Bush's economic advisor under fire for defending outsourcing to India

indiaexpress.com ^ | 22.37 IST 12th Feb 2004 | IndiaExpress Bureau

[Destro]

Bush's economic advisor under fire for defending outsourcing to India

22.37 IST 12th Feb 2004

By IndiaExpress Bureau

A key economic advisor to President George W Bush has come in for sharp criticism by both Democrats and Republicans for defending outsourcing of IT jobs to countries like India.

Gregory Mankiw, Bush's Council of Economic Advisors' Chairman and noted Harvard economist, was attacked by the Speaker of the House of Representatives J Dennis Hastert and Democratic Presidential hopeful Senator John F Kerry for suggesting that outsourcing to India and other countries in which they have a comparative advantage is a "win-win" for both the exporter and importer.

"I understand that Mr. Mankiw is a brilliant economic theorist but his theory fails a basic test of real economics.

We can't have a healthy economy unless we have more jobs here in America, said Speaker Hastert, the legislative leader of the Republicans.

Joining the Republican Speaker in attacking outsourcing, Senator Kerry said that if he becomes President, his economic policy would be "not to export American jobs but to reward companies for creating and keeping jobs in America."

In response to Hastert's remarks, Mankiw said in a statement: "Some of my recent comments on outsourcing have been misinterpreted. It is regrettable whenever anyone leaves a job. Some would respond to the recent challenges facing the economy by erecting trade barriers. History teaches that a retreat to economic isolationism would mean lower living standards for American workers and their families."

[Agnes Heep]

In response to Hastert's remarks, Mankiw said in a statement: "Some of my recent comments on outsourcing have been misinterpreted. It is regrettable whenever anyone leaves a job. Some would respond to the recent challenges facing the economy by erecting trade barriers. History teaches that a retreat to economic isolationism would mean lower living standards for American workers and their families."

Nice explanation. But if you can't reduce it to a slogan, you're lost.

[Ciexyz]

Paging "Damage control". And bring in the big guns.

[Lijahsbubbe]

Backpeddle bump.

[adam_az]

You can't compress complex economic issues, the understanding of which can only be bootstrapped onto a basic knowlege of microeconomic and macroeconomic theory, into a catchy slogan.

That's why Rats win. :(

[oceanview]

he should be fired immediately.

[Willie Green]

This Ivory Tower boob doesn't understand that the bloated federal bureaucracy will continue to place our domestic business and industries at an economic disadvantage until our standard of living is driven down into parity with the Third World.

[adam_az]

Most people who read this won't understand the economic concept of "comparative advantage."

Some concepts for economically uneducated Freepers:

Comparative advantage - When one nation's opportunity cost of producing an item is less than another nation's opportunity cost of producing that item. A good or service with which a nation has the largest absolute advantage (or smallest absolute disadvantage) is the item for which they have a comparative advantage.

Opportunity Cost - – The value of the best alternative to a given choice, or the value of resources in their next best use. In regard to time, the opportunity cost of time spent on one activity is the value of the best alternative activity that the person might engage in at that time.

absolute advantage - a country has an absolute advantage if its output per unit of input of all goods and services produced is higher than that of another country.

[adam_az]

Please read

"David Ricardo and Comparative Advantage"

http://www.systemics.com/docs/ricardo/david.html

and then tell me why you think he should be fired immediately.

[Cold Heat]

Outsourcing can be easily explained and defended with a cogent audience.

Unfortunately, democrats and many ignorant others are not the proper forum.

[adam_az]

"he should be fired immediately."

I propose instead directing your anger at the bureaucratic technocrats and their byzantine regulations which are a giant drag on American productivity and competitiveness.

[Willie Green]

In his treatise on comparative advantage, David Ricardo also asserted that labor wages are driven to the subsistence level.

---

[adam_az]

I know.

Never mind that the US is as successful as it is because internally, it's a giant free market with little barrier to trade, with some regions of the country specializing in some things, and other regions specializing in others.

[oceanview]

if you watch Brit Hume tonight, you will see the Dems have now claimed this issue as theirs and are running with it. Pelosi, Kennedy, Daschle were all on top of it, using this "advisor" comment as the jumping off point. He must be fired immediately.

we've been saying all along the Dems would pick this up, and they now have.

Bush needs to get it in gear: TARGET ONE COMPANY, IBM (the biggest offshoring actor) AND ANNOUNCE THAT THE GOVERNMENT WILL REVIEW AND CANCEL THEIR CONTRACTS. Otherwise, the Dems have this issue, even though they have no actual ideas or solutions.

[adam_az]

"In his treatise on comparative advantage, David Ricardo also asserted that labor wages are driven to the subsistence level."

I hope you are prepared to quote chapter and verse.

[Willie Green]

and then tell me why you think he should be fired immediately.

If there is anything clearly exposed in political economy, it is the fate attending the working classes under the reign of Free Trade. All those laws developed in the classical works on political economy, are strictly true under the supposition only, that trade be delivered from all fetters, that competition be perfectly free, not only within a single country, but upon the whole face of the earth. These laws, which A. Smith, Say, and Ricardo have developed, the laws under which wealth is produced and distributed — these laws grow more true, more exact, then cease to be mere abstractions, in the same measure in which Free Trade is carried out. And the master of the science, when treating of any economical subject, tells us every moment that all their reasonings are founded upon the supposition that all fetters, yet existing, are to be removed from trade. They are quite right in following this method....

Thus it can justly be said, that the economists — Ricardo and others — know more about society as it will be, than about society as it is. They know more about the future than about the present. If you wish to read in the book of the future, open Smith, Say, Ricardo. There you will find described, as clearly as possible, the condition which awaits the working man under the reign of perfect Free Trade. Take, for instance, the authority of Ricardo, authority than which there is no better. What is the natural normal price of the labour of, economically speaking, a working man? Ricardo replies, “Wages reduced to their minimum — their lowest level.”...

Either you must disavow the whole of political economy as it exists at present, or you must allow that under the freedom of trade the whole severity of the laws of political economy will be applied to the working classes. Is that to say that we are against Free Trade? No, we are for Free Trade, because by Free Trade all economical laws, with their most astounding contradictions, will act upon a larger scale, upon a greater extent of territory, upon the territory of the whole earth; and because from the uniting of all these contradictions into a single group, where they stand face to face, will result the struggle which will itself eventuate in the emancipation of the proletarians....

~Frederick Engels, The Free Trade Congress at Brussels, October 9, 1847

[oceanview]

sure, that's going to level the playing field against chinese manufacturing workers who make 27 cents an hour, and Indian IT guys making $20K per year.

[FreedomSurge]

My pro free market college economics professor, who make 6 figures a year working for a government institution and can never be fired as he has tenure, can prove that every high tech job sent overseas creates about a million bazillion jobs in the US.

[HiTech RedNeck]

Just wait until electrician jobs are mostly "outsourced" to folks from Mexico with little more than an amnesty card.

[adam_az]

"Bush needs to get it in gear: TARGET ONE COMPANY, IBM (the biggest offshoring actor) AND ANNOUNCE THAT THE GOVERNMENT WILL REVIEW AND CANCEL THEIR CONTRACTS"

That's immensely stupid.

I worked for IBM Global Services for YEARS and know directly that most overseas employees are SERVICING OVERSEAS CUSTOMERS.

How do you think the stock market will react? ALL tech company stocks will nosedive. Just like they did after Willie sued Micro$oft.