.
A company that employs 100 people for every 1000 jobs they eliminate, you still have a big net loss of jobs, even if it’s an American company building the machines
These seem to be issues that affect the Indian economy, not the American economy.
I’m interested in hearing more arguments on how this is economically different than mechanization. Honestly, all the negatives posted so far can easily be applied to job loss due to machines.
I see this as less of a ‘market forces’ issue than an ‘efficiency’ issue. Corporations can be more efficient by employing cheaper labor overseas. Well and good. From an efficiency standard that’s sweet. (For the record, my history is as a corporate executive and have made similar decisions in the past.)
But is great efficiency truly a worthy goal? After all, if we wanted perfect efficiency we’d not support the non-productive with welfare and such. We’d mulch them and put them in our fields as fertilizer.
I think we can all agree that would be undesirable, right?
Therefore, we have agreed that maximum efficiency is not desirable. The question then becomes when on the curve from ‘maximum’ to ‘minimum’ efficiency do we wish to be? And for 100 people there will be 100 answers.
So to simply say that something is inevitable or desirable is not truly answering the overall question.
I think that line of reasoning represents the dominance of the mercantile thought processes in American life. But is that truly a goal that suits most people and maximizes happiness and citizen contentment? Or is it just something we’ve been fed?
What could POSSIBLY be worse for Americans than to lose their jobs and find themselves working at burger doodle wages. If we don’t let the Invisible Hand pick our pockets, it will strangle us? How could a free market economy POSSIBLY harm its citizens more than by beggaring them?
Exactly. I’ve made that same argument in several other outsourcing threads, and no one has been able to offer a counter arguemnt.
Company A buys automation equipment from Germany that allows it to eliminate 100 manufcturing jobs and reduce its manufacturing costs
Company B, it’s competitor, matches Company A’s new cost structure by outsourcing 100 of its manufacturing jobs its Chinese subsidiary.
Company C matches that cost structure not by outsourcing jobs, per se, but by importing subassemblies from a Mexican company. And, this company is brand new. It never had any manufacturing jobs in the US for those subassemblies.
Which of these companies “shipped American jobs overseas”? What steps would the government need to take to prevent that from happening?
It comes down to the only part you dismiss as an issue only for the economy of issue. In a set up where you are promoting cheap labor in areas that are not held to the same labor practices as America you are promoting a race to the bottom. This means that labor prices stay low and the source the labor moves as countries find ways to undercut other countries or workers decide they don’t like the outsourcing conditions. This could be good for the economy of the outsourcing nation. A nation that is home to the bulk of companies operating on the international scale and employing its citizens to manage them could be quite prosperous. I’m just saying that the set-up abroad is different than if that nation is built on machines doing a great deal of labor.
On preview I notice that I didn’t make myself clear about why machines are better than outsourcing in terms of developing new machines. I’m not arguing that the company that makes the machines is going to create enough jobs to compensate for what the machines replace. I’m saying that when you give money to a company that develops machines you are provoking new research and development, which in turn will yield new machines. The company can’t just survive on a single model. With outsourcing you are not encouraging this sort of technological development. You may for a variety of reasons provoke a downward spiral of labor costs but there will be none of the beneficial fall out that comes from technological development.
I admit that this is a small difference in the short run and if you limit yourself to looking at the American economy. It is, however, a real difference and saying that outsourcing is just the new mechanization is flat out wrong.
If the goal is to provide a safetly net for those unfortunate citizens who are UNABLE to work, then tax all the productive citizens equally to provide that saftely net. There is no reason to put particular industries at a global comeptitive advantage in order to provide that safety net. Governments have a terrible track record of picking which industries to foster and which industries to ignore. The free market has proven itself much better at making that decision.
Now, if you want argue about providing a safety net for those citizens UNWILLING to work, then that’s a different argument. I opperate under the assumption that there is always only a small percentage of citizens UNABLE to work. Given the right incentives, there probably would be a large percentage of citizens UNWILLING to work.