Posted on 11/28/2012 9:40:46 AM PST by SeekAndFind
In a campaign speech, President Obama said: “I know we can outcompete any other nation on earth.”
No we can’t. We can’t outcompete Germany, China, France–we can’t compete any other country. In fact, no country can outcompete any other. The very concept “outcompete” makes no sense on a national scale. One business can outcompete another business, but a nation can’t outcompete another nation across the board.
Suppose Bangladesh firms have a comparative advantage in sewing garments. Even if Americans are better at it than Bangladeshis, both countries gain if Americans outsource their garment-sewing work to Bangladesh firms and shift American resources into producing the things we do even better than they. We will get a bigger bang for the buck from investing in the things that we do best, paying Bangladeshis to do the sewing–paying with the higher output in our most efficient areas of production.
This is not rocket science. The Law of Comparative Advantage was discovered by David Ricardo about 200 years ago, before there were rockets. Economists know this Law, but they don’t seem to communicate it to the public. A nation is not one business. It is not many business all in the same line of work. A nation contains a huge array of businesses in a great variety of fields, from fishing to finance, from advertising to advising, from manufacturing to movie-making. A nation outcompeted in one line of work–say, chip-manufacturing–automatically gains a comparative advantage in some other line of work–say, movie-making.
Comparative advantage is a different animal from absolute advantage. Bangladesh probably has no absolute advantage over the U.S. in any line of work. But there’s still the best of the worst: what Bangladeshis do the least badly at producing. That’s where their comparative advantage lies. That’s what it pays them (and us)
(Excerpt) Read more at forbes.com ...
The only industry that ‘Rats COMPLETELY refuse to outsource... is the Stupidity Industry.
Hows that shovel ready jobs program working out Obama?.
Ole Volt
Foreign workers should receive the same minimum wage as workers in the US. Factories should meet the same OSHA standards that US factories must adhere to.
We've got people dying in factories in Bangladesh, working for pennies per day to sell cheap clothes to the US and Europe. If factories in 3rd world nations had to meet the same safety standards as those in the US, and treat their employees the same as in the US, we wouldn't be losing jobs overseas. With better pay and work conditions, people may net be so eager to leave their 3rd world hell holes to come to the US.
While I despise Unions, and believe in competition to keep prices low, etc., the movement of jobs overseas has created a permanent underclass in the US that will ALWAYS vote Democrat.
With higher wages, higher energy prices, and more regulation?
Union jobs include the National Education Association, National Teachers Association, and United Auto Workers to name just a few. Jobs in Education are secure, as are those of the UAW. The UAW is kept afloat by the non-union auto producers selling their cars at higher profit margins instead of killing GM and Ford. While costs averaged $84 in UAW factories, they were 30% cheaper which when factored in as 300 man hours per vehicle it costs UAW plants a thousand more per vehicle. Toyota, Honda, Mercedes, VW and others are building in right to work states, and making record profits - these jobs are attracted by the same contradiction that makes the USA lose manufacturing jobs. It is a sad state of affairs that allows the UAW to make all cars cost more just by their very existence. Socialism makes everything more expensive in Europe and the USA. Tax codes in different countries change over time but at this period of time it is better to build cars in the USA rather than build them overseas if you are an importer.
For Ricardo’s theory of comparative advantage to work, a country’s labor, capital, and technology must not move offshore. This international immobility is necessary to prevent a business from seeking an absolute advantage by going abroad. His theory only works for such factors as geography and climates.
Ricardo himself admitted this:
“Experience, however, shews, that the fancied or real insecurity of capital, when not under the immediate control of its owner, together with the natural disinclination which every man has to quit the country of his birth and connexions, and intrust himself with all his habits fixed, to a strange government and new laws, check the emigration of capital. These feelings, which I should be sorry to see weakened, induce most men of property to be satisfied with a low rate of profits in their own country, rather than seek a more advantageous employment for their wealth in foreign nations.”
In ‘Principles of Political Economy and Taxation ‘ Ricardo demonstrates with a discussion of production of wine in Portugal and cloth in England.
the same OSHA standards yes, but the minimum wage can vary -- in Bangladesh you can get full meals each day for a dollar
The 'pennies' per day are still better than other alternatives they have
Bangladesh is a sad case -- they have extremely rich agricultural land -- they can support 200 million people with the rice in that water-logged land and have been supporting large numbers of people as well as animals for millenia there
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