Would some economist please explain: What's wrong with outsourcing?

Still waiting for a cite for this claim.

As Ruken and others have mentioned, flipping this around makes more sense than the way you state it. Given that outsourcing and free trade in labor helps more people than it hurts, is it moral to sacrifice the well-being of several members in order to help one?

You say you support trade sanctions against countries that do not guarantee workers’ rights. Would you say that you support such sanctions against, say, Cuba? Their record on human rights in general is appalling. Therefore we, and Europe and Canada and the rest of the developed world, need to prevent the sale of their cigars and sugar until they clean up their record. Right?

Regards,
Shodan

I really don’t think I am.

From my post:

From your second cite:

Your own cite backs up what I said, the same time period and a restriction to developed countries. You don’t seem to be arguing against the point I made.

Let’s take a step back or two.

If a poster here started complaining that we didn’t protect our own workers from the creators of goods with the wrong skin color, this sort of discussion would turn out much differently. If they provided cites that people of their preferred skin color lost a little, while people of their non-preferred skin color gained a lot, we would not see the discussion played out as it tends to in this thread and in others like it. At least, I don’t think it would.

If a poster here started complaining that we didn’t protect our own workers from the creators of goods with the wrong gender or sexual orientation, this discussion would not work out the way it normally does.

But here we have a thread in which some people, it seems, are complaining that we don’t properly protect our own workers from the creators of goods who were born on the wrong side of an an arbitrary line drawn on a map. And for reasons that I can’t quite understand, the discussion seems to go a completely different way.

People tell me it’s “natural” that they want to favor [their chosen ingroup] over [the resulting outgroup]. (We can fill in the blanks there in any number of possible ways.) And I agree completely, tribalism is completely natural to human behavior. We divide ourselves into groups and heap scorn on our preferred scapegoats. But what has happened with respect to some groups is that we have acknowledged (at least some of us…) that doing this is morally wrong. But when it comes to that line on that map, the old atavistic part of our brain starts squeaking in alarm, and for some reason we don’t recognize collectively as a group that this is problematic and morally questionable.

And then people start talking about politics.

One group of people is saying, hey, just leave us alone. We want to trade with who we want to trade with, and it really isn’t your business to interfere with that. And the other group is like, nope, we’re going to tell the people with guns that they’re going to interfere with that voluntary exchange because of, you know, lines on maps and all that. In any other context, this sort of discussion would not develop in the way that it does. But for some reason, this topic is different.

It’s not even every line on the map. Basically nobody worries about imports from Canada. We do more trade with them and with the EU than we do with China at present (altho maybe that won’t last much longer) but we don’t hear the same complaints about trading with developed countries that we do trading with poorer countries. This is, of course, because a place like Canada or France does not compete in the low wage labor markets.

We gain more trading with richer countries. They can afford to pay us more.

Yet those poor countries are slowly becoming rich countries. The current round of globalization is the biggest anti-poverty program in the history of the world. The moral questions above are about the weirdities of who we like to scapegoat – the people who aren’t good enough to be in our hallowed ingroup – but I think an even more fundamental moral question is one of the greatest good for the greatest number of people. One of the poorest countries on earth, where literally tens of millions of people had starved to death, is starting to become a rich country. This is one of the greatest goods that has happened in all of human history. Yet people are complaining about it. (I can understand complaints about the relative instability of their government, which I completely understand. But these sorts of conversations are complaints about starving peasants working in new factories, which I do not understand.)

After it becomes a rich country, it will no longer compete in the low-wage labor markets. We’ll stop complaining, like we don’t complain so much about Canada. It’ll be a bunch of rich people trading with each other, where it’s more emotionally obvious that everyone is a winner. This is what is going to happen. This is what is happening.

Even more than that, it’s not clear what our other options even would be.

How would we even stop the process if we wanted to? Island USA? All we’d manage to do in that context is create a mass of weak industries that people would falsely claim require permanent protection as they fell further and further behind the rest of the world. Rather than the very painful, but ultimately temporary, adjustment we’re suffering now, we would be crippling ourselves indefinitely, until the unknown future day when we eventually came to our sense.

This damage would be extremely bad. People have to keep in mind that “import” numbers have become a lot more hazy in the era of the global supply chain. Final assembly in the US still contains a lot of foreign parts. Foreign assembly still tends to contain a lot of US parts. The web of interconnection is deeper than any one person realizes, and in fact deeper than any human brain is capable of realizing. There are arteries and veins in the world supply chain that don’t get properly measured, and we cannot cut off those blood vessels without doing vast harm to the body. What is Seen and What is Not Seen, in the language of Bastiat. There is a shitload out that that we cannot directly see. It’s not a great plan which causes double the suffering in the attempt to alleviate the original suffering.

When the proposed cures are worse than the disease, we need to acknowledge that.

You know that feeling when someone articulates something that exists in your head but less coherent and articulate? Is there a word for that? Probably a German one. If only I had something to give them in exchange…

O.P. here:

Great: If the money does not return to the home country, the home country wins. We have their goods and all they have is pieces of paper for their walls. We can just print more. … But if there is too much money in the foreign country, the law-of-supply-and-demand will lower the value of our dollar, making our goods less expensive and their goods more costly and things will eventually balance out. Try as much as Congress does, the can’t repleal the law of supply-and-demand for any length of time.

Well, I know that South Korea imports it’s Volkswagen Passats from Chattanooga, TN. I was wondering if anyone would mention that my Passat was made in the USA while my Dodge Caravan was imported. Nobody did.

Twenty years ago, I lost my job when my company decided to merge two divisions. The company wanted (and presumably succeeded) to lower its costs. I was unemployed. It made no difference whether I had been replaced by a computer, a robot, or a Brazilian.
It’s not “outsourcing”, per se, that I endorse; it’s the free market. As a whole, the economy does best when everyone is allowed to act in their own self-interest.

And fewer jobs in the sectors which the home country loses competitive advantage. Trade balances are not determinative of currency values. There’s a whole branch of economics and public policy known as monetary policy, and on the whole, governments have central banks that set monetary policy to address things like inflation, bank solvency, etc. Countries don’t “print more money”’ to address the economic effects (job losses, etc) of trade. Besides, if exchange values swing back and forth to the point that Dodge Caravans become much more competitively priced overseas, boosting the home country auto industry, the corollary is that Passats become unaffordable by a commensurate amount.

We know empirically this doesn’t happen. You’re arguing a fiction.

Look, everyone in this thread is on the same page that overall, trade is beneficial to all nations that engage in it. But you don’t seem to acknowledge that there are sectors of each country that will lose, and that means bankrupted companies, foreclosed houses, unemployment, and financial misery for real people. If trade worked as neatly as you’re talking about it in this thread, the whole Rust Belt phenomenon would be impossible. China would gain an advantage in steel production, and American steelworkers would become software engineers, and everyone would be better off. That’s a fantasy.

In each of your posts, you seem to imply that the major debate is whether countries should trade or be protectionist. In reality, the number of protectionists is quite few. The major political debate is actually between free trade and fair trade, with the difference being that, to be flippant, free traders don’t care if smartphone manufacturers in Fredonia pay slave wages and poison their workers with toxic chemicals, and fair traders want to make sure that the smartphone workers have universal health care and a union contract.

Let’s say we find out that the manufacturing process used to build your smartphone cost the lives of three Fredonians every week. It’s in your self-interest to buy a phone at a low price; its in the company’s interest to sell it to you; the Fredonians who don’t die each week get a modest paycheck. Is this the sort of free trade you endorse?

Many of those on the “free trade” side of the fair vs. free debate you posit simply ask which approach is more effective at reducing the number of unnecessary deaths of Freedonians: relatively unrestricted trade deals that will increase Freedonian wealth marginally more than trade deals with lots of conditions, or trade deals with lots of conditions to incentivize Freedonians to adopt reforms in order to get more business. In other words, they start from the assumption that the lives of Freedonians are more important than the marginal cost of a phone, they just think the answer to how to get there is not highly encumbered trade deals.

Well the machine won’t buy what you produce whereas the country might. Thus there should be higher demand with the country doing the work that it can at a cheaper rate thus freeing up labor in your country to do more valuable things.

However, labor within a country is pretty damn far from homogeneous. Go to Appalachia or a random inner city ghetto and I’d wager the quality of labor you’d find might approach a market value of 0/hr or even -/hr. So some of that labor displaced is permanently out of the market due to artificial barriers to trade. That leads to many bad second order effects.

Trade is wonderful. But the market needs less regulation in order to achieve even higher levels of wealth production. Distribution is a separate issue.

Define fair? And why is the life of an American worth more than the life of a Chinese?

Those folks outside that political line can’t directly empower a preferred political party. It’s that simple. Why do you think the utilization of doublethink on topics that obviously display such blatant intellectual double standards is so prevalent?

You’d have to ask Ravenman, but I took it to denote trade deals in which the rich countries require the poor countries to take specific efforts on worker safety and rights in order to access the rich countries’ markets.

It isn’t, IMO, not morally speaking. I suspect you rather misinterpreted my post if you’re asking that.

I shouldn’t have asked that question after your quote. Sorry. It wasn’t a question prompted by your quote.

That’s really it- globalization and outsourcing are great for people with money and jobs in the US as we get cheaper goods, and is great for the third-worlders providing the cheap labor (they get paid more), but it’s all at the expense of the working class/lower-middle class American workers, as they’re the ones being cut from their jobs without replacement as the casualties/cost of doing business, etc…

What worries me is rather than a rising tide lifting all boats, it sure looks like everyone’s going to level out at some equilibrium wage point better than where the third world nations were before, but substantially lower than where working-class US wages and benefits are with our current laws and regulations.

I realize that most of this stuff is high-level macroeconomics- the US is still better off overall with globalization and free trade, but I also hate to see our own people being screwed.

And for all the people saying “Why is an American worth more than a Chinese?” or other stuff like that- nobody’s saying that in an absolute sense. But is IS part and parcel of a government’s responsibilities to look out for their own citizens- they would be seriously remiss in their duty to the citizenry if they didn’t prioritize their well being above that of people in other countries. And in democracies, in a large sense, it’s the people themselves prioritizing their own well being (and that of their countrymen) above that of people from other countries.

You seem to be assuming balanced trade. When you issue the world’s reserve currency, there is really no reason for people to spend your money, they can just save it. This can result in the shift of wealth from importing nations to exporting nations.

In the past with mercantalism, those factories in China would belong to Americans and the wealth would come back to America but that is not what happens today.

This is the province of ERISA lawyers. There’s maybe a few thousand of them in the world, probably none of them on this board.

is it me or do you think octopus wouldn’t mind a return to guilded age labor relations and wages ?

Sure in the sense that everyone wins a little bit when you can buy shit for a few pennies less and there are only a few guys that end up on the government line for cheese when their job gets outsourced.

We stopped living in mud huts way before Ricardo came along with the theory of comparative advantage. The industrrial revolution was not only well under way when comparative advantage came along it was pretty coincident with the end or slowing down of the industrial revolution wasn’t it?

And after almost 200 years we have seen generations for politicians pushing this trade model and almost never pushing ways to ameliorate the painful transition. Probably because the benefactors of this sort of trade don’t want to share the benefit with those who are negatively affected and they own the politicians. I have never heard economists supporting a painful transition amelioration tariff or anything else that would tax those who benefit the most from this form of trade.

Who said, lets destroy it. Lets just stop taking it as an article of faith that more trade is always better for the nation as a whole if we take marginal utility into account.

Our politicians have no moral or ethical obligation to the suffering poor of other countries.

Our politicians have no obligation, moral or otherwise, to give a rats ass about the welfare of the poor in other countries except to the extent it affects their constituency. It is not clear that their constituency is better off because a few people get very rich, a lot of people get laid off and everyone gets their widgets for a few pennies less.

Its not even clear that the world is better off as the American consumer class gets gutted.

Fairness doesn’t have an authoritative meaning. I’m sure you will agree that fairness is a fairly subjective opinion that the relative benefits of a particular situation are generally shared by interested parties. I’m not sure what this has to do with this debate, however.

I have no damned idea what you’re talking about.

As I understand it, outsourcing has become something of a necessary evil in international contract competitions, in the sense that the company that outsources the most, wins - this is supposedly the case with defense contractors, for instance.

If Defense Contractor A and Defense Contractor B are bidding to sell fighter jets to India, and Defense Contractor A is willing to outsource a lot of the work and allow the jets to be assembled in India and offer all sorts of industrial offsets, and Defense Contractor B isn’t willing to, then all other things being equal Defense Contractor A is more likely to walk away with the contract.
Thus, perversely, it is Defense Contractor B that misses out on revenue and an industrial boost, and thus the economy of Defense Contractor B misses out on good stuff. Some is better than nothing at all.