Skip to comments.Obama Does Not Know What ‘Outsourcing’ Means
Posted on 06/27/2012 6:25:56 AM PDT by SeekAndFind
Could somebody please get Barack Obama to shut up about outsourcing until some undergraduate aide has explained to him what the word means? As it stands, the president is showing himself an ignorant rube on the subject, and that is to nobodys advantage.
The Obama campaign, as you probably know, has been running ads denouncing Mitt Romneys role at Bain Capital, in which Romney made various business deals that had the effect of making a whole lot of money for Bains customers while also allowing a lot of dirty foreigners to eat, and God knows the world would be better off if a billion-some Chinese were hungry and desperate, that being an obvious recipe for global stability.
Because the Obama campaign knows that one of its most important constituencies is economically illiterate yokels a demographic to which the president himself apparently belongs it is on the airwaves claiming Romneys never stood up to China all hes ever done is send them our jobs. (Whose?) The Obama campaign cites a Washington Post story on the subject, and the Romney campaign has noted that the folks over at WaPo did not distinguish between outsourcing and offshoring (and, indeed, the story is not a very smart one do read it and see). Obama responded thus: Yesterday, his advisers tried to clear this up by telling us that there was a difference between outsourcing and offshoring. Seriously. You cant make that up. And indeed you wouldnt have to make it up, because it is a real thing: different words with different meanings. (Seriously, can we get this guy a library card?)
Outsourcing happens when a firm contracts out its non-core functions to other vendors, e.g., a hotel decides to hire a cleaning service rather than keep maids on the hotel payroll. To take an extreme but illustrative case, consider that the firms that provide car-driving services do not manufacture their own automobiles or stitch their drivers uniforms, even though doing so would create jobs. They outsource those tasks to GM or Ford and to whomever makes their uniforms. Likewise, their communication systems are outsourced to Apple or Motorola or RIM.
But at least they should buy American, right? GM is an American company building American cars, but it too outsources many of its needs, sometimes to other U.S.-based companies, sometimes to companies overseas. Moving facilities overseas is what offshoring means; it is not synonymous with outsourcing. GM has decided that it can build cars without manufacturing brake pads or tires, much less manufacturing steel or rubber, and its production partners include facilities, workers, and investors from around the world. (This is, it should go without saying, a good thing. People who talk mistily about the virtues of global cooperation rarely recognize it when they see it.) But of course the idea of GM as an American company is itself a bit suspect. In his 2002 paper on outsourcing, Prof. Gene Grossman of Princeton cites a World Trade Organization study about American cars:
Thirty percent of the cars value goes to Korea for assembly, 17.5 percent to Japan for components and advanced technology, 7.5 percent to Germany for design, 4 percent to Taiwan and Singapore for minor parts, 2.5 percent to he United Kingdom for advertising and marketing services, and 1.5 percent to Ireland and Barbados for data processing. This means that only 37 percent of the production value . . . is generated in the United States.
Notice that a lot of that value is going to relatively high-wage countries: Japan, Germany, Singapore, Ireland. As the Washington Post story notes, many of Bains investments during Romneys tenure were in firms building facilities in Singapore, Taiwan, South Korea, Germany, Ireland, France, and Australia not exactly the desperate Chinese sweatshops of anxiety and lore. (France, for Petes sake.) And thats an important corrective to the usual knuckleheaded narrative about offshoring: Poor desperate Third World brown types subsisting on four grains of rice a day are stealin our jobs! But youll notice that capital is not exactly rushing to Haiti or Rwanda in order to build shiny new factories, while Germany, where workers do not come cheap, remains a manufacturing powerhouse. That is because low wages are not the goal of offshoring. High productivity is the goal of offshoring. There is a reason that BMW does not move all of its manufacturing operations to India, and patriotism is not it.
In fairness, Romney has said some dumb things about China, too, doing a lot of silly and pointless saber-rattling about Beijings monetary policy. (Currency manipulators? Have you heard of Ben Bernanke?) But hes also said some smart things about China and promised action on more legitimate grounds, such as wholesale Chinese thievery of U.S. intellectual property, a problem about which something can and should be done.
Whats interesting about this controversy to me is the naked xenophobia of the Left on display alongside the amusing ignorance. Liberals love a good talk about the value of learning from other cultures and other peoples, so long as those foreigners dont mind staying poor. If they want to sell goods and services, they are the enemy. Asians are allowed to be airy gurus and quaint villagers, but the day one of them wants to set up a factory, Democrats have a fit. Mohandas Gandhi good, Ratan Tata evil. You want collective, coordinated global cooperation to solve the worlds most pressing problems? That doesnt look like a working-group meeting at the United Nations; it looks like what Bain does. You want a display of backward, ignorant chauvinism? Put Obama in front of a union hall.
Theres a famous and probably apocryphal story about Milton Friedman being taken on a tour of a giant Chinese infrastructure project of some kind, in which the workers were using old-fashioned shovels and picks and wheelbarrows. Curious, Friedman asked his guide why they werent using bulldozers and other heavy machinery. The answer was: We care about creating jobs for our people. To which Friedman responded: Then why not use spoons? I wonder if Barack Obama could answer Milton Friedmans question.
No, his teleprompter doesn’t know the difference.
Send that teleprompter back to school.
I think he knows, he just does not care.
GM took bailout money and built two plants in Mexico. 3,000 jobs.
Remember in Bill Ayers’ “Dreams from my Father,” Obama, talking about his drug use, said he “spent the last two years of high school in a daze.” You can’t expect him to have a basic foundation for understanding economics. So lay off!
You mean he never took a course in economics in Occidental, Columbia, or Harvard?
What are these elite schools teaching?
Years ago a fellow serviceman was in Egypt on a construction project. They needed a core sample so the Egyptians dug a well big enough for a man to put a ladder into. Then an engineer went down every 10 feet and scraped a little dirt from the side of the wall...after that they filled the hole in.
He did take four courses in economics. He failed three and got a D in the fourth.
He has. Refer to the recent agency decisions that Tombstone, AZ must fix its water supply using manual labor with picks and shovels instead of bulldozers and backhoes.
or is that a distinction without a difference???
It's not just Democrats; plenty of Buchananite trade protectionists, many who post here routinely, have the same "fit."
Well, you have to give bambi some credit. He has figured out how to stop sending jobs to Mexico: just bring the Mexicans here to do the job.
America here's where your jobs went, and the country will stay mired in a recession until they return.
Of course he has no idea what it is. The Dope has never held a private sector job, let alone have his job outsourced.Community Organizer. Hell this A**Clown is just a step above an Occu-Tard.
I agree completely.
And we are NOT talking about a hotel hiring a cleaning service as a vendor... BTW Hotels do that to insulate themselves from the fact that those cleaning service vendors staff almost exclusively Mexican illegal aliens.
Outsourcing is more like when Verizon hires Erickson to run it’s network operations and Erickson keeps on the old employees for the contracted 12-18 months for knowledge transfer, then lays them all off after that and gives those jobs to offshored foreigners earning 1/4 the wage. Verizon wins because they cut their operations costs in half for the short term without getting the bad press of shipping jobs overseas. Erickson wins because they win the contract and double their revenue. Foreign workers in India win because they get to make $1.25 an hour instead of $.25 an hour.
Only Americans lose.
Outsourcing = Offshoring in 75% of the cases. Large Companies learned long ago that headlines like “Lucent ships jobs overseas” is very bad press. Instead an acceptable headline is “IBM wins contract for Lucent IT Operations”.
American workers with the modern leviathan labor unions and education standards are not productive enough to be competitive.
How do you know that? Link? Or are you just goofing on him?
Just look at his college transcripts.
Oh, he’s never released them, you say?
Then no one can prove me wrong.
Unions represent something less than 7% of the private American workforce, but thanks for playing.