Posted on 08/02/2012 7:01:12 AM PDT by SeekAndFind
Economic change unleashes powerful forces. We can stubbornly resist them and cling to the status quo, but at best, that ushers in a slow but inevitable decline. A better approach lies in understanding the forces that periodically remake the economy, so we can seize the emerging opportunities they bring. This strategy has worked in the past, and it will work today.
A significant force in recent decades has been globalization. It has brought with it a surge in outsourcing, the shorthand term for businesses’ cutting jobs in the United States and moving production overseas to gain access to lower-cost labor. Many Americans view this development as a scourge, meaning the business practices of Mitt Romney’s private-equity firm, Bain Capital, have become fodder for the presidential campaign’s mudslinging.
Outsourcing makes for perfect political posturing — a quick-jab sound bite, serving up big business and foreign workers as villains and unemployed Americans as victims. But the economic reality of outsourcing isn’t so black and white. The issue goes far beyond the simple fact of job losses and touches on the broader realities of trade, basic human rights, and economic progress.
In economic terms, outsourcing jobs differs little from importing goods. Both involve using labor abroad rather than at home — so there’s no logical consistency in cursing one while tolerating the other. In 2011, America imported $2.6 trillion in goods and services, suggesting that outsourcing has just a tiny share of the effect foreign trade overall has on American jobs.
But people also commonly consider imports bad, calling them job killers, and consider exports good because they create domestic employment. In reality, that view is incomplete. When goods and services come from overseas, foreigners work and Americans consume, so imports contribute to higher U.S. living standards. Our exports go to foreigners, so we work and they consume. Some lament America’s trade deficits, but they’re only part of the country’s international balance sheet. In 2011, our red ink in goods totaled $738.4 billion, offset by a services surplus of $178.5 billion and foreign-investment inflows of $559.8 billion. As a matter of strict accounting, all countries’ international transactions balance — so nobody is taking advantage of anyone else.
Within the overall international balance, countries have trade surpluses in the industries they’re relatively good at, and deficits in those they’re not good at. Turns out, America’s surpluses are in high-value-added manufacturing and sophisticated services, where wages are high. Our deficits are in low-skilled manufacturing, where wages are low. With or without outsourcing, the U.S. economy is exporting low-wage labor.
Once we accept that payments balance, it becomes difficult to sort out trade’s overall impact on U.S. jobs. Imports displace U.S. production and jobs, but exports and capital flows increase the country’s economic activity and stimulate employment. We shouldn’t just focus on the job losses from trade and conclude that it hurts the economy.
Moreover, trade is a question of individuals’ freedom to choose. Countries don’t trade, individuals and companies do. They buy foreign goods and services because of price, quality, availability, tastes, or any number of other reasons. These are voluntary transactions between individuals, distinguished only because the nationalities of the buyers and sellers differ. Free trade among individuals is a basic human right. Protectionist interventions that attack imports or outsourcing rob Americans of a piece of their economic freedom.
Freer trade and cheaper communications have spurred globalization in recent decades, exposing once-insulated parts of the economy to foreign competition. Americans can’t cling to the jobs of the past. We need to find the best opportunities in the global economy. In the new international division of labor, we can be the managers, consultants, and even facilitators of outsourcing.
Trade and new technologies are a lot alike. They both upset the existing economic order, undermining some products, industries, and professions while giving rise to new ones. America’s prosperity has been built on wave after wave of such upheavals, with new jobs continually replacing old ones. That’s why American workers are insurance salesmen and dentists, not blacksmiths and buggy-whip makers. We don’t have to know exactly where the new jobs are. We only need faith in the American people and the capitalist system.
Politicians’ attacks on outsourcing won’t work any better than the Luddites’ assaults on technological innovation. If their argument prevails, it is a path to decline. America will be better off if we grab the opportunities arising out of globalization. That is the only thing that will work.
— W. Michael Cox is director of the William J. O’Neil Center for Global Markets and Freedom at Southern Methodist University. Richard Alm is writer-in-residence at the center.
China's per capita GDP is at a third world level.
They will probably never catch up to us.
In 1984 I read a detailed report by a CIA intelligence officer who guaranteed that Japan's GDP would surpass the USA by the year 2000.
Don't believe everything you hear or read.
The key part of your argument.
And census or no census, steel, textile, automobile, electronics, etc. manufacturing is gone. How many 'Made in America' labels have you seen lately?
I think the majority of the American public is with Ross Perot on this one.
Protectionism may be crappy macroeconomic policy. But we are darned sure ready to give it a try.
I work for a company that makes refrigeration equipment.
Everything we produce is labeled “made in the USA”.
The machine tools I use are made in the USA.
The auto parts I buy are made in he USA.
My tractor, lawn mower and my car are made in the USA.
Most of the food I eat is made in the USA.
Et Cetera
Not to the extent we have in the last 30 years or so and NOT paid for on credit to the extent in the last 30 years or so.
Our economy is 70% based on consumption, much of that based on credit that was itself based on an unsustainable rate of asset valuation rise (namely real estate).
Not sustainable. Which is why we are in the pickle we are in now.
Protectionism gives the government more control of business (leaning towards socialism) and hurts the American consumer.
How could any conservative support that?
They'll flat out lie to your face about just about anything.
The last place I worked had outsourced a lot of software development work. We figured it took 20 Indians to equal one of our American developers, and they still couldn't deliver software components to spec. management was absolutely living in a dreamworld, and was working the domestic folk to death who had to make up for the shoddy product coming from overseas.
Consumers are the drivers behind economies.
Consumption is the only drive for any growth in economic activities.
By buying more of a product, we allow the producer of said good to either make more of his product or increase efficiency or quality of their product. Thus, by purchasing more and more products, we promote the betterment of our products as a whole.
Look what happened to Japan.
Consumers saved too much which led to the lost decade and they are still recovering from that.
Hyperconsumption (which is the only way we can get GDP growth at the levels economists and politicians say we want e ... north of 5%) is not sustainable over the long term.
Rich countries consume more.
Poor countries consume less.
... forgot to add:
Moreover consumption based on debt based on unsustainable rates of asset valuation rise is not sustainable.
Our entire model is based on quicksand.
The perpetual ‘growth’ model won’t work. The only way it can work in the short term is ever increasing consumption. But to do that you have to have an ever increasing asset valuation rise ... or bubbles ... which as we have seen are not sustainable in and of themselves.
Rich countries consume more ... until they can’t any longer.
Not on this planet.
Which planet are you from, BTW?
In the late 1800s many American agriculture jobs were offshored to South American countries where labor was cheaper.
People did not cry about “the end of American agriculture” because they knew it was beneficial to everyone.
The Americans that lost their jobs simply moved up to higher skilled work like manufacturing of services.
The same is true today.
https://www.stlbeacon.org/?_escaped_fragment_=/content/23613/anti_dumU.S. manufacturing jobs have declined by 36% in the last decade and that is because of trade with other countries. millions of Americans have lost their jobs because of that. We have to stop China now.
12:07 am on Mon, 03.26.12
WASHINGTON – Steel wheels, nails and bedsprings made in Missouri are on the list. So are pipes, paintbrushes and coat hangers from Illinois. Not to mention a host of other products, from Silicon Valley electronics to Detroit auto parts.If it seems that the Chinese are throwing cheaper versions of everything but the kitchen sink at U.S. markets, think again. This month, an Illinois kitchen-sink manufacturer — the Elkay Cos. — asked Washington to slap an “anti-dumping” tariff on Chinese steel sinks.
Whether the product is sinks or steel wheels, the complaints by U.S. manufacturers allege that China unfairly subsidizes the plants that make such products, allowing exporters to sell them in this country at less than fair market value.
In the most recent Missouri case, executives of Hayes Lemmerz — an international steel wheels manufacturer that employs more than 300 people at its plant in Sedalia — asked the U.S. International Trade Commission on March 8 to order punitive duties against Chinese imports that they contend unfairly undercut their prices.
“Don’t let dumped Chinese wheels shut down these plants and cost these good, hardworking Americans their jobs,” said Donald Hampton Jr., who supervises the steel-wheel plants in Sedalia and Akron, Ohio.
China has been destroying the U.S.A. China has caused untold misery, unemployment, homelessness and killed many Americans by denying them a chance to make a living.
So by your logic we have to allow china to do anything to the U.S.A. and Americans individuals or American companies as long as they call it “trade” or economics.NO we need the military for stopping China from invading the U.S. with troops . likewise we need to stop China's economic war against the U.S.A and from what China is doing to Americans. We need the government to protect Americans against armies, against China, against immigrants, against anything foreign. By your logic then we have to allow U.S companies to import an unlimited number of immigrants also( are you for that too?)Yes we need to limit government inside the border but we need a border and to protect that border against immigrants , china , the UN, WTO, .We need a fortress America .We must be for America first and let China go to hell! I declare war against China.I am ready to give it all up and to fight in a war against China . I would enlist right away. I only hope war breaks out as China is buying up the U.S.A and the world without firing a shot.I would rather die fighting China than to live as their slave. I want war and I want vengeance against China. Pass this article on to all you know. China makes 54% of the world's steel and most of the consumer electronics 9 billion people use. We in the U.S. cannot even make our own consumer electronics. but many say U.S. produces more(ridiculous).
Is this a joke or are you really that insane?
Outsourcing and ‘free trade’ are only beneficial to the globalists, and the politicians they keep in power with their bribes.
Globalists thrive on slave labor, especially slave labor supplied by communist masters.
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