Believe it or not, Outsourcing *is* OK

CBS News | Bush Econ Advisor: Outsourcing OK | February 16, 2004�07:04:23

This story from CBS is an Interesting commentary.

What surprises me more than anything else though, is that it is another example of politicians fleeing from thoughtful analysis for fear that the American populace will condemn them for holding a view that seems contrary.

Outsourcing has been portrayed lately as another example of a Bush Administration seeking the well being of corporations, to the detriment of the “working class families.” In fact, the Kerry campaign is pointing out quite consistently that we have a large number of jobs that have “moved” overseas. The fact is, most business professors will tell you that the globalization of the economy, and the “outsourcing” as it is so popularly described, has helped fuel the economic growth seen throughout the 90s. Yes, the 90s–that era of Clinton growth so touted by Democrats.

It is the ability to find, and leverage, comparative advantage, I commend as a good discussion of comparative advantage.

It is unfortunate that we find ourselves once again seeking to protect jobs that have become uncompetitive rather than encourage people to be re-educated, or at a minimum retrained, to do jobs in which we ourselves have a competitive advantage. Of course, educating America is a herculean effort, and given that those charged with that very task, educating America, have consistently allied themselves with a particular party, and a particular agenda, it is a task we won’t see tackled any time soon.

This is the problem with much of the discussion from the politicians. Because things seem, as that academic link says, to be counterintuitive, or worse, to be without heart, we distance ourselves from it, no matter how truthful.

Homework for today is quite simple: Read the link, and answer this thought question: How would you educate America on those issues that seem on the face counterintuitive, but if accepted would greatly improve our lot as a nation? Submit your thoughts, as a comment on this blog!


5 thoughts on “Believe it or not, Outsourcing *is* OK

  1. Sounds like a job for Superman. How do you educated people who do not want to learn? You can’t teach anything in the schools because people are always crying about “you can’t teach that”. That is why STD’s and teen pregnancy are rampant now.
    Most of the older ones don’t want to learn something new (“I can’t learn that”)don’t want anything to do with computers.
    There is a lot of little trinket junk that is made overseas and is quite popular here. I would support starting up some old plants, upgrading them, and making some of that stuff here.
    As far as educating the people, you just have to DO and let them see you DO until it piques their curiosity and they ask what are you doing and why are you doing it. In order for you to teach anything to anyone,they have to have the desire to learn. That comes from curiosity. That’s why kids are so easy to teach. Adults lose their curiosity, (after all, it killed the cat), and we have to try to fan it back into flame.
    It won’t work with all people. Some will see you succeed and want to go with you. Others will just call you names and pray for you to fail. It’s like a garden. You cultivate the plants that will grow and produce.

  2. Education and “finding something new” may sound feasible to the line worker. Rather callously, we have long forgotten the American textile/furniture/etc industries. And I may be able to concede that they can learn something different. But what about engineers? computer programmers? Folks that *are* educated, whose jobs have been hit by offshoring to folks in India, the Philippines, RUssia, etc? What do you want them to “learn”?

    It’s a fickle issue, that honestly doesn’t sit well with my Libertarian leanings…

    I don’t think we can simply say globalization is good, though, for individual citizens of the US. I’m not sure your backgfround, sir, but I’m from a family of engineers. THe 1990’s, while everyone was celebrating dotcoms or whatever, were not terribly keen to the engineers of the defense industry (granted, there were post-cold war cuts. But most didn’t realize the ecnonmic effects of defense/aviation industry drops because everyone was fascinated by the internet and dotcoms…). TOday, as then as well, real computer programmers (as my mother) aren’t doing so hot either (actual programmers were largely unaffected by the dotcom bubble…the dotcoms’ contributions, contrary to pupular belief, was not in hiring programmers, but hiring webmasters, designers, secretaries, janitors, caterers…). I think folks would be surprised how much is offshored even in the historically foreign-shy defense industry now.

    Outsourcing Labor jobs? Heck, we killed those a long time ago. It’s a relative non-issue. Offshoring tech support jobs? that’s arguably a problem to some, though still largely “explained” away. But when you get to full-on engineers and computer programers, one must start to wonder: where is the line drawn?

  3. ALso, the argument that we should “find something new” to be competitive in is one based on a timeline. Years, and even generations are what’s necesary for the transition. But what is happening is happening veirtually overnight. Is the rise of ghettos not tied to the death of industry? We find line workers suddenly out of a job, do opportunities exist for a 40 year old to learn a new trade? Or, more chillingly, what about the 40 year old mechanical engineer…already with a MS or even Ph.D in engineering, the victim of being undercut by a fresh college grad Indian. Yes, I have seen instances of experience being undercut for foriegn bottom line. (That is not from thin air, it has happened…you’d be surprised at the training US programmers give out over the phone to Indian branch offices filled with iniexperienced INdian programmers).

    It is not a transition that is gently letting our college students know to study somthing outside of Computer Sciences…these college kids are graduating finding their job is already owned by a Filipino in Manila (or even a Filipino on a work visa in California).

    I think the model is effective if it is held on a timeline. BUt it isn’t. ANd even if it was, the question regarding the top-end line remains. You may be able to explain away what engineers are supposed to do…but how far up do you go with the explanation?

  4. One more thing, though. I don’t want any of my above comments to paint the picture I’m some loon who wants big brother government to necesarilly bust up the evil corporations or anything. At the end of the day, I justify it all by realizing it’s all in our hands…if people know “All AMerican” Sam Walton has stores filled wall to wall of CHinese made goods and still choose to shoot themselves in the foot… Hey, what can I do? I shop at Wallyworld too…

    There is little else more democratic than a free market. We vote everytime we buy something or use the service of a multinational company.

  5. Of course outsourcing helped fuel growth in the “Clinton” 90’s (it wouldn’t have mattered whose 90’s it was)! The economy was growing (for all sorts of reasons), and so unemployment was very low. Without “outsourcing”, companies and industries would not have been able to continue growth. Without “outsourcing”, the labor shortage would have slowed down the economic growth trends. So, yes, at that time, “outsourcing” helped fuel growth. No one worried about it then.

    As part of the globalization trend, “outsourcing” became yet another tool in the entrepreneur’s pocket. A tool that could save money, hire talent when there was a shortage, lower health insurance costs, etc. Many found out it was not good for all situations, though. For example, Indians could program code cheap, but they only programed *exactly* as told. Nuances and other creative or user-friendly elements were lost in translation. Some managers ended up hiring more people to manage the outsourced staff or project than had originally been hired to simply work the project directly. So, “outsourcing” is a tool… it has its uses…and its drawbacks.

    When our economy is not blasting ahead full-speed (i.e. the 90’s), it was (and I would argue *is*) standard practice to become a bit protectionist for a while. After all, India’s import-export laws rigidly protect their burgeoning IT economy, as well as their massive manual labor classes. This is true of many other emerging and established national economies. I would argue that “standard practice” is to modulate national economic policies (open vs. protectionist) based on the current status of the national economy. There is nothing wrong with this. Such policies that are implemented are usually not implemented forever. Nor are they meant to be THE solution. If they are, then we have lost our vision and we are in trouble. Such protectionist policies are implemented in the short term, until such time as the economy turns around, or until such time as other steps can be implemented to re-train large groups of people and change the educational systems.

    I would argue that the current debates about “Outsourcing” are almost purely political (not economic) in nature. They are make people angry. Everyone knows someone who has lost a job and who feels this loss was due to “outsourcing”. It is easy to drum up ‘paranoia’ on this subject (like so many others). It seems like a subject that one can have a black and white opinion on. One to divide the candidates, perhaps.

    I argue that both political parties are using this and other “hot topics” to shy away from other more complex issues they wish to avoid.

    “Outsourcing” itself if very complex. Much of our economy would fall apart completely if it weren’t for migrant workers, which is like the other side of the coin of “outsourcing”. Or, in another flip, aren’t many of our USA companies or industries the “source” used by the rest of the world. If the rest of the world stopped outsourcing to us for consultation services, education, architechture, military, Coke, Procter & Gamble, banking, etc., what of our economy then?


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