Newsweek column on outsourcing

Newsweek ^ | 8-07-2003 | Michael Rogers

[DugwayDuke]

"Yup. I do. I think I have a right to a job. What of it?"

My apologies, I should have asked if you have an "entitlement" (meaning both a right to a job on your part and an obligation on the part of someone else to provide that job).

[harpseal]

That power was granted to Congress in 1789 see Article I US Constitution.

Implicit within that power is the power to set wage levels and to determine the number of workers in a particular industry.

That assetion is unsupported by the Historical record but even if it were suppoprted then we are discussing the very nature of what constitutes the United States of America.

(that's just another manifestation of the living wage) Of course, if the government is going to do that for textile workers, how about auto workers? If you're going to influence wages and employment levels, then you're into the relative levels between industry. And, that is the old argument about "compartive worth". Should a textile worker make more or less than an autoworker? Do we really want to go down this path?

No it is not just another manifestation of tthe living wage. Under a tariff system the market determines the wages. This was the case from 1789 on. Tariffs were not about living wagesthey were about letting the Free market operate within the USA. The historical record shows that your inferences are unsupported on this.

[DugwayDuke]

"I guess it's wrong that the tariff gave HD enough breathing room to reorganize and become the industry leader and economic powerhouse in the motorcycling industry that it is today. - Pretzel logic."

Yes it was wrong. I think you'd have to agree that the Japanese bikes were superior on cost, quality, and performance. (If you don't want to agree, then why were consumers running to buy them?)

Why should the government raise prices on a superior product and force consumers to pay more for less? Is this an example of who one segment of the population (HD workers) using the power of government to extort money from another? Why should a conservative support such activities? How is it different from a democrat using the power of government to affect wealth transfer from the wealthy to the poor?

BTW, HD is still overpriced IMHO and their success has more to do with Baby Boomer nostalgia than tarriffs. I also note that Indian is coming back into the market.

[drlevy88]

RIAA doesn't have the power to tax and raise tarrifs.

Ooooooh, if it got its way, all computers (or at least new ones) would had to have lockdown built into them.

[DugwayDuke]

"I guess the arguement boils down to, do you want cheap things, or are you willing to pay double and have a job? The jury is still out."

The jury should not be out on this issue for a conservative. Essentially, the use of tarriffs to protect wages is a form of government coercion to force consumers to pay more for a product that is either inferior or more costly or both. Should a conservative advocate the use of the power of government to set wages and employment levels? If you want to base your decision on purchases based upon US content, then that is fine, well, and good. It is the use of the power of government to force others to make that same decision where I have a problem.

[DugwayDuke]

"Yes, I think I have a right to a job. Any man who's willing to work hard deserves a job. Obviously, you've never been without a job for very long. Otherwise, you wouldn't say something so stupid and judgmental."

I was downsized in '94. Moved two thousand miles to a desolate location to take a job I didn't like paying 25% less than what I had been making. I was unemployed for seven months. So, my comments were not "stupid or judgemental". As the saying goes, not only do I have the t-shirt, I paid for it. FYI, I've moved back, got two promotions, a great job, and I'm making 50% more than before I was downsized. I'm 57.

You have a right to look for a job, you don't have the right to a job.

[DugwayDuke]

Well good morning, glad to see someone else is an early riser.

You wrote: "That power was granted to Congress in 1789 see Article I US Constitution."

"Clause 1: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;"

I'm not arguing that Congress cannot impose tariffs. I am arguing that imposing tariffs for the purpose of protecting wages and ensuring certain levels of employment was not the original intent. These powers were given to Congress only to fund the federal government. That is clearly supported by both the text of the Constitution and the historical record. If you wish to argue that we should abolish the income tax and revert to tariffs, that is another argument.

"No it is not just another manifestation of tthe living wage. Under a tariff system the market determines the wages. This was the case from 1789 on. Tariffs were not about living wagesthey were about letting the Free market operate within the USA. The historical record shows that your inferences are unsupported on this."

I disagree. Under a tariff system, the government sets the tariffs to achieve a specific wage and level of employment within an industry. Otherwise, how does the government know the level to set the tariff? Consequently, prices and wages become a political matter, one decided at the ballot box and are not determined by market forces.

I really believe this is just another manifestation of the "living wage". These articles and threads always argue that workers should be protected from competition to ensure a certain wage level, a wage necessary to maintain an American standard of living. I fail to see the difference between these arguments and arguments that a worker at McDonalds needs to be protected from competition by enforcing a "living wage" standard.

Do you, as a conservative, want the federal government in the business of determing who gets what wage? If you support protective tariffs, then you must face the fact that you are advocating such a role for the federal government.

[LS]

If you want, I can give you the specific studies done on 19th century trade. The ONLY industry where there is even any debate about whether or not tariffs "protected" it is textiles 1815-1835, and recent scholarship suggests that in fact even that didn't happen---that British textiles hit a totally different market/niche than did American textiles, and that the tariff only drove up the cost on some Americans to benefit others. I don't usually support the neo-Confederates, but they do have a valid argument on this point.

[LS]

Fine. I suggest we begin with the premise that the tariff was NOT a predominantly "protectionist" measure---it only affected two areas, textiles and iron, in that sense---and that it was primarily a revenue raising measure (along with the main source of revenues, land sales).

A good place to begin it Frank Taussig's traditional history of the tariff, where you can see the rates and impact for yourself.

While I know few will take my word for it, I do survey the economic history literature every 2-3 months, and the current debate has pretty much concluded that a) the ONLY protective tariff that had any impact at all was the one on textiles; b) the iron tariff was steadily reduced BEFORE America became a leading iron/steel producing country; and c) the debate is how much (if any) the textile tariff affected the domestic industry.

There are some (C. Knick Harley) who continue to maintain that the tariff "protected" the textile industry (which never eclipsed England's before the Civil War); but other, more recent studies, have found that there were key differences in the U.S. textiles an British textiles---we made low-end goods (i.e., like China) and the free trade British made high-end, value-added goods (like quality shirts, dress coats, etc.). We did not start to capture the latter market until after the tariffs were significantly reduced.

There is a third issue, though, that cannot be avoided, which is that the SOUTH inevitably ended up supporting the NORTH, because the South's goods were not "protected," but her citizens had to pay the higher prices. Hammond, Calhoun (who was wrong about a lot, but right about this), Thomas E. Dew, and even Jefferson Davis all recognized this. While I do not agree with Lincoln-bashers that the tariff was "the cause" of the Civil War (slavery was), it is undeniable that the tariff helped further separate the two sections.

Once you have gotten to this point in the scholarship, next look at Doug Irwin and Mario Crucini, two young, contemporary scholars who have worked on tariffs and who have a devastating critique of their impact on American business and labor forces.

[LS]

Harp, you are getting repetitions, and either you are deliberately obtuse, or (a worse alternative) cannot read what I have written, repeatedly: I do not support government subsidies for ANYTHING except clear cases of national defense (i.e., if, for example, Boeing could no longer compete in passenger aircraft, I would support subsidizing Boeing).

[rdb3]

Throughout this entire debate I've noticed something conspicuously missing: the idea of reducing obscene taxation and the monsterous amount of red tape involved in starting and maintaining a business.

The populist sentiment (which is in no way conservative) here of late desires more government intervention, believes that someone owes someone a job and a certain standard of living, and scuttles the idea of private property by desiring penalties against companies doing what they are in business to do, profit.

What is the appreciable difference between this sentiment and the Leftist thinking that shouts the same thing(s) only using slightly different language? I mean, really, what gives?

[rdb3]

The jury should not be out on this issue for a conservative. Essentially, the use of tarriffs to protect wages is a form of government coercion to force consumers to pay more for a product that is either inferior or more costly or both. Should a conservative advocate the use of the power of government to set wages and employment levels? If you want to base your decision on purchases based upon US content, then that is fine, well, and good. It is the use of the power of government to force others to make that same decision where I have a problem.

Amen! You just broke it down, and as my late uncle used to say, let it be broke! ;-)

[LS]

Please see my post above on the sources. Begin with Taussig, who merely supplies most of the numbers, but then look at Doug Irwin's new book and Mario Crucini's articles.

The best study on the antebellum tariff is Doublas Irwin and Peter Temin, "The Antebellum Tariff on Cotton Textiles Revisited," Journal of Economic History, 61, Sept. 2001, 777-805; and Temin, "Product Quality and Vertical INtegration in the EArly Cotton Textile Industry," (same source), 48, (1988), 891-907. A contrary viewpoint is expressed in C. Knick Harley, "International Competitiveness of the Antebellum American Cotton Textile Industry," (same journal), 52 (1992), 559-584, but then see the comments by Harley following the Irwin/Temin article. The main problem is lack of data prior to 1830, due to the poor collection of reports, but Irwin and Temin conclude that "the u.S. cotton-tetile industry was largely independent of the tariff by the early 1830s." Even after the tariff was drastically lowered---AND IMPORTS SUBSTANTIALLY INCREASED---there was no decline in domestic output, because we made "different stuff" than the British did. Harley tries to explain the differences by claiming the reasearchers were using "different sources" than he was---unpersuasive. (BTW, Temin, if I'm not mistaken, used to be a "pro-tariff" guy).

On Vandy, see Burt Folsom's very readable book, "Myth of the Robber Barons." It's quite well researched. And no, Vandy's triumph was no insignificant. It was quite impressive, as was his victory over SUBSIDIZED businesses every time he contronted them.

As for the late 19th century, Irwin's paper "Explaining America's Surge in Manufactured Exports, 1880-1913" (Review of Economics and Statistics, May 2003, 364-376) shows that natural resource changes, particularly the discovery of the Mesabi iron ore range, accounted for the productivity improvements and price declines, not other factors (especially not tariffs). "However these new technologies were all developed during an age when the benefits of capital investment in the USA were clear because of the protective tariffs." Irrelevent. Has nothing to do with the tariff. They were enacted because it was profitable to do so.

Your comment on Bessemer is interesting. Carnegie did not benefit greatly from the light steel tariff, yet he instantly replaced his furnaces with Bessemer the minute he could, and then outproduced the British, even accounting for the tariff.

This cirucular argument that the non-protected areas surged BECAUSE they were not protected is amazing. Indeed, no further comment IS necessary, and I'll leave it to readers to figure out which of the two of us is more logical.

I'm not going to go through two pages worth of discussions, so keep it to one or two questions---it starts to get too much like teaching. :)

[LS]

We became the richest nation on earth with virtually NO tariffs on all of the stuff we took the lead in---sewing machines, firearms, high-quality steel (tariffs were quite low on steel by then), canned goods, paper, whatever. The one area where we never took the lead was in the one area we had a tariff---high-end textiles.

How, exactly, should higher education "correct" the problems of the lower-end schools. Do you hire incompetent people just so you can train them? The purpose of a university is to provide ADVANCED degrees. It defeats its purpose if you do remedial stuff. I do not support dumbing down of our colleges. I support AMERICAN students getting their butts in gear and learning, even in spite of the cruddy schools, like our competitors do.

BTW, Britain had no tariffs, on anything, when she was at the peak of her industrial might. It was only after she started to adopt socialist policies (welfare, etc) that she lost her edge. THEN she started to adopt tariffs, and that was the end. If tariffs were so great, why did the Brits not "come back" by adopting tariffs?

[taxed2death]

I've been in the MC business since 1988.

Yes, I'd agree that at the time Jap bikes were superior in cost, quality and performance.

"Why should the government raise prices on a superior product and force consumers to pay more for less"?

Answer: To save an American icon.

No one forced any consumers to do anything.

"Is this an example of one segment of the population using the power of government to extort money from another"?

Yes. Look at the recent "no-bid" contract Haliburten and Dynacorp were awarded. Wake up. This is common business practice 24/7.

"Why would a conservative support such a decision"?

To protect American jobs.

"How is it different than a Dumacrat using the power of government to affect wealth transfer from the wealthy to the poor"?

As a consumer, you still have a choice. As a tax payer, you don't.

"BTW, HD is still overpriced IMHO and their sucess has more to do with Baby Boomer nostalgia than tariffs."

Nothing could be further from the truth. I don't ride a HD, I'm partial to Italian twins. Hd sucess came directly from the breathing space that the tariffs allowed. They realized at that time their product was inferior. They changed their business plan 180 degrees. They capitalized on their "image" and made it work to their advantage. They stopped selling motorcycles on their merit, or lack of, and started selling the image. This is pure genious and should be used in every business school as an example. All the while they were doing this they updated their motorcycle, engine and production facilities. Had tariffs not been employed, this company would have ceased to exist. Did anyone force you to buy a HD?

Overpriced?

My local HD dealer is selling the V-rod for $7000.00 OVER list price. My local dealer is imposing a tariff. How has this affected your purchase of a HD? Someone out there is willing to pay these prices, not you, but they are selling them as fast as they can make the.

[RockyMtnMan]

Actually the issue is divisive for many conservatives that have children nearing college age. What do you tell them to study that isn't a target for BPO? Everybody can't be a dentist, lawyer, politician or business owner. While these are fine professions there are over 300 million Americans.

At the moment no one would be encouraged to go into the sciences and risk their future career path being wiped out. Engineering requires increadibly intelligent people and we are discouraging those people from even entering the field.

America's dominance in technology was born of our science community. If no one wants to enter the field then we are denying ourselves future dominance in the technology field. Countless innovations have come from the science community that have fueled job growth over the years. Now we are eliminating the act of innovation itself.

I have no faith in the business community to provide future opportunities like I do the true innovators, our scientists, engineers, software developers, etc.

The short term answer is general trade tariffs combined with targeted tax cuts for affected industries. The long term answer is a complete overhaul of our tax system, changes in our regulatory practices, limits on settlements and ultimately a much smaller federal government.

The solution is not a simple "no tariffs" or a "tariffs forever" approach. We all know that reducing the burden of our government will not happen quickly. We cannot expect people to compete wage to wage with third world countries with the current cost of government while those root problems are addressed. If we do many professions will simply be wiped out or voluntarily avoided by the masses. That avoidance will cause a massive void in our scientific capacity and risk our national security.

[harpseal]

Fine. I suggest we begin with the premise that the tariff was NOT a predominantly "protectionist" measure---it only affected two areas, textiles and iron, in that sense---and that it was primarily a revenue raising measure (along with the main source of revenues, land sales). A good place to begin it Frank Taussig's traditional history of the tariff, where you can see the rates and impact for yourself.

First, the premise that the tariffs in place in 1848 in the USA were not protectionist in nature would have been news to the Southern politicians oif that era. Noe have you ever heard of the doctrine of nullification. It reffered top protective tariffs. lets start with the premise there were tariffs in place in 1848.

While I know few will take my word for it, I do survey the economic history literature every 2-3 months, and the current debate has pretty much concluded that a) the ONLY protective tariff that had any impact at all was the one on textiles; b) the iron tariff was steadily reduced BEFORE America became a leading iron/steel producing country; and c) the debate is how much (if any) the textile tariff affected the domestic industry.

Excuse me the current economic literature is mostly a reinterpretaion iof the data whos econclusions are irrelevant and not specifically germain to a debate on the histroical record. Presumptions that do not necessarily conform to the actual history of the period are not germmain to the issue.

There are some (C. Knick Harley) who continue to maintain that the tariff "protected" the textile industry (which never eclipsed England's before the Civil War); but other, more recent studies, have found that there were key differences in the U.S. textiles an British textiles---we made low-end goods (i.e., like China) and the free trade British made high-end, value-added goods (like quality shirts, dress coats, etc.). We did not start to capture the latter market until after the tariffs were significantly reduced.

Again with the references to others opinions and no hard data facts. You did understand teh challenge it was on the Historical record. We are not here to bring in others conclusions whether they agree or disagree.

There is a third issue, though, that cannot be avoided, which is that the SOUTH inevitably ended up supporting the NORTH, because the South's goods were not "protected," but her citizens had to pay the higher prices. Hammond, Calhoun (who was wrong about a lot, but right about this), Thomas E. Dew, and even Jefferson Davis all recognized this. While I do not agree with Lincoln-bashers that the tariff was "the cause" of the Civil War (slavery was), it is undeniable that the tariff helped further separate the two sections.

I personally agrre that the underlying issue of Slavery was the primary cause of the Civil War but it is also clear from the South Carolina secession resolution that the tariff was an immediate concern. I will stipulate that the politicians you mentioned all disliked the tariffs in question which were in effect but I do not admit they were correct on this issue.

Once you have gotten to this point in the scholarship, next look at Doug Irwin and Mario Crucini, two young, contemporary scholars who have worked on tariffs and who have a devastating critique of their impact on American business and labor forces.

Perhaps instead of your conclusions and recommending two young scholars who ageree with your viewpoint you could have actually referenced the records and tried to show any harm from tariffs. You have yet to do anything remotely likke this.

[harpseal]

Harp, you are getting repetitions, and either you are deliberately obtuse, or (a worse alternative) cannot read what I have written, repeatedly: I do not support government subsidies for ANYTHING except clear cases of national defense (i.e., if, for example, Boeing could no longer compete in passenger aircraft, I would support subsidizing Boeing).

Please understand the addressing of government subsidies was meant for Poohbah not you. you were copied as a courtesy because I was mentioning you.

[LS]

My mistake. I didn't realize we were having a multi-player discussion.