The great hollowing-out myth

From The Economist print edition ^ | Feb 19th 2004 | From The Economist print edition

[Forgiven_Sinner]

I thought this would provoke good discussion between the free traders and the protectionist crowd.

[Taliesan]

In a couple of years, the unemployment rate will be 110%. We'll be a nation of burger flippers. Who will buy these products? And so on.

[1rudeboy]

bttt

[azhenfud]

If American International companies outsource or send all their higher paying jobs overseas to low wage personnel, their profit margins momentarily increase and so does their stock pricing. Because there is a loss of jobs by people who can buy/most afford their products at their current pricing levels - that help support those corporations' current incomes, the momentum of those American losses hasn't yet caught up to them. Eventually the results will be that American workers won't be abled to afford anything but foreign imports at foreign prices. The wheel is still turning but the driveshaft is disconnected....

[Chuckster]

It's a matter of perspective: If you get layed off, it's a mild recession. OTOH, if I am unemployed it's the worst economic disaster since the Great Depression.

[<1/1,000,000th%]

And yet we continue to create jobs. From the US Department of labor:

Total employment rose by 496,000 in January after accounting for the adjustment to population controls. (See table A and the note on page 6.) The employment-population ratio--the proportion of the population age 16 and older with jobs--increased to 62.4 percent over the month. (See table A-1.)

That's half million in one month.

[reformedliberal]

All this while the EU wants to create a new *Bureaucrat in Charge of Jobs* so that eventually they might have 67% of their workers engaged in productive work. The EU unemployment rate is double ours, officially.

[John Valentine]

Your analysis is intellectually berift and perhaps inadvertentently dishonest as well.

It is as if you didn't understand a single word of what you just read in the post and are fixated instead on the 1996 campaign speeches of Pat Buchanan.

The "job losses" you speak of are not of the "people who can buy/most afford their products at current pricing levels". That's just nonsense both as to the facts of the situation as well as to the economics.

And do you really think that the phrase "current pricing levels" actually means something?

Your predictions as to the future, i.e. "American workers won't be able to afford anything but foreign imports at foreign prices" are equally absurd, and couched in terms that are economically meaningless. Just what are "foreign prices"? You remind me of the old Eddie Murphy bit where he imagines that white people get free newspapers at the news stand when black folks aren't watching.

Maybe you think we'll all be driving $45,000 BMWs. What a laugh.

What I'd really like to do is send you to school, but I can't afford it at "current pricing levels". But I can afford it for for my kids!

Instead, for a start, why don't you get yourself a copy of "Basic Economics" by Thomas Sowell. He might help you get a grip on your thinking processes. He might just also give you a whole new, and healthier, outlook on life.

[raybbr]

Of course some firms wither—Reynolds Tobacco's workforce shrank by nine-tenths between 1980 and 2002—but others grow: Wal-Mart's by 4,700%. During the 1990s, about a quarter of all American businesses shed jobs in a typical three-month period, equivalent to 8m jobs. Yet jobs created greatly outnumbered these, to the tune of 24m over the decade.

Oh yes, Wal-mart, the great jobs provider. They are bragging about jobs created by Wal-Mart.

[A. Pole]

"The creation of new jobs always overwhelms the destruction of old jobs by a huge margin"

Economist is a shill for international corporations.

[neuron2]

John,

Your ad hominems are significantly outnumbering your reasoned refutations. I suggest that you try again.

[PianoMan]

bump for reading later

[Siamese Princess]

That's half million in one month.

There's a natural attrition in the workforce. People die, retire, leave to have a baby or start a business, whatever. Most of them will be replaced with another employee.

[Siamese Princess]

In a couple of years, the unemployment rate will be 110%. We'll be a nation of burger flippers. Who will buy these products? And so on.

The multi-nationals are hoping to sell their products to the growing Chinese and Indian middle classes. They ignore the fact that these countries have stiff tariffs in order to protect their industries.

[Siamese Princess]

Oh yes, Wal-mart, the great jobs provider. They are bragging about jobs created by Wal-Mart.

If you work at Wal-Mart one of the few places you can afford to shop is Wal-Mart.

[<1/1,000,000th%]

The half million aren't replacement jobs. These are over and above the jobs lost.

[Siamese Princess]

The half million aren't replacement jobs. These are over and above the jobs lost.

Even the government admitted that the economy only added about 1000 new jobs in December. They had been hoping for, what, 125,000 or 130,000?

[LowCountryJoe]

In a couple of years, the unemployment rate will be 110%. We'll be a nation of burger flippers [and blue vest wearing door greeters]. Who will buy these products? [we can't compete with workers who make 12 cents a day, outsourcing will be a detriment to national security, Dogs and cats sleeping together, the sky is falling, a]nd so on.

Nice! Sometimes - as Limbaugh would say - you have to use aburdity to illustrate the absurd.

[azhenfud]

JV,
Might I direct you to:

http://www.freerepublic.com/focus/f-news/1081226/posts?page=12#12

You have a good day, too.

[Taliesan]

As usual, the protectionist vision sees part of the economic system and thinks it is the whole picture. Like a blind man feeling an elephant's trunk and yelling "snake!"

Think about it. When your costs decrease, you either drop your prices to capture market, or you keep the profits. If you keep the profits, your competitors drop their prices and take your market. This is a process of dropping the return on capital to the level towhere it can get the same return at lower risk elsewhere, at which point it leaves.

So the shift of labor to cheap markets produces two deflationary pressures: one on American wages, the other on American prices. How these two will net out in the short run no-one knows.

The protectionists like to talk about wages dropping while arguing, in abject ignorance of how competition really works, that corporations will use all the profits from outsourcing to give their executives 50 million dollar bonuses. Nonesense.

Corporations do give irrational bonuses to executives, and they are disciplined by the market -- whether they know it or not. Smart corporations will make money by outsourcing, give some of it to the CEO (there is a market price in the CEO market, after all) and re-invest most in the company or return it to shareholders (that is me and you).

If you were the CEO of Acme widgits, you WOULD -- get this -- YOU WOULD OUTSOURCE YOUR LABOR. If you didn't, your board will find someone who would. This is as certain as the sun rising in the morning. And you could go wave your flag at home.