Columbia Professor re: Globalization - "Kerry and Edwards are trying to use scare tactics"

"Spiegel-Online" ^ | August 20, 2004 | Matthias Streitz

[longjack]

SPIEGEL ONLINE - 20. August 2004, 10:07
URL: http://www.spiegel.de/wirtschaft/0,1518,314042,00.html

Bhagwati interview (English original)
 
"Kerry and Edwards are trying to use scare tactics"

Leading globalization scholar Jagdish Bhagwati, himself a Democrat, is highly critical of candidate John Kerry's course on economics, outsourcing and trade. He spoke to SPIEGEL ONLINE about Kerry's anti-offshoring rhetoric, his ideas for reforming company taxation - and George W. Bush's record on job creation.

Columbia University

Columbia professor Bhagwati: "As you grow older, you attach more importance to worrying about policy; you want to affect society"

SPIEGEL ONLINE: Professor Bhagwati, one of the defining slogans of the first Clinton campaign was "It's the economy, stupid". Will economic issues again be decisive for this year's presidential election, in spite of issues like Iraq and national security?

Bhagwati: I think Kerry has made up his mind that the economy is what he wants to campaign on. He had two choices - one was to emphasize issues like jobs, outsourcing worries, anti-globalization ideas and so forth. The other was to zero in on the war. But he's virtually throwing in the sponge on Iraq, I'm afraid - he's almost Bush light on that issue. So the main differences between Bush and himself that Kerry highlights are on economics.

SPIEGEL ONLINE: Do you think, then, that he can beat the President on those issues? Kerry's staff tries to capitalize on the fact, for instance, that Bush is the first President since Herbert Hoover to preside over a net loss of jobs in his term.

Bhagwati: Those are the type of arguments statisticians produce for the party. You can be sure that by the time of the TV debates, Bush will have worked out a nice-sounding answer to that. The real question is: How do people feel? Wherever I walk around in New York and elsewhere, there are all these signs saying "Wanted: Experienced Workers". You don't see people marching in the streets saying "I've lost my job".

SPIEGEL ONLINE: New York may be atypical - recent figures suggest that job creation in the US overall has slowed to a trickle. The Bush team seems genuinely worried by that.

Bhagwati: The unemployment rate still went down a bit, according to last month's figures. To look at figures month by month is ridiculous anyway - but that's the way politicians behave before an election. I actually think the economy in Bush's term has done reasonably well - and I'm a Democrat, you see.

SPIEGEL ONLINE: In your recent book, you argue that a fear of globalization, of international competition, once restricted to the developing world, has now reached rich countries like the US. Is this fear playing a role in this year's election?

Bhagwati: The Democratic party is moving towards a kind of anti-globalization attitude, an anti-free trade attitude in particular. I think this is dangerous. Since I finished my book, there has been this debate about outsourcing. Kerry and Edwards are clearly trying to use scare tactics here. At the convention, they got lots of applause whenever they spoke about American jobs being shipped overseas.

SPIEGEL ONLINE: If those arguments resonate at the convention, they might convince voters, too.

Bhagwati: But Kerry and Edwards don't know what they're talking about. If we look at the offshoring of online services like call centers or basic accounting, we're talking about a maximum loss of 100.000 jobs a year to countries like India. That is nothing for an economy this size. The US is a major hyperpower, and yet every time it gets into competition with Mexico, China and India, we work ourselves into a panic. It's like a rottweiler getting scared because a French poodle is coming down the road.

SPIEGEL ONLINE: Kerry and Edwards are not just speaking about call centers. Especially in industrial swing states like Ohio, they promise to stop the loss of manufacturing jobs to lower-wage countries like China or Malaysia.

Bhagwati: Here we're not talking about outsourcing but good old foreign investment. There is a huge amount of academic work that shows that this is beneficial to the US. On average, low-value jobs are going out and high-value investment is coming in. In North Carolina, where Mr. Edwards comes from, we have the I95. Along the way, there used be textile firms that have gone out since they can't produce efficiently there. Now the workers are employed by Siemens and several other German companies, with far better salaries. That section of I95, in fact, is now known as the autobahn.

SPIEGEL ONLINE: Rhetoric is one thing - but do you think Kerry will actually implement detrimental economic policies if he's elected? For instance, he proposes to give tax credits to companies that create jobs in the US instead of abroad. That can't do any harm, can it?

Bhagwati: It boils down to subsidizing companies when they stay and penalizing them when they go out. If we start doing that, other countries can follow. Everybody will be worse off. Our firms lose comparative advantage if they're stopped from saving costs. A dead firm can only employ dead souls. So we may save 10 jobs by not outsourcing but we will lose the entire 100. Keep in mind, too, that investment from multinationals helps countries like India and Mexico fight poverty. Some sections of Africa sorely need foreign investment. If we Democrats crack down on this, it's not compatible with our notion that Bush and his friends are the nasty guys.

SPIEGEL ONLINE: Bush himself is hardly a model free-trader. He imposed highly protectionist tariffs on steel imports right at the beginning of his term.

Bhagwati: He tried to win over voters in crucial industrial states. But he later punched holes into the safeguards, exempting all kinds of products and countries. Once the WTO declared them illegal, he quickly lifted the tariffs. Bush really believes in the capacity of American firms to compete successfully. During the campaign, he keeps stressing that free trade is good for us. He even got a member of his cabinet to say there's nothing wrong with outsourcing. I'm afraid Bush looks very presidential on trade, unlike my own party.

SPIEGEL ONLINE: All of these issues are central to your book In Defence of Globaliziation, which got splendid reviews from the Economist or Anne Krueger of the IMF - parties that were pro-globaliziation to begin with. Do you think you've won over anti-globalizers, people who'd been demonstrating against multinationals or the WTO?

Bhagwati: Whether I've helped convert anyone, I don't know. I've had about 80 speaking engagements throughout the world. Usually, the reaction is quite favorable. There are always some activists, but I can handle them. My best reaction is in the classroom where I teach over 150 students on globalization. They are worried about these issues, they want to think about them and reach their own conclusions. They say that I help them do this.

I wasn't trying to write a partisan tract, you see; I wanted to reshape the debate. So I try to show that multinationals don't run sweat shops in poor countries - they actually pay above-average wages there. But then I add my own criticism and argue that liberalizing capital flows too quickly has been harmful for countries like South Korea. So some of the more vocal criticism has not come from the anti-globalizers but from the right - they think I'm conceding too much ground.

SPIEGEL ONLINE: The book's fairly accessible. Do you regret that, to write it, you've had to cut back on your more academic work?

Bhagwati: I've turned 70 in July. I've done a huge amount of academic writing already, about 50 books, mostly theoretical. When you're young as an economist, you do things that are mathematical, that establish your reputation. As you grow older, you attach more importance to worrying about policy; you want to affect society. So I'm trying to help students, politicians and members of NGOs think about globalization. It sometimes takes 20 years to change minds. But it happens.

Interview: Matthias Streitz
 

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[longjack]

A little gift for me from "Spiegel-Online" this morning - "Spiegel-Online" posted the original English interview.

Pro-Bush articles are rare, Kerry negative articles rarer still, so I am trying to figure this out.

Germany has the same outsourcing fears/issues we do, so perhaps the article spoke to those.

Links:

"Spiegel-Online" - "Kerry and Edwards are trying to use scare tactics"...Print version

"Spiegel-Online" - "Kerry and Edwards are trying to use scare tactics"...Full version

Link to print version is posted above.

longjack

[longjack]

German ping.

longjack

[Sam the Sham]

So only low wage, low skill jobs are going overseas (coincidentally, the kinds of jobs that would enable America to absorb all those illegals and make them into a productive working class instead of a gangbanger underclass) ?

Bull. Any job that can be done in front of a computer terminal can be outsourced. And the American worker knows it and flatly does not trust the smug assurances of the pro free trade academics.

[wonders]

Thanks for the ping, longjack.

Tony, I wonder if I know what you're going to think about this?

[longjack]

I know your question is rhetorical and not directed at me.

I do read the outsourcing debates with interest in order to get as much information from all aspects that I can. I don't post to those threads since I am not at all qualified to say anything about it.

I generally translate articles from German sites that may be of interest. In this case, "Spiegel" was nice enough to post the English version.

More of an interest to me is the fact that this particular site went on-line with a pro-Bush / negative Kerry article.

I am hoping that there will be good debate on both the economical issues raised in the article, and the import of this pro-Bush article posted on "Spiegel", as well. As I mentioned, however, I feel more comfortable commenting on the latter.

longjack

[raybbr]

So only low wage, low skill jobs are going overseas (coincidentally, the kinds of jobs that would enable America to absorb all those illegals and make them into a productive working class instead of a gangbanger underclass) ?

It has nothing to do with unskilled labor anymore. Where I work they are putting illegals into skilled positions (even though they can't communicate). It's about the money. A roll tender used to make about $15/hr. but the hispanics will do it for $10.

[raybbr]

This guy is an economist first.

I wasn't trying to write a partisan tract, you see; I wanted to reshape the debate. So I try to show that multinationals don't run sweat shops in poor countries - they actually pay above-average wages there.

Sure. If the average is $1 a day and they pay $5. That's not exactly spreading wealth.

[DoctorZIn]

This article has been posted to DoctorZin’s New News Blog!

[TopQuark]

Bull. Any job that can be done in front of a computer terminal can be outsourced.

Absolutely true. And it's YOUR job, if you sit behind that terminal, to ensure that is is not outsourced.

You do that by improving education, demanding fewer benefits from your employer, demanding the tort reform from your senator, and by ensuring that your productivity makes your worth the keep to your employer.

Bashing academics does not help.

[TopQuark]

A roll tender used to make about $15/hr. but the hispanics will do it for $10. Does this not prove that "roll tender's work was not worth $15?

What's wrong with buying something cheaper when you can? Don't you do that? And if you do, then why do you deprive the owners of the company --- people who gave the hob in the first place and without whom you would not have any --- why do you deny them the same right?

[TopQuark]

If the average is $1 a day and they pay $5. That's not exactly spreading wealth. This is a preposterous statement. Firstly, $5 where $1 is average is the same as $200,000 a year for the family of four in this country. That's pretty damn good.

And, secondly, only a socialist would ever phrase his thought in terms of "spreading" wealth. Conservatives understand that wealth is not to be spread but created. Do you?

[Sam the Sham]

Bull. Any job that can be done in front of a computer terminal can be outsourced.

Absolutely true. And it's YOUR job, if you sit behind that terminal, to ensure that is is not outsourced.

You do that by improving education,...

Being smarter than anyone in China or India.

..demanding fewer benefits from your employer,

Compete on price with a third world standard of living

demanding the tort reform from your senator,

Restoring 1900 levels of environmental controls and workplace safety. Bring back the good old days of company police, company stores, and sweatshops.

Oh, and you forgot making sure that I never grow older than 45.

[TopQuark]

Compete on price with a third world standard of living That is a complete misunderstanding of the issue, I am sorry to say. You NEVER compete on the standard of living: you do so on productivity. And you don't need to be paid the same: to be paid 10 time more than an Indian you need to be 10 times more productive. If you're only 9 times more productive, job outsourcing will stop if your salary dropps by only 10%.

Restoring 1900 levels of environmental controls and workplace safety. Bring back the good old days of company police, company stores, and sweatshops.

Where does this follow from? I never said anything of that sort. The courts went berserks only a few decades ago, and this is the point that we need to bring back. When they award millions of dollars for someone spilling coffee in his or her lap, YOU and I pay for that. It has become a matter of POLICY (which the courts have no business undertaking in the first place) to make companies pay simply because they have the money. That must stop: what you see is the companies' adjustment to this idiotic situation.

So, where's connection with sweat-shops?

[Sam the Sham]

And you don't need to be paid the same: to be paid 10 time more than an Indian you need to be 10 times more productive. If you're only 9 times more productive, job outsourcing will stop if your salary dropps by only 10%.

A white collar worker sitting in front of a computer terminal in New York will be doing precisely the same job as a white collar worker in Bangalore. The guy in Bangalore has the same training and software and has as much God-given smarts as the guy in New York. So unless the guy in New York is a genius there is no way he will be ten times more productive than the guy in Bangalore. So to prevent himself from falling to a Bangalore paycheck, the guy in New York will use the political process to protect himself. Yell "socialist" or "commie" all you like. It won't matter. The guy in New York cares more about his future and that of his family than he does about the purity of the free market and he will not allow them to become casualties to comparative advantage. Looking after their young is what mammals do.

And tort reform isn't the issue. Its the wage differential. That is what makes outsourcing so attractive.

[raybbr]

And, secondly, only a socialist would ever phrase his thought in terms of "spreading" wealth.

And, only a rabid super-capitalist would think that worrying about how Americans are going to find work 10 ten years from now is something bad.

[TopQuark]

A white collar worker sitting in front of a computer terminal in New York will be doing precisely the same job as a white collar worker in Bangalore.

Correct: the tasks are the same. But it is incorrect to say that he will be doing it in the same way. The productivity of American labor is much higher, including white color labor. You underestimate the cultural differences that, in particular, make Americans better problem-solvers than anyone else, including the Europeans. This is particularly evident in tasks that are ill-structured and novel. Most of the innovation in the last 50 years has come from this continent.

Yell "socialist" or "commie" all you like. I don't yell: I merely name things by their proper names.

It it the attitude such as yours against the use of these terms that permitted socialists to hijack the word "liberalism."

The guy in New York cares more about his future and that of his family than he does about the purity of the free market and he will not allow them to become casualties to comparative advantage. He simply has no choice.

And tort reform isn't the issue. Its the wage differential. The main component of that differential is the cost of benefits: it is that cost that has skyrocketed, not the paycheck.

[TopQuark]

And, only a rabid super-capitalist would think that worrying about how Americans are going to find work 10 ten years from now is something bad.

That's unfair: firstly, I never held your worries against you; and, secondly, I worry about that as much, or more, as you do.

What I objected to was the MEASURES that you adovcate as a result of your worries.