The Myth of "Exporting Jobs"

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

[GOP_1900AD]

Bull.... offshoring gets you a one time incremental cost reduction for the good or service. Once we've maxed out on offshoring what can reasonably be offshored, the cost reductions stop. In fact, due to the inevitable and overlooked increase in logistics complexity, prices may actually start to then climb slowly. Then what? A bunch of people working at Mickey D's in an inflationary economy. DOH!

[WOSG]

RussianConservative: Da, you are right! I've worked with team of SW developers in Moscow - great team, very productive.
There are opptys working with Russian teams and companies.

Of course, they programmers are making under $20,000/yr.

[Willie Green]

Two sides of the same coin representing a transference of wealth, not wealth creation.

[lasereye]

Two sides of the same coin representing a transference of wealth, not wealth creation.

Why isn't the same thing true about goods, since all goods wear out and have to be replaced?

[WOSG]

"there literally are an infinite number of things that must be done. As Alchian and Allen have noted in their 1983 book Exchange and Production, the elimination of some tasks due to improved methods of productivity frees up scarce labor to do other things. That, they point out, is how an economy grows, a simple truth that seems to have escaped most of the economics profession."

This is true, your skepticism on it is wrong. And it's a strawman to allege he is talking about labor theory of value - when he explicitly stated otherwise elsewhere.

One thing to consider: If it was cheap enough, would you have a 10,000 sq ft mansion, fleet of cars, cook, gardener and personal fitness trainer? Certainly practically everyone would consume more if they had the funds; the limit is money, which in turn is based on the *value we create*. Which is a function of our productivity.
So the limit on our wealth is our productivity.

We cannot and will not grow poor and unemployed 'exporting jobs' SO LONG AS WE REMAIN A PRODUCTIVE NATION AND PRODUCTIVE POPULACE.

[lasereye]

Two sides of the same coin representing a transference of wealth, not wealth creation.

Furthermore, if we exported services and imported goods, according to your "logic", that would indicate we were accumulating wealth at the expense of the countries we were importing them from.

[RussianConservative]

Yes but 1 dollar or 30 ruble can buy you loaf bread, kilo or two potatoes.

[Willie Green]

Furthermore, if we exported services and imported goods,

But that is not what we're doing.
The trade balance is in deficit,
wealth is flowing OUT of the country.

[maui_hawaii]

The problem with all of this globalization stuff is that there is no orderly move towards it. The moves have been very sporadic and unbalanced.

I can give you some qualified examples if you want.

The moves so far haven't done $#^& to build a market. Producing goods in economies that don't consume what they make is an entirely stupid prospect. It might be cheaper, but thats all it is. A broke down Pinto is cheaper than a Benz, but since when does that mean its better?

The US should have a national strategy towards globalization as they had for 50 years up until the last decade. Again, I can qualify this statement to anyone willing to ask.

[ffusco]

Which would you prefer? A return to an industrial economy in this country by time machine or government fiat.

[lasereye]

wealth is flowing OUT of the country.

First of all, the MERCHANDISE trade balance is in deficit. That doesn't include services, which we are net exporters of. But never mind that. I'm trying to focus on your definition of wealth. Wealth, according to your "logic", consists of goods, so we are IMPORTING wealth according to your "logic". No wealth is flowing out of the country (according to your own logic).

[dark_lord]

One thing to consider: If it was cheap enough, would you have a 10,000 sq ft mansion, fleet of cars, cook, gardener and personal fitness trainer? Certainly practically everyone would consume more if they had the funds; the limit is money, which in turn is based on the *value we create*. Which is a function of our productivity. So the limit on our wealth is our productivity. We cannot and will not grow poor and unemployed 'exporting jobs' SO LONG AS WE REMAIN A PRODUCTIVE NATION AND PRODUCTIVE POPULACE.

These are two separate things.

1st thing - me, myself -- no. Even if it was absolutely free, no strings attached...I don't want that. Me, personally, if I was not married with kids I would be absolutely delighted to have nothing more than a 1 bedroom condo with quiet neighbors in a zero crime area, close to expressways, a major airport, lots of bookstores and libraries, and lots of jobs. That would do it for me. No cook, gardener, I only need one car and I sure don't need 10K sq. feet. I am probably not representative of the "people".

2nd thing - you use the concept of productivity, and that is a slippery concept. As I mentioned with the comparison of the dirt pies and the apple pies. If I built a factory to produce millions of dirt pies really cheaply, still very few would pay money for them. Yet this would generally be considered quite productive. You, on the other hand, are implying that productivity is related to, in your terms, *value created*. And you are defining value as "that which people wish to spend money on. I agree with that. So your argument with me is????

You say -- "We cannot and will not grow poor and unemployed 'exporting jobs' SO LONG AS WE REMAIN A PRODUCTIVE NATION AND PRODUCTIVE POPULACE" but you are directly tieing productivity to value, and value to "stuff we want to spend money on". Hey, I agree with that. The issues are these:

(a) When we export those jobs we may not remain a productive nation with a productive populace.
(b) The first problem is that when we export jobs, we have unemployed people. These people are not net producers.
(c) The second problem is that unemployed people have less money to spend and therefore are consuming less -- thus lowering the demand for goods and services.
(d) The third problem is that when these people are reemployed they may be working for a lower wage and thus have less ability to consume - the demand side of the equation is going down.
(e) This leads to a net drop in demand.
(f) Henry Ford paid his workers well because they formed a good chunk of the group that bought his cars. Peasants don't buy cars.

[Willie Green]

First of all, the MERCHANDISE trade balance is in deficit. That doesn't include services, which we are net exporters of. But never mind that.

Well of course you want to say "never mind that" and quickly change the subject. The merchandise trade deficit dwarfs the piddly amount of services that are exchanged.

"Pay no attention to the man behind the curtain."

 - The Wizard of Oz

[Willie Green]

But never mind that. I'm trying to focus on your definition of wealth. Wealth, according to your "logic", consists of goods, so we are IMPORTING wealth according to your "logic". No wealth is flowing out of the country (according to your own logic).

Hey, you want to focus on the definition?
Fine by me, I'll post it again for reference:

WEALTH: The net ownership of material possessions and productive resources. In other words, the difference between physical and financial assets that you own and the liabilities that you owe. Wealth includes all of the tangible consumer stuff that you possess, like cars, houses, clothes, jewelry, etc.; any financial assets, like stocks, bonds, bank accounts, that you lay claim to; and your ownership of resources, including labor, capital, and natural resources. Of course, you must deduct any debts you owe.

You see that part about deducting any debts that you owe???

That's what the Trade Deficit is: DEBT!
Essentially, we've imported goods without exporting an equivalent amount of goods in return.
The paper money we send to them are nothing but IOUs.
That's how wealth is flowing out of the country, we are going into debt with our Trade Deficit.

[lasereye]

Well of course you want to say "never mind that" and quickly change the subject. The merchandise trade deficit dwarfs the piddly amount of services that are exchanged.

No you're changing the subject. You keep maintaining that wealth is only in goods. I'm trying to address that issue. If we are net importers of goods, that means according to your "logic" that net wealth is flowing INTO the country. That's why I said never mind that. Because the amount of the services we export is not relevant to the question I'm asking you, which has to do with your "wealth" theory.

[dark_lord]

You are technically correct. However, the problem that the holder of debt always has is -- to collect. The Jews in the middle ages got screwed that way a lot. They loaned money to a feudal lord type...who then reneged on payment. Suppose, for example, you loan me a pile of money which I invest in factories to make stuff. I then inflate my money and pay you off with inflated dollars. You get screwed and I have factories. If I have a good military and have oceans around me, you are out of luck.

Of course, I am not saying that this is the actual plan, you understand. Just pointing out a scenario.

[lasereye]

The merchandise trade deficit dwarfs the piddly amount of services that are exchanged.

According to your wacko theory that wealth is only created by goods production, if we exported far more services than the value of goods that we imported, but we were still running merchandise trade deficits, than we would be exporting our wealth, even though net goods would be flowing into the country and we wouldn't have any trade deficit whatsoever.

[Willie Green]

Of course, I am not saying that this is the actual plan, you understand.

IMHO, we'll likely have to go into Chapter 11 reorganization and dispose of some of our assets to satisfy our creditors.
Maybe China will accept a territorial exhange of Alaska in leiu of payment of our debt.

Just another possible nightmare scenario to consider.

[Willie Green]

if we exported far more services than the value of goods that we imported, but we were still running merchandise trade deficits, than we would be exporting our wealth,

No, then our wealth would be increasing.
Only it would be increasing through the mechanism of wealth transference, not wealth creation.

But that's not what's currently happening is it?
Wealth is being created offshore, and our wealth is diminishing as we accrue debt to import goods.

[Jorge]

I'm fat, ugly, old, and white. And I'm making more money than I ever have in my life.

Just goes to show that being white easily compensates for any other disadvantage.(sarcasm)
And don't you know that no one is ugly... who makes a lot of money.