Offshore Outsourcing

If you buy a new computer and call the company for tech support you shouldn’t be surprised if you end up talking to someone in Bangalore, India. In 2004 while an adviser to President Bush, was asked about the movement of such jobs overseas. He replied that the trend was probably a plus for the economy in the long run. Most economists agreed but some elected officials responded differently.

The Economic of Progress:

It is difficult to say something perfectly, precisely false. But house Speaker Dennis Hastert did when participating in the bipartisan piling on against the president’s economic adviser who imprudently said something sensible.

John Kerry and John Edwards who are speaking under oath and who know that economic illiteracy has never been a disqualification for high office, have led the scrum against chairman of the president’s Council of Economic Advisers N Gregory Mankiw who said the arguments for free trade apply to trade in services as well as manufactured goods. But the prize for the pithiest nonsense went to Hastert: An economy suffers when jobs disappear.

So the economy suffered when automobiles caused the disappearance of the jobs of most blacksmiths buggy makers operators of livery stables etc? The economy did not seem to be suffering in 1999, when 33 million jobs were wiped out – by an economic dynamism that created 35.7 million jobs. How many of the 4,500 US jobs that IBM is planning to create this year will be made possible by sending 3,000 jobs overseas?

Hastert’s ideal economy where jobs do not disappear existed almost everywhere for almost everyone through almost all of human history. In say 12th century France, the ox behind which a man plowed a field changed but other wise the plowman was doing what generations of his ancestors had done and what generations of his descendants were to do. Those were the good old days, before economic growth.

For the highly competent workforce of this wealthy nation, the loss of jobs is not a zero game it is a trading up in social rewards. When the presidential candidates were recently held in South Carolina, historically lamenting the loss of textile jobs, they surely noticed the huge BMW presence. It is the off shoring of German jobs because Germany’s irrational labor laws, among other things give America a comparative advantage. Such economic calculation explains the manufacture of Mercedes Benzes in Alabama, Hondas in Ohio, and Toyotas in California.

As long as the American jobs going offshore were blue collar jobs, the political issue did not attain the heat it has now that white collar job losses frighten a more articulate assertive social class.

Kerry says off shoring is done by Benedict Arnold CEOs, but if he wants to improve the health of US airlines and the security of the jobs and pensions of most airline employees, should he not applaud Delta for saving 425 million a year by sending some reservation services to India?

Does Kerry really want to restrain the rise of health care costs? Does he oppose having X rays analyzed in India at a fraction of the US cost?

In November Indiana Gov Joseph Kernan cancelled a $ 15 million contract with a firm in India to process state unemployment claims. The contract was given to a US firm that will charge $23 million. Because of this 53 per cent price increase there will be 8 million fewer state dollars for schools, hospitals, law enforcement etc, and the benefit to Indiana is what?

When Kernan made this gesture he probably was wearing something that was wholly or partly imported and that at one time, before off shoring would have been entirely made here. Such potential embarrassments are among the perils of making moral grandstanding into an economic policy.

  • Outsourcing has kept a lot of US firms afloat during the crisis, so it has its contributions as well. Moreover, there are countries who outsource to the US as well.

  • I don’t think that it would completely right to blame the offshoring as a reason of economic crisis. Offshoring was and is still a beneficial fact for them, I think U.S. has forgotten to what they have gained from it.

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