Offshoring - the snake that is eating itself.

As I have said in previous threads, offshoring has resulted in:

  1. Declining US wages.

  2. Skyrocketing unemployment

  3. Reduced State and Federal tax revenues as a result of 1) and 2)

  4. Increased national debt.

Now the Von Mises Institute, while still vigorously defending offshoring, has stated that:

If we continue to allow jobs to be sent overseas to cheap labor nations (as opposed to Canada and Europe, which tend to have more equitable exchanges with the U.S.), all the arguments about offshoring’s benefits and the benefit our suffering will offer to other nations will be moot:

Because a collapsing US Dollar will make offshoring difficult if not impossible.

What will those poor workers in China do when America can no longer afford their stuff and is FORCED to build domestically to get around the high cost of imports?

It’s coming, and there’s nothing anyone can do to stop it at this point. The offshoring snake is eating its own tail.

Labour is like any other internationally traded product; if the price goes up, less of it will be bought. Thus a decline - if perceived to be permanent or enduring - in the US dollar will result in the US purchasing less labour from abroad.

What will the Chinese workers do? Well, the article suggests an answer; they’ll sell their labour to some country with a stronger currency.

American workers, especially low-skilled and low-waged workers, will benefit; they’ll find more domestic demand for their labour, which should mean higher wages and/or more jobs.

On the other hand, American exporters will suffer; there will be fewer dollars outside the US looking to buy American goods and services.

And the US government will have a problem; who are they going to borrow all those dollars from, if the Chinese are no longer trying to lend dollars? Interest rates will rise to make lending to Uncle Sam more attractive and/or US taxes will have to be raised.

Will taxes have to be raised?

Might the increased onshore employment generate enough taxes to make up the difference? I don’t know if it will, but might it be a possibility?

How will American exporters suffer? Our exports will be so cheap compared to now that exports may start booming.

Why else do you think China pegs its currency to our dollar?

Unfortunately that is a bridge we must eventually cross. It’s useless at this point to debate whether it’s going to be good or bad for America: it simply will be.

I’ll repeat what I said in the other thread. You can isolate the US economically, but that would not make the US more wealthy-- it would make the US less wealthy.

We’ve been through this many times before. Offshoring to Japan, the Korea, then China. As wages rise in the country we are offshoring to, then it makes less sense to offshore. Econ 101. So what? Our problem, to the extent that we have one, is deficit spending. And that has nothing to do with offshoring.

Putting up trade barriers just makes US companies less competitive in the world market. Many US companies sell more of their products outside the US than they do inside the US. Protectionism will just shrink those companies and put Americans out of jobs. You can make wonderful TVs in the US, but if only a few people can afford to buy them at $4,000 a pop, all you have is unsold inventory.

You can repeat yourself until you’re blue but you are still wrong both in your premise (that I’m calling to isolate the US economically) and in your conclusion (that offshoring creates jobs).

I answered your wrong-headed argument in the other thread but it seems you ran away from that. No, you didn’t find it not worth your time - you found that your arguments had been deconstructed from whisker to tail and now you’re running around repeating the same discredited stuff in hopes that I’ll just give up and let it pass uncontested.

History has already disproven your theories.

China has massive trade barriers. They are highly prosperous. They are one solid example of where you are dead wrong when you say that trade barriers harm prosperity.

Sigh. More flawed and canned arguments.

Why are TV’s not $4000 a pop in China where they’re made domestically? That’s error #1 in your argument.

Error #2: Plenty of hypothetically $4000 TVs would sell in the US because workers’ wages would be higher as a result of the return of all those manufacturing jobs. Those who couldn’t afford the TVs outright would put them on layaway.

Error #3: TVs now cost $300 for high-def and they are not selling. They’re selling so poorly that we’re looking at another massive price drop in the fall season. Right now we have a massive amount of unsold TV inventory. With offshoring in full effect.
Look, John Mace, you keep pushing this stuff and the facts keep discrediting you. You have yet to directly address my points but I have rigorously dealt with yours. If all you’re going to do is keep repeating talking points that have been countered with historical facts then why are we continuing to discuss this?


You haven’t posted any facts. You’re just posting what I like to refer to as Economic Creationism.

China is highly prosperous. What a joke. Why don’t you go look up what the Per Capita GDP of China is, and then come back and tell us how prosperous they are. They have a lot of money, but they also have a lot of people. If I make $200k/year, but have to support 25 people, I’m not rich.

Oh, you got one thing right. “The snake that is eating itself”. That’s basic economics. Companies rise and fall. New products beat out old products. Wages rise and make certain jobs economically unsupportable.

It’s a feature, not a bug.

Couple things.

First of all, the US manufacturing sector is much bigger absolutely than the Chinese manufacturing sector.

And China has 4 times the population of the United States.

That means their per-capita GDP is on par with El Salvador.

China is still a poor country. Even when/if they have a GDP greater than the United States, they’ll still be a poor country, because they’ll still have 4 times the population of the United States.

Danish companies have been outsourcing quite a lot to the USA. Especially medical and manufacturing jobs. The cost of doing business in the US is actually quite low.

I’ve posted facts and documented a lot of them. You haven’t documented anything. You haven’t substantiated anything you’ve said.

GDP? Is that all you’ve got? GDP is not the same was wages or standard of living. China is now the world’s SECOND largest economy. Or did you miss that fact, too?

The problem is they’re dragging us down.

We now have 40 million Americans on food stamps.

I’m sure that this is considered, in John Mace’s words, a “feature, not a bug”. Right?

If GDP isn’t important, then why are you touting it? China being the 2nd largest economy in the world is precisely because they have the 2nd largest GDP. Tell us about the wages and standard of living of the average Chinese person. Tell us how that translates into a “highly prosperous” country.

And since John Mace is accusing me of not posting any facts, I will now make him eat his words. Again.

The fallacy:

The facts:

So, despite the fact that we have offshoring, we have TVs going unsold and building up excess inventory.

John Mace said that this scenario would happen if we didn’t have offshoring. It is happening even with offshoring: TVs are dirt cheap but too few Americans can afford them anyway.

John Mace will you acknowledge you’re wrong? The facts say you’re wrong. Your TV example has been factually turned on its head. TVs are cheap and no one’s buying. Lemme guess… is being wrong a feature and not a bug?

I can tell you that proportionally speaking fewer Chinese people are on food stamps than people in America.

China’s wages have doubled between 2003-2007 and are outpacing their economic growth. FACT. Can you say that about America?

America’s wages are stagnating or in decline. FACT.

Now would you like to repeat your claim that I’ve posted no facts?

I’m not wrong. TVs sell at the market price, whatever that market price is. If it falls to $200, then that’s great for consumers. But if you insist that TVs be made in the US, and not in low wage countries, then either the price is going to go up, or US wages are going to go down. You can’t have it both ways.

Now, please explain to us what you mean when you say that China is a prosperous country. I don’t care if their wages have doubled. That’s a relative measure. And comparing food stamps in the US to “food stamps” in China is ludicrous. We are a prosperous country. We can afford to give our poor citizens food stamps.

When you say that “China’s” wages have doubled, are you counting (from your cite):

So, 800M Chinese make about $100/month. That’s 800,000,000 people. Almost 3 times the population of the US. Your “fact” that wages have doubled is not a fact. It’s a distorted statistic, looking only at a fraction of the Chinese economy.

Duh, China doesn’t have food stamps ;).

I’ve said it before and I’ll say it again, we can have all the jobs we want back from China when we are willing to exist at a Chinese standard of living. That’s a per capital GDP of about $3,700 a year. The U.S. has a per capita GDP of between $46,000 and $47,000.

Income disparity in the U.S. is a huge problem. And China has some true advantages as a communist dictatorship. They want to dam the Yangtze, they say to 1.3 million people “you have to move now” and they do.

Let’s put that in perspective, shall we? That’s $100 more a month than a lot of long term unemployed Americans are making. And $100 more than even more Americans than that will be making when the benefits expire under the coming Republican Congress. Would you like to deny that this is true? Or is this another one of those “features, not bugs” that you’d like to tout?

Look, man. You’ve been preaching about the benefits of offshoring and you have not shown one example. You have dismissed our off-the-charts unemployment rate as a non-fact. You have failed to show proof of your claim that trade barriers harm a nation’s economy, and you have dismissed a huge counter example in the form of China, whose economy is absolutely booming as a result of its trade barriers.

America’s economic statistics have deteriorated since offshoring started taking off. Offshoring has left us in debt to China. When the 2008 crisis came China enacted a Government stimulus that pushed them out of the crisis. What happened to America? We sank. Oh wait, are you going to claim now that these are not facts?

Aside from lower prices (on some things), none of the benefits offshoring was supposed to bring us, has materialized. If you believe I’m wrong, then show us the benefits. I say your emperor has no clothes.

Apparently they have little need for them if 800 million people are farmers.

We are descending toward China’s standard of living right now. America’s economy is on the decline. China’s is on the rise. Their trade barriers have improved their situation. Our lack of trade barriers has decimated ours.

There is no proof that we need to exist at a Chinese standard of living. We didn’t have much offshoring in the 1950s and only one worker was needed to finance a house and a car. Tell me we had China’s standard of living back then, please. Your claim that we need to exist at China’s standard of living is proven wrong by history itself.

Oh that brings up another issue. China is a command economy and they’re kicking our asses and owning our currency and debt. They’re like steroid users playing in the NBA. You will always lose to the steroid using team: when their players wear out they’ll just replace them with more amped-up junkies.

American workers will never come out prosperous with low trade barriers against an undemocratic nation that pegs its currency to our dollar. You know very well that American workers have not been better off so far; it’s the one thing all those high falutin’ economists are unable to explain about their defense of offshoring.

But… in any case, when the US dollar collapses, offshoring will go byebye anyway.