Posted on 02/17/2004 5:35:48 PM PST by phil_will1
Last week, Council of Economic Advisers Chairman N. Gregory Mankiw ran into a buzz saw. He committed a major gaffe, which in Washington means he spoke the truth, by defending the concept of outsourcing -- contracting with foreigners for information technology services. With a lack of job growth being the central economic issue in the country today, Mankiw's comments were assailed across the political spectrum. President Bush quickly distanced himself from his aide's remarks, House Speaker Dennis Hastert, R-Ill., repudiated them, and many Democrats called for Mankiw's dismissal.
There is at least one person in Washington who knows precisely how Mankiw feels: Federal Reserve Chairman Alan Greenspan. Back in 1974, Greenspan held the same position Mankiw now holds. Shortly after his confirmation in September of that year, Greenspan participated in an economic summit. At the time, the United States was in the middle of the deepest recession of the postwar period and inflation was rising rapidly. That year, the Consumer Price Index would rise 12.3 percent.
Greenspan was asked whether the Ford administration's policies were benefiting the rich over the poor. He replied: "If you really wanted to examine who, percentage-wise, is hurt the most in their incomes, it is Wall Street brokers. I mean their incomes have gone down the most."
Needless to say, Democrats had a field day attacking Greenspan for seeming to worry more about the problems of rich Wall Street brokers than those of common people. Although he quickly apologized, many observers believe that Greenspan was permanently scarred by the incident and forever afterward became far more circumspect in his public and even private comments.
Of course, when one gets caught in one of these Washington firestorms, there really isn't much one can do except apologize, hunker down and wait for the storm to pass. That is what Mankiw is doing. Unfortunately, the result is that debate on serious issues is often short-circuited and the political establishment draws erroneous conclusions. In this case, it may conclude that the issue of outsourcing is radioactive and everyone may rush to support ill-conceived legislative fixes with harmful economic consequences.
Here is the offending statement in the Economic Report of the President that has led to calls for Mankiw's head: "One facet of increased services trade is the increased use of offshore outsourcing in which a company relocates labor-intensive service industry functions to another country. ... Whereas imported goods might arrive by ship, outsourced services are often delivered using telephone lines or the Internet. The basic economic forces behind the transactions are the same, however. When a good or service is produced more cheaply abroad, it makes more sense to import it than to make or provide it domestically."
One would have a hard time finding a reputable economist anywhere who disagrees with this analysis. No nation has ever gotten rich by forcing its citizens to pay more for domestic goods and services that could have been procured more cheaply abroad. Nations get rich by concentrating on doing the things they do best and letting others produce those things they can produce better and more cheaply. It is called the specialization of labor, and it is the foundation for economic growth. That is why even Democratic economists like Janet Yellen, Laura Tyson, Brad DeLong and Robert Reich have come to Mankiw's defense.
What is different about outsourcing and why it has aroused so much protest is that it is affecting workers who thought they were immune from international competition. Blue-collar workers in manufacturing have been suffering from outsourcing for 100 years. It is worth remembering that textile jobs in South Carolina today were originally outsourced from Massachusetts. While in the short run, the transition was painful for Massachusetts textile workers, they soon found better jobs in new industries. That is why per capita income there is and always has been far higher than that in South Carolina.
It would be grossly unfair to say that it is OK to move manufacturing wherever production is cheaper, but wrong to subject information technology services to the same competition. It is mostly because of the Internet and the fact that IT people know how to use it that they are getting attention disproportionate to their numbers. Moreover, if we hadn't just gone through a painful economic recession, most of these people probably would have already found new jobs and the problem of outsourcing would not be worth writing nasty emails about to politicians and people like me.
In any case, even if the federal government tried to stop outsourcing, it cannot. We can put quotas and tariffs on goods that cross our borders, but it is impossible to stop people from importing software and data over the Internet. The only response that is possible is to adapt, innovate and stay ahead of the curve.
Not really. India and China with 2500 million people has 20 gifted for American 2. They can replace every American worker and more.
Which was made possible by generations of government funding for science in Germany.
You would think, to hear them talk, that we'd have 50 million people living in cardboard boxes by now. But I just don't see it.
I realize that many people lost jobs but they are apparently finding new ones. And not necessarily low paid ones either. How do I know that? I just look around me. Restaurants and shopping centers are still jammed. On Friday or Saturday night, you can count on a one or two hour wait for a table at just about any restaurant in the Boston area. New, expensive cars are flying off the lots, making my car look like a junker. Houses are selling around here for $300,000 and up. If you aren't at the first Open House and you don't submit a bid close to or at the asking price, you lose out. Housing is very, very tight. Not something you'd expect to see if everybody was out of work or if everybody was working at Wal-Mart, as some would have us believe.
Can anybody explain the "disconnect" here between what I am observing and what the lamestream media and Democrats are telling us, regarding the "worst economy since the Depression"?
That and access to a lot of free stuff. Free frontier, free land, free lumber, no income tax, no OSHA.
One of the serious adverse affects of the industrial revolution (in all parts of the world, not just the U.S.) is that for the first time in history we had an enormous class of "free" people who relied entirely on employment by others for their livelihoods. As a result, we now have a country in which people who don't know even the most rudimentary principles of economics are casting votes for public officials based primarily on the state of the nation's economy.
Jefferson was right. Nevertheless, the horse is out of the barn.
As someone else posted on a similar thread, this is no different than asking the electorate to vote on the best method for treating pancreatic cancer.
Yes but those voters are here, nevertheless. The are not going away and neither are they Richard Burton the Orientalist.
As a business owner, to protect your own interests, you must either take away their franchise before they vote themselves a helping of your wallet, which you can only do by force (they still have guns) or by luring them with a Patriot Act style "security in exchange for freedom" trick - having "bought" some politicians (the currently preferred tactic), OR you can give up your citizenship and move to one of the many free countries in the world, OR you can buy the mob off - either via paying huge taxes, or by getting something in exchange for paying all that money - something like work.
You can pay Americans to work for you and to not kill you at the same time.
It's blackmail. If you want to stay, pay. Otherwise leave and take your chances with China's gerontocracy.
Whachyagonnado?
Your post is right on target -- and it actually goes a long way toward explaining why democratic rule is very "unnatural" system of government. It eventually gives way to a more totalitarian type of rule.
I can. One is reality, the other is ficion. The fiction falls into two subsets.
What you are observing is the real world.
"Worst economy" etc. was intentional fiction, written by Democrats to get votes. The people who wrote the phrase were sitting in a $800,000 house when they wrote it.
The "conservatives" on this board who think the sky is falling are a different story. They are sincere; they are extrapolating one trend into the whole field of vision. Unintentional fiction.
This delusion and lost of concept of common good affects both the poor and rich alike. But those on top should lead and give example.
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