Outsourcing 101 Flunked by Major Media Reporters

AmericanEconomicAlert.org ^ | Tuesday, April 13, 2004 | Alan Tonelson

[Willie Green]

For education and discussion only. Not for commercial use.

Some day, Big Media journalists may understand at least some of the fundamentals underlying the outsourcing debate -- or even become curious about them. But recent pieces in The Wall Street Journal and The New York Times, show that "some day" remains a long way off.

In a procedurally refreshing but substantively dismaying confession of bias, Times reporter Ken Belson declared his intention to demonstrate that "many of the same tax benefits and free-trade agreements that prompted...companies to seek opportunity in China, India, and elsewhere have also made it easier for foreign companies to invest in the United States."

But the piece simply reveals the deep ignorance of Belson and his editors. They display no awareness of the difference between (a) outsourcing U.S. jobs to serve the U.S. market from foreign facilities rather than U.S. facilities and (b) insourcing by foreign firms to serve the U.S. market from U.S. facilities rather than foreign facilities. And they have no sense that recent tax and free-trade policies have had no significant impact on the ability or willingness of foreign firms to set up shop in the United States. This country has always been wide open to such investment policy-wise, and has always been appealing because of its wealth and huge consumer market. All the trade agreements accomplished was to help U.S. companies move to formerly investment-unfriendly low-income countries and use their cheap labor rather than U.S, workers to supply U.S. consumers.

As for The Wall Street Journal's Jon Hilsenrath, he literally plays dumb -- and succeeds. Hilsenrath focuses on the lousy data available to study outsourcing. The data is indeed lousy, but Hilsenrath suggests that we're dealing with formidable mysteries or intrinsic unknowables, like space-time theory. We're not. The multinationals know exactly how much manufacturing and services work they've outsourced over exactly what time period. Any well-run company has this info at its fingertips. Fortunately for the outsourcers, their massive Washington lobbying has paid off, and the U.S. government doesn't require them to disclose this information.

Maybe Hilsenrath could play smart instead and focus on the real data story. And maybe Belson could transfer to the editorial page, where he seems to belong -- assuming he can crack the already overcrowded ranks of outright globalization shills at The Times.

(Sources: "Outsourcing Turned Inside Out," by Ken Belson, The New York Times, April 11, 2004; "Data Gap: Behind Outsourcing Debate: Surprisingly Few Hard Numbers," by Jon E. Hilsenrath, The Wall Street Journal, April 12, 2004)

Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).