The Myth of "Exporting Jobs"

Ludwig von Mises Institute ^ | June 27, 2003 | William L. Anderson

[ggekko]

"If that were truly the case, as critics of the left and right are charging, then low-wage backwaters like Rwanda and Zimbabwe would receive the lion's share of investments from the West.[...]"

If your point is that these countries being wracked by instability and war don't offer a fair base of comparison then your point is well taken. While the choice of these two countries do not convincingly reinforce the author's contention there are other countries that do support his argument.

Exhibit A: France. According to OECD statistics France ranks lowest among OECD members for foreign direct investment. This is true despite the fact that France has a very advanced telecommunications and transport network. French private labor costs are also not the highest in the EU. What is repelling foreign direct investment in France are a byzantine and expensive legal system (sound familiar?) and an arbitrary and unpredictable regulatory environment (also sound familiar?).

Exhbit B: Russia. Russian private wages are at third-world levels and the country is now relatively stable. FDI in Russia is, however, still very sparse. According anti-globalization trade theorists the US should be off-shoring jobs to Russia in droves to take advantage of "slave" wage levels. This has also not happened to any appreciable degree because the Russian legal system is a thoroughly corrupt morass and companies fear that they will not be allowed to re-patriate their profits.

The pattern of off-shoring that other identifies is clear: companies are off-shoring to foreign jurisdictions that have a pro-business climate and legal system. The lower wage levels are an attraction but it is not the pre-emminent reason.

It is time to face the fact that the real prime mover behind most off-shoring arrangements is an attempt to escape a radically adverse business climate in the US. The factors behind this adverse climate are an antiquated corporate tax system which may be one of the worst in the world, an out of control lawsuit culture, and an arbitrary regulatory climate. These investments by US corporations are the equivalent of flight capital.

The making these decisions in US companies, in my experience, are not scheming globalists who want to depress the wages of Americans as part of some nefarious plot. These men are faced with the choice of investing money in the US where they face unknown risks in controlling their investment or they can invest in certain places overseas where their money is welcomed and not subjected to erratic political control.

The idea that America is being pauperized by globalization is narcotic myth that dulls the pain but does not address the roots of our competiveness problems.

[Paul Ross]

Since, relocated to Alabama of all places. Wacked.

[Joe Hadenuf]

Do what all those Oriental immigrants do and open your own business.

Did you ever happen to notice that Orientaly business owners that come to this country and open small to medium size businesses generally only employee their own family members or other orientals? In California, and other places, this is what is taking place. They take down the old English signs and put up signs in Chinese etc. I could show you entire areas where there are no signs or very few in English, and they operate almost 100 percent for other Asians, by Asians...They are not only opening up businesses, they are opening up entire Asian towns, that generally only cater to other Asians...

Even though many have a good work ethic, I find this offensive that they come into American, and have no intention of assimilating into our country and generally only cater to and do business amongst each other. I can name many *large* areas that have been completely changed and appear Chinese or Asian like, in every aspect, including the Asian gangs, that as recently as two days ago, stood outside of a Chinese cleaners and four Asians opened fire with mulitple high powered weapons, killing one female worker inside the Asian owned cleaners, the victim had just entered the U.S. a week earlier. This was all in *broad day light*, and was even caught on video tape.

How is this different from the idea that Americans should only buy American goods?

Huh? LOL!

[Poohbah]

Outstanding analysis!

[1rudeboy]

Easy cowboy. I could just as easily make the argument that the U.S. was built on trade. I choose not to, because that was in the 18th Century.

[Willie Green]

So, moving a good from the port in San Diego to Chicago doesn't add value?

Not one bit.
San Diego = -1 good
Chicago = +1 good
Net sum = 0
No wealth created.

[Paul Ross]

The idea that America is being pauperized by globalization is narcotic myth that dulls the pain but does not address the roots of our competiveness problems.

You are not taking cognizance of the industrial piracy being plied by China.

[A. Pole]

I could just as easily make the argument that the U.S. was built on trade.

Why? It was in part built on trade - protected from foreign imports by tariffs on imports and by export of goods (not burdened by income tax).

But until recently the foreign trade was not so big in proportion and the present trade deficit would not be imaginable in the past.

[Toddsterpatriot]

The Overseas Investment Act makes low interest loans to companies going overseas

Thanks for the info. OK, ready? Whatever we spend on this is too much. Surprised?

Fair trade would set tariffs equal to the cost of our regulations and enviromental laws or fair trade would eliminate all our regulations equal to the regulations in Botswana.

Or, we could reduce our taxes and regulations to the point where our greater productivity would make manufacturing here more profitable without raising the cost of our goods to our consumers.

[hchutch]

An excellent analysis of why we have the problems. It's the litigation and regulatory taxes that are reflected. We pay every time some shyster files a suit.

We need tort reform and regulatory reform in this country. Unless someone has a magical gemstone that can export OSHA, EPA, and other government bureaucracies.

[Willie Green]

I guess if it didn't add any value I could just drive to and from California to pick it up?

Yep. It's the same good either way.
If the cost of picking it up yourself is less than having it shipped,
you might as well do it and save some money.
Not much sense paying for a service that doesn't add anything to a good except cost.

[Toddsterpatriot]

Not one bit.

San Diego = -1 good

Chicago = +1 good

Net sum = 0

No wealth created.

I think you've got a problem with your math.

Usually, you take your ending point (in your example +1) and subtract your starting point (in your example -1) to get the difference.

+1-(-1) = +2

[Toddsterpatriot]

Yep. It's the same good either way. If the cost of picking it up yourself is less than having it shipped, you might as well do it and save some money. Not much sense paying for a service that doesn't add anything to a good except cost.

Sometimes you make sense, but why would anyone pay for a service that doesn't add anything except cost? (That could be a good definition of government!!)

I have to say a good that is available across the street is worth more to me than an identical one that is a 16 hour drive away.

How does this not add value??

[m18436572]

Hehehe! Thanks, I needed that! Wish it really worked like that. I'dd be a zillionaire.

[ffusco]

All you did was add cost to move it around.
Nothing new was created.

So making something available and convenient to the consumer adds no value? Ridiculous argument Comrade.

[Toddsterpatriot]

Bingo.

[SauronOfMordor]

It is a touchy subject, but let me try. National Socialism was much more effective than Soviet Socialism. It did not nationalise the industry - it subjected it to the national interest as understood by its government. Nazi Germany did not collapse economically - it was defeated MILITARLY with the great effort of many nations.

F.A. Hayek explained it very well in "The Road to Serfdom", Chapter "Why the Worst Get on Top". In a nutshell, in a socialistic system, the path to wealth and power is thru control of the government. So those who really want power will try to rise thru the bureaucracy. But the people who are most likely to rise are those who are the most ruthless, and willing to do whatever it takes to get to the top. If Hitler had not been born, a National Socialist system would have resulted in somebody very much like him getting to the top. It is not a coincidence that people like Stalin, Mao, and Pol Pot rise to the top in socialistic systems

[Incorrigible]

Yeah, I stopped reading this earlier today after the Rwanda statement.

No factoring in of education, foreign policy of the outsourcing country and technology proliferation.

I'm an Austrian school arm-chair economist so I'm bummed that this is coming form the Von Mises Institute but, ya can't always hit a home run.

[samuel_adams_us]

No, we should hold the corporate officers accountable for their fraud. Instead of sending them to Club Med, if they are proven guilty and convicted by a jury of their peers for defrauding the share holders for millions, kind of like Enron, execute them, firing squad.

[ffusco]

WG is a good case study of sloppy thinking. He corrupts Locke's theory of property to describe labor and uses physics to devalue services: In Pyhsics work is done when a mass is moved up or down- It takes work to lift a box, but not to carry it.

Psuedo intellectual NYT-worthy nonsense.