[neutrino]

Let's see now. No facts. No figures. Just lots of words about how wonderful outsourcing is. And then we have Friedman: "Friedman warned: "There is more to outsourcing than just economics. There's also geopolitics."

That's the same argument one might use for any other welfare program - i.e., pay them off so they don't burn down the 'hood.

Outsourcing - another UN backed global welfare program, paid for by American workers.

[SupplySider]

Free trade in goods and services can be an important tool for accomplishing peacefully what our soldiers are, in part, fighting for in Iraq, namely a transition to a freer and more prosperous world that, in turn, will make Americans more secure.

A great point. I wish the dictator thugs of the Arab world would look to what the Indians and the Chinese are doing.

[jocon307]

"Of course, the entire preoccupation with call-center jobs is a bit strange, since Kerry and other members of Congress had previously passed "Do Not Call" legislation that, according to telemarketing industry estimates, could eliminate as many as two million U.S. call-center jobs."

LOL, I never thought of this!

[StolarStorm]

Customers are informed that if they press the "India" button, their loan will be processed in one day, while the U.S.-based work may take two days or longer.

Of course customers are told that the Americans may take longer... because eloan saves money using the Indians. They have a vested interest in putting the American based workers in a bad light.

[ETERNAL WARMING]

The Harsh Truth About Outsourcing
S BusinessWeek
Uhttp://www.businessweekasia.com/magazine/content/04_12/b3875614.htm
Published: Mar 22, 2004
Author: Paul Craig Roberts



It's not a mutually beneficial trade practice -- it's outright labor arbitrage

Economists are blind to the loss of American industries and occupations because they believe these results reflect the beneficial workings of free trade. Whatever is being lost, they think, is being replaced by something as good or better. This thinking is rooted in the doctrine of comparative advantage put forth by economist David Ricardo in 1817.

It states that, even if a country is a high-cost producer of most things, it can still enjoy an advantage, since it will produce some goods at lower relative cost than its trading partners.

Today's economists can't identify what the new industries and occupations might be that will replace those that are lost, but they're certain that those jobs and sectors are out there somewhere. What does not occur to them is that the same incentive that causes the loss of one tradable good or service -- cheap, skilled foreign labor -- applies to all tradable goods and services. There is no reason that the "replacement" industry or job, if it exists, won't follow its predecessor offshore.

For 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. The internal cost ratios that determine comparative advantage reflect the quantity and quality of the country's technology and capital. If these factors move abroad to where cheap labor makes them more productive, absolute advantage takes over from comparative advantage.

This is what is wrong with today's debate about outsourcing and offshore production. It's not really about trade but about labor arbitrage. Companies producing for U.S. markets are substituting cheap labor for expensive U.S. labor. The U.S. loses jobs and also the capital and technology that move offshore to employ the cheaper foreign labor. Economists argue that this loss of capital does not result in unemployment but rather a reduction in wages. The remaining capital is spread more thinly among workers, while the foreign workers whose country gains the money become more productive and are better paid.

Economists call this wrenching adjustment "short-run friction." But when the loss of jobs leaves people with less income but the same mortgages and debts, upward mobility collapses. Income distribution becomes more polarized, the tax base is lost, and the ability to maintain infrastructure, entitlements, and public commitments is reduced. Nor is this adjustment just short-run. The huge excess supplies of labor in India and China mean that American wages will fall a lot faster than Asian wages will rise for a long time.

Until recently, First World countries retained their capital, labor, and technology. Foreign investment occurred, but it worked differently from outsourcing. Foreign investment was confined mainly to the First World. Its purpose was to avoid shipping costs, tariffs, and quotas, and thus sell more cheaply in the foreign market. The purpose of foreign investment was not offshore production with cheap foreign labor for the home market.

When Ricardo developed the doctrine of comparative advantage, climate and geography were important variables in the economy. The assumption that factors of production were immobile internationally was realistic. Since there were inherent differences in climate and geography, the assumption that different countries would have different relative costs of producing tradable goods was also realistic.

Today, acquired knowledge is the basis for most tradable goods and services, making the Ricardian assumptions unrealistic. Indeed, it is not clear where there is a basis for comparative advantage when production rests on acquired knowledge. Modern production functions operate the same way regardless of their locations. There is no necessary reason for the relative costs of producing manufactured goods to vary from one country to another. Yet without different internal cost ratios, there is no basis for comparative advantage.

Outsourcing is driven by absolute advantage. Asia has an absolute advantage because of its vast excess supply of skilled and educated labor. With First World capital, technology, and business knowhow, this labor can be just as productive as First World labor, but workers can be hired for much less money. Thus, the capitalist incentive to seek the lowest cost and most profit will seek to substitute cheap labor for expensive labor. India and China are gaining, and the First World is losing.

Paul Craig Roberts is a former Assistant Treasury Secretary in the Reagan Administration and a former BusinessWeek columnist.

[WhiteyAppleseed]

With millions of unemployed Islamic fundameentalists worldwide, do we export virtual reality games to alleviate boredom, or wait for reality to implode virtually on the television screen?

[Ronzo]

My nomination for the most idiotic statement of the year:

"There is more to outsourcing than just economics. There's also geopolitics. It is inevitable in a networked world that our economy is going to shed certain low-wage, low-prestige jobs. To the extent that they go to places like India or Pakistan--where they are viewed as high-wage, high-prestige jobs--we make not only a more prosperous world, but a safer world for our own 20-year-olds."

Yep, all those mere $50K - $75K annual "low-wage" jobs are flying over to Inida & Pakistan. Shoot, can't even find an illegal alien who would work for such a paltry fee...

All of us "low-wage" programmers and engineers here in the Midwest are just so glad the Indians are now doing our jobs so we can enjoy those great "high wage" jobs being offered by the local Mickey D's and the Wally World's...

If there's anything else we can do for the great ideal of "geopolotics" just let us know...

[A CA Guy]

A friend just told me his brother works now in Mexico regarding printing because they saved $60,000 in worker's comp alone.

I think it is a bottom dollar issue that moves these companies out.

We are too litigious!