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Then the problem will be self-limiting, won't it?

In a "perfect" economy, kind of like the kind they use when teaching economics classes, yeah. But in the real world, maybe not.

Here is an example of a counterintuitive economic law. It is called Gresham's Law. Basically it means if you have a country with two currencies, one good and one pretty lousy, everyone independently realizes -- Geeze, I better put my good currency under my mattress or in the bank because it is valuable and spend this lousy currency to get rid of it. Result is, the good currency disappears from circulation while only the lousy currency stays in circulation. And a currency that doesn't circulate isn't really a currency. So the bad drives out the good.

I think it is perfectly possible for companies to independently decide to outsource, replace good American IT people with mediocre to bad non-Amercian (but cheaper) people, and then just stay that way. After all, changing after that would cost money and the benefits would be unquantifiable (after all, IT is a cost center, right?).

But this kind of decision making is bad across the board. There is a reason that corporate profits stink, and it isn't just because "labor costs are too high". I think much of it is due to plain rotton executive (and management) decisions. So a lot of corporations will just declare chapter 11 due to mismanagement (stockholders get dirt, bondholders get a bit, executives cash out), and then outsource lock, stock, and barrel. Other corporations will just become more and more multinational every day until they are US corporations only by registration.

As to why this happens -- my personal theory is that it is because the stockholders are now "owners" in name only. Instead of a few wealthy guys as owners, or ownership within a family, it is spread over a few hundred mutual funds, with hundreds of thousands of "owners". Therefore, there is no check on the board of directors, no check on the executives. Therefore they run the companies as their personal cash cow piggy banks. Managers who rock the boat (take risks) get canned, so managers just cover their own butts and rubber stamp the executives. Why do I think this? From being in consulting for a number of years and witnessing this first hand over and over and over and over.

Therefore, there is no check on the board of directors, no check on the executives. Therefore they run the companies as their personal cash cow piggy banks.

Agree 100%. What I can't understand is that our government promotes this activity. How much debt does MCI / Worldcom have? If I were to have that much debt relative to my earning power I'll be thrown in debtor prision. Is it fair to the other market players that you're allowed to continue functioning without concern for the marketplace? If its all funny money then you can afford to pay $100M salaries and make idiotic decisions.
I bring up MCI as I heard they're down in Iraq handing out cell phones to NGOs looking for phone service. Why on earth would you be a prudent company that cared about making a profit if you can fail miserably and then get rewarded with a juicy contract like that?
This whole marketplace stinks. You're raised to believe in following the rules (ie earn more than you spend and don't cheat) and meanwhile execs are flippin you the bird while driving off in their half million dollar Mercedes.
Pretty soon the whole system will collapse on itself when a majority of the people realize the game's rigged, and its rigged to take advantage in your belief of fair play and other capitalist (I'm thinking Ayn Randish) ideals. Someone needs to save capitalism from these globalists faking to be free marketers.
Rant mode off. I'm trying to limit my FR time as my blood starts boiling. For the need FReepathon someone should sell blood pressure medication.

As to why this happens -- my personal theory is that it is because the stockholders are now "owners" in name only. Instead of a few wealthy guys as owners, or ownership within a family, it is spread over a few hundred mutual funds, with hundreds of thousands of "owners". Therefore, there is no check on the board of directors, no check on the executives. Therefore they run the companies as their personal cash cow piggy banks. Managers who rock the boat (take risks) get canned, so managers just cover their own butts and rubber stamp the executives.

Bump

As to why this happens -- my personal theory is that it is because the stockholders are now "owners" in name only. Instead of a few wealthy guys as owners, or ownership within a family, it is spread over a few hundred mutual funds, with hundreds of thousands of "owners". Therefore, there is no check on the board of directors, no check on the executives.

Vox Day said the same thing a few weeks ago.