Should firms be made to forego the option of outsourcing/offshoring?

In an article in the NYtimes, Paul Krugman seems to be arguing against outsourcing/offshoring.

He goes on to say that since American contractors just use workers with lower benefits and pay, even outsourcing is bad for Americans in general, and it comes off sounding like he is against outsourcing in principle.

This doesn’t make sense to me. Outsourcing is just a strategy that enables firms to cut costs and maintain a competitive edge. If you argue that an approach which allows your firms to gain an advantage should be taken off the table, you should either be able to ensure that every firm out there does not have that option, or you’re handicapping the firms that do have it. For instance, lets say Apple and every other American comapany is not allowed to outsource manufacturing to China, where it’s cheap. Samsung on the other hand, would face no such restrictions. Would Apple be able to do as well, or even survive? If it doesn’t, as is a possibility, the gains made in terms of factory jobs would be gone, as would any wealth created by Apple for its shareholders.

Being against outsourcing thus seems like a short-sighted approach, reminiscent of the (perhaps inaccurate) stereotype of unions insisting on benefits that end up running their firm into the ground. Do you think outsourcing should be disallowed? Instead of arguing that outsourcing is the Big Bad, wouldn’t it make more sense to try and address the reasons why companies feel the need to outsource in the first place?

First of all, you have to understand that there are 2 Paul Krugmans. There is Paul Krugman the economist and Paul Krugman the political hack. The former is seen less these days than the latter.

Krugman, the economist, is a strong supporter of free trade, and understands the net benefit of offshoring, in principle. What he’s doing here is taking a dig at Romney because Romney tempered his statement so as to not make a political gaffe and sound like he was happy to “ship jobs to China”. But in the end, Romney, Obama and Krugman all understand the concept of Comparative Advantage. However, they will all dance around the subject in order to score political points against their opponents.

Never happen, Apple has enough people brainwashed into Iownership that they will always have a army of buyers that will buy an apple product no matter what the cost. Look how many morons are sitting on line days in advance to buy the latest Iwhatever.

Even Krugman (who often sounds like an idiot) can’t repeal the law of comparative advantage. If Gupta in Bangalore can answer questions about your cable TV service for five bucks a day, then he should clearly be doing that and your U.S. call center employees should be doing something else. In the long run, everybody benefits.

What should they be doing, then? If the jobs they can do are no longer available, then how do they benefit?

Third world people need jobs too, because hey, they’re people.

I don’t understand this mentality of “Americans first”. First of all, that’s pure bigotry. Second of all, protectionism will ruin our economy. Ask any economist anywhere. We should be fighting to END tarrifs and trade barriers, and that includes fighting for the freedom to migrate. A big part of the reason Chinese workers get treated like shit, is because they can’t come to America and get jobs here. If they could, they would, and bam, outsourcing “problem” solved. (Then you have more xenophobes complaining about “they’re taking our jobs” but they don’t realize it isn’t a zero sum game. More workers roughly equals more wealth to go around. Opening up borders WILL improve our economy. I’m sure of it. But that’s a different debate.)

This is a worldwide economy, and we better start acting like it, or it’s going to keep on crashing.

They used to say that about BlackBerry.

I hate to sound like a pedant, but what you are describing has nothing to do with comparative advantage.

Comparative advantage doesn’t have a thing to do with Gupta answering phone calls for five bucks an hour while Jim in California answers them for $35. It is perfectly possible for a country to pay its employees seven times more but still enjoy a comaprative advantage. Comparative advantage is what Country X does well as compared to the things Country X does poorly.

It is actually quite possible that even with higher wages, Americans are still more productive at running call centres than Indians are. What would give India a comparative advantage is not that they do it cheaper, but that it’s one of the things THEY do better than anything else, while Americans are better at, say, making airplanes (as in fact they are) than they are at anything else.

India will have a comparative advantage in cell centres if call centres are what Indians do better than Indians can do anything else, and if call centres are just the 24th best thing Americans do. That’s the point, and the really counterintuitive thing, about international trade; the American call center worker isn’t competing against the Indian call ceter worker, he’s competing against American corn farmers, Boeing employees, insurance agents, and industrial machinery millwrights.

I don’t think the OP is talking about tariffs or immigration. Tariffs certainly hurt U.S. exporters elsewhere, and immigrants have historically been good for the country.

What I think the OP is talking about is sending U.S. jobs overseas. You’re right that people in other countries need to live. On the other hand, ‘Charity begins at home.’ A worker in the U.S. contributes more to the U.S. economy than a worker in Bangladesh. That worker earns a wage here, and he spends his money here. Further, taxes collected from the worker and from the businesses he buys from contribute to the general welfare of the country.

So. Why should a business be penalized for employing people in other countries instead of employing people within the country? Because the people within the country contribute more to the economy than those in other countries. But since American workers cost more than foreign workers, the cost of consumer items increases. We want our consumer items to be cheap. Thus consumers benefit from foreign workers by having access to cheaper goods. Only there are fewer consumers.

I think though, that people will be willing to pay more if they are making more. Some people will pay a premium for that Made In America sticker. But I think that most people don’t mind spending money if they have it. For example, I can cook my own meals. I think I’m quite good at it. But when I have the extra funds, I like to go out. When my job was off-shored, I contributed much less to the economy than when I was employed. No going out to eat, few non-essential consumer items. The Indian workers who replaced the American ones made money for the stockholders of the corporation. I doubt they contributed to the U.S. economy as much as the workers who live here and spend money here.

Talk to the Pubbies. They’re the ones who want to make this election about American jobs über alles*.

*über alles other issues, that is

Unless the job reports closer to November start to look TOO good…then you’ll see “jobs” falling back to the 9th or 10th most important issue in this election from a GOP POV.

Poor consumers.

If only we had a system where the consumer could choose which product they wanted to buy. Oh well.

Krugman wasn’t doing any of the things attributed to him. He is just pointing out that Romney is a hypocrite, and that the result of outsourcing often is people doing jobs for less money and benefits. I’m sure he is not calling a small company outsourcing payroll evil, for instance.

At some point Krugman even noted that what Bain did made perfect business sense. Just don’t call it good for the country - it is good for Bain’s rich owners.

The Republican Party thinks that those are transitive characteristics…

What jobs in the US? They are all being sent overseas, only jobs here soon will be McJobs, WalMart jobs and other retail stuff, mainly because people insist on retail workers actually being present where they shop. If Walmart could manage to remove every person from their stores and have machinery do it, they would. Heck, I have been to a pizza place that put the order taker function at a call center.

See, this is why I consider US economists to have their heads firmly up their respective asses. If all the companies outsource manufacture, what jobs are going to be left here other than service positions? Unless you end up as one of a very few management, uberleet research scientists or married to a 1%, you get a service job no matter how much edumacation you tries fer. All you will get is college loan debt out the ass and a McJob.

That isn’t entirely true. Comparative advantage tells us that when two countries engage in free trade, both end up better off. When companies outsource, it drives down costs and frees up cash and resources for other things. Outsourcing also makes available products and services that the country might not be able to produce itself.

It’s not really all that different when Obama responds to claims that he’s a Muslim by stating that he’s a Christian. Why is he saying it’s bad to be a Muslim? Well, he isn’t. He’s correcting an erroneous statement meant to paint him in a negative light. That’s exactly what Romney was doing.

But they and Fox haven’t brainwashed enough people to say it openly yet. You’ll know that happens when the person who gets fired thanks his boss for letting him improve the economy. Kind of like what George Clooney’s character was doing in Up in the Air.

i am 62 and have been out of work for over a year now, had to take early retirement because no one wants to hire me, so that really hurt on my full age retirement. i get $150.00 a week in unemployment, now i have an apartment to pay for, phone, gas, utilities, meds that are well over $200.00 a month, with no other assistance. this country is going to pot. i tried to get on at the county hospital but was told it would be 90 days before they could even interview me!!! when i know of people who don’t even live in this country, nor are they american citizens, who just walked in to the hospital and were signed up immediately , i have a very bad heart problem i might add. but these foreigners come every year to get their check up and meds, now you know that has to cost a lot of money to be able to travel like that, and get the benefit of our low cost county hospital. i pay taxes and can’t get in to be seen, its going the same way england has gone, soon we will have mosques everywhere, we already have them but they’re unnoticed because they have taken over old closed down stores. just a matter of time… i have a friend in england and he says if you don’t wear the long robes you don’t get anything over there. what has happened to our country??? we send work overseas and invite foreigners to come and take our jobs and get all the benefits without having to be a citizen. really sucks!!!

Thanks for being one of the few honest enough to make it clear what protectionism is about.

something else! why do we have to learn to speak spanish??? they are coming into an english speaking country and OUR language has to be change to accommodate them. i have worked in a post office and there would be 5 and 6 yr old kids translating for the mother who spoke NO english, come on!!! if youre going to let them in then they should be made to learn english as a FIRST language and they should also be made to become citizens if they’re going to live here, i became a citizen and proud of it in 1978!!!