Source
Posted on 08/02/2012 7:01:12 AM PDT by SeekAndFind
Economic change unleashes powerful forces. We can stubbornly resist them and cling to the status quo, but at best, that ushers in a slow but inevitable decline. A better approach lies in understanding the forces that periodically remake the economy, so we can seize the emerging opportunities they bring. This strategy has worked in the past, and it will work today.
A significant force in recent decades has been globalization. It has brought with it a surge in outsourcing, the shorthand term for businesses’ cutting jobs in the United States and moving production overseas to gain access to lower-cost labor. Many Americans view this development as a scourge, meaning the business practices of Mitt Romney’s private-equity firm, Bain Capital, have become fodder for the presidential campaign’s mudslinging.
Outsourcing makes for perfect political posturing — a quick-jab sound bite, serving up big business and foreign workers as villains and unemployed Americans as victims. But the economic reality of outsourcing isn’t so black and white. The issue goes far beyond the simple fact of job losses and touches on the broader realities of trade, basic human rights, and economic progress.
In economic terms, outsourcing jobs differs little from importing goods. Both involve using labor abroad rather than at home — so there’s no logical consistency in cursing one while tolerating the other. In 2011, America imported $2.6 trillion in goods and services, suggesting that outsourcing has just a tiny share of the effect foreign trade overall has on American jobs.
But people also commonly consider imports bad, calling them job killers, and consider exports good because they create domestic employment. In reality, that view is incomplete. When goods and services come from overseas, foreigners work and Americans consume, so imports contribute to higher U.S. living standards. Our exports go to foreigners, so we work and they consume. Some lament America’s trade deficits, but they’re only part of the country’s international balance sheet. In 2011, our red ink in goods totaled $738.4 billion, offset by a services surplus of $178.5 billion and foreign-investment inflows of $559.8 billion. As a matter of strict accounting, all countries’ international transactions balance — so nobody is taking advantage of anyone else.
Within the overall international balance, countries have trade surpluses in the industries they’re relatively good at, and deficits in those they’re not good at. Turns out, America’s surpluses are in high-value-added manufacturing and sophisticated services, where wages are high. Our deficits are in low-skilled manufacturing, where wages are low. With or without outsourcing, the U.S. economy is exporting low-wage labor.
Once we accept that payments balance, it becomes difficult to sort out trade’s overall impact on U.S. jobs. Imports displace U.S. production and jobs, but exports and capital flows increase the country’s economic activity and stimulate employment. We shouldn’t just focus on the job losses from trade and conclude that it hurts the economy.
Moreover, trade is a question of individuals’ freedom to choose. Countries don’t trade, individuals and companies do. They buy foreign goods and services because of price, quality, availability, tastes, or any number of other reasons. These are voluntary transactions between individuals, distinguished only because the nationalities of the buyers and sellers differ. Free trade among individuals is a basic human right. Protectionist interventions that attack imports or outsourcing rob Americans of a piece of their economic freedom.
Freer trade and cheaper communications have spurred globalization in recent decades, exposing once-insulated parts of the economy to foreign competition. Americans can’t cling to the jobs of the past. We need to find the best opportunities in the global economy. In the new international division of labor, we can be the managers, consultants, and even facilitators of outsourcing.
Trade and new technologies are a lot alike. They both upset the existing economic order, undermining some products, industries, and professions while giving rise to new ones. America’s prosperity has been built on wave after wave of such upheavals, with new jobs continually replacing old ones. That’s why American workers are insurance salesmen and dentists, not blacksmiths and buggy-whip makers. We don’t have to know exactly where the new jobs are. We only need faith in the American people and the capitalist system.
Politicians’ attacks on outsourcing won’t work any better than the Luddites’ assaults on technological innovation. If their argument prevails, it is a path to decline. America will be better off if we grab the opportunities arising out of globalization. That is the only thing that will work.
— W. Michael Cox is director of the William J. O’Neil Center for Global Markets and Freedom at Southern Methodist University. Richard Alm is writer-in-residence at the center.
Are you Senator Feinstein by any chance? She publicly kowtowed to the Chinese in 2001 to protect her crappy Shanghai steel mill.
It was a good bet because instead of the American people becoming nauseated by her grubbing she managed to stay in power. Now her crappy chinese steel is being used to build the san francisco bay bridge. Too bad for California taxpayers as the crappy welds on Feinsteins crappy steel have to be cut out and redone by Americans. No wonder building the bridge is taking so long.
Oh yeah, Ms Feinstein, everyone it benefiting from ‘free trade’. Uh huh, yeah right.
Are you Senator Feinstein by any chance?
Maybe that is Feinstien. I hear Pelosi also has made millions off of Asian investments.
https://www.stlbeacon.org/?_escaped_fragment_=/content/23613/anti_dumU.S. manufacturing jobs have declined by 36% in the last decade and that is because of trade with other countries. millions of Americans have lost their jobs because of that. We have to stop China now.
12:07 am on Mon, 03.26.12
WASHINGTON – Steel wheels, nails and bedsprings made in Missouri are on the list. So are pipes, paintbrushes and coat hangers from Illinois. Not to mention a host of other products, from Silicon Valley electronics to Detroit auto parts.If it seems that the Chinese are throwing cheaper versions of everything but the kitchen sink at U.S. markets, think again. This month, an Illinois kitchen-sink manufacturer — the Elkay Cos. — asked Washington to slap an “anti-dumping” tariff on Chinese steel sinks.
Whether the product is sinks or steel wheels, the complaints by U.S. manufacturers allege that China unfairly subsidizes the plants that make such products, allowing exporters to sell them in this country at less than fair market value.
In the most recent Missouri case, executives of Hayes Lemmerz — an international steel wheels manufacturer that employs more than 300 people at its plant in Sedalia — asked the U.S. International Trade Commission on March 8 to order punitive duties against Chinese imports that they contend unfairly undercut their prices.
“Don’t let dumped Chinese wheels shut down these plants and cost these good, hardworking Americans their jobs,” said Donald Hampton Jr., who supervises the steel-wheel plants in Sedalia and Akron, Ohio.
China has been destroying the U.S.A. China has caused untold misery, unemployment, homelessness and killed many Americans by denying them a chance to make a living.
WE the U.S.A can't even make our own consumer electronics nor our own clothes and many other consumer industries. China makes MOST of the consumer electronics that 9 billion people use, 54% of the world's steel. China has 10 times the number of manufacturing workers than the U.S. has. Most of these workers work in new modern factories that the U.S.A has never seen the like of. Yet many propagandists here say that the debt ridden U.S. is more productive than China: it's all lies.
So by the logic of some on here we have to allow china to do anything to the U.S.A. and Americans individuals or American companies as long as they call it “trade” or economics.NO we need the military for stopping China from invading the U.S. with troops . likewise we need to stop China's economic war against the U.S.A and from what China is doing to Americans. We need the government to protect Americans against armies, against China, against immigrants, against anything foreign. By your logic then we have to allow U.S companies to import an unlimited number of immigrants also( are you for that too?)Yes we need to limit government inside the border but we need a border and to protect that border against immigrants , china , the UN, WTO, .We need a fortress America .We must be for America first and let China go to hell! Pass this article on to all you know. China makes 54% of the world's steel and most of the consumer electronics 9 billion people use. We in the U.S. cannot even make our own consumer electronics. but many say U.S. produces more(ridiculous)
WE the U.S.A can’t even make our own consumer electronics nor our own clothes and many other consumer industries. China makes MOST of the consumer electronics that 9 billion people use, 54% of the world’s steel. China has 10 times the number of manufacturing workers than the U.S. has. Most of these China workers work in new modern factories that the U.S.A has never seen the like of. Yet many propagandists here say that the debt ridden U.S. is more productive than China: it’s all lies.
We need protective tarriffs. And we will probably have to abandon the WTO to put them in place.
We need to raise import tarriffs preferably on imports that are high tech, high manufacturing knowledge, high value, or strategic for defense. And we need to raise them and keep them up, until unemployment goes down.
There is in my opinion a fundamental flaw in our capital markets. The value of a firm to the country as a whole is probably 8 times greater than the value of a firm to it’s owner.
This is because a firm’s owner only values profits, while the country as a whole values profits, all wages both direct and indirect, and all taxes. For a typical firm direct wages probably accounts for 70% of product costs, and indirect wages probably accounts for 70% of raw materials.
The capital markets work okay as long we trade only with like minded companies that have similar wages and similar tax structures and all have free markets.
But when trading with a communist company like China, that restricts ownership and has massive amounts of cheap labor, they can buy our firms for a fraction of what they are really worth, put our people out of business, and employ their people.
It’s a massive win for them and it’s a loss for us. And we better figure out how to fight this economic war and quick. The easiest way is simply to raise tarriffs and give our economy a chance to recover. We can and should take advantage of their cheap labor, but not to the extent that it causes high unemployment here.
That's an overly simplistic way of looking at it. It ignores that if you are importing goods, and exporting your manufacturing capability, that you are liquidating your means of production. And that is "balanced trade" recipe for bankruptcy.
I disagree. They are inconvenient and so are the first things people complain about, but they are not crippling. And you could do away with all taxes and regulations and not compete with countries employing communist slave labor.
2) The U.S. is not playing on a level field---the jobs are going to places like Communist China, lawless Mexico, and Southeast Asia, where slave-like labor is common place, especially with children.
THIS is the key point. But this is easily rectified, just raise import tarriffs until our unemployment goes down. And then selective lower them, allowing high value processes to remain in the U.S. while highly competitive low value processes can be outsourced to take advantage of cheap labor.
"3) The unions and lawyers have driven costs of production through the roof."
Again, remove the unions and we still are not going to compete with slave labor from communist china. Unless our own labor markets fall that low. I don't think unions made that much impact to the labor markets, but if they did, I'd take my hat off to the unions. In fairness, the unions did warn us against lowering the tariffs. Ignoring them was all fine and good, until nobody had jobs.
I don't see any hope for this country---the factories will never return, and the U.S. will be service industry only in the future, if that.
I do, we can easily turn this around, if we raised import tarriffs. Manufacturing would come back real quick and the government would have increased revenues to pay down the debt until it did. (That's a con until we have responsible legislators, but let hope this election will change that.)
Reagan's tactic of forcing foreign manufacturers to produce here, also worked. At least the labor component of the goods and the knowledge are retained in the country even if profits are not.
But we are not exporting our manufacturing capability. It continues to grow at a faster rate than the economy in general. We are about equal to the Chinese (who have 4x our population) and way ahead of whoever is in 3rd place. Plus, as I have noted many times, we are exporting 747s and impotnrting plastic toys and clothing. Big difference.
Anybody who has been to wal-mart or bought consumer electronics, or bought a car lately, knows that we have indeed exported much of our manufacturing capability.
If total manufacturing dollars has continued to grow despite the amount the amount of manufacturing capability that has been transferred overseas, then that's great. But it won't last forever. We have transferred way too much manufacturing capability and the 25% real unemployment rate is evidence of that.
Anybody who has been to wal-mart or bought consumer electronics, or bought a car lately, knows that we have indeed exported much of our manufacturing capability.
If total manufacturing dollars has continued to grow despite the amount the amount of manufacturing capability that has been transferred overseas, then that's great. But it won't last forever. We have transferred way too much manufacturing capability and the 25% real unemployment rate is evidence of that.
I’m not talking about manufacturing JOBS. Of course they are on the decline. Computer controlled machines are replacing humans in the manufacturing workplace. But the total manufacturing output grows every year (with possible recent Obama exceptions).
Is that a bad thing? If so, let’s outlaw the use of machines in manufacturing. And let’s go after ATM machines while we’re at it. How many tellers did they put out of work.
Times change. How big was the software industry in the 70’s? How about the cell phone business?
Thanks for the ping
What does it say about the state of the U.S.A when we the U.S. don’t even have the ability to make our own consumer electronics, clothes, thousands of other consumer industries? It says we we are done and in decline. It’s more efficient for China to buy oil,coal and minerals from Australia, U.S.A and Canada then make manufactured products out of that and ship them all halfway around the world to us the U.S.A. : that is ridiculous when we in the U.S. have unlimited amounts of coal, natural gas, oil shale, oil etc.
WE the U.S.A can’t even make our own consumer electronics nor our own clothes and many other consumer industries. China makes MOST of the consumer electronics that 9 billion people use, 54% of the world’s steel. China has 10 times the number of manufacturing workers than the U.S. has. Most of these China workers work in new modern factories that the U.S.A has never seen the like of. Yet many propagandists here say that the debt ridden U.S. is more productive than China: it’s all lies.
WE the U.S.A can’t even make our own consumer electronics nor our own clothes and many other consumer industries. China makes MOST of the consumer electronics that 9 billion people use, 54% of the world’s steel. China has 10 times the number of manufacturing workers than the U.S. has. Most of these China workers work in new modern factories that the U.S.A has never seen the like of. Yet many propagandists here say that the debt ridden U.S. is more productive than China: it’s all lies.
Automation may account for some jobs, but clearly unless those same machines are stamping "Made in China" on all the goods in the stores, those manufacturing processes are going overseas. And if automation was the only factor, a machine can run as cheaply here as there. Labor is the big difference in the countries. And that has to be big enough to overcome transportation costs. Manufacturing is going overseas, because the labor is cheaper over there and there are no tarriffs to prevent companies from using that labor over our own.
If manufacturing output has managed to show gains, it's managing to show those gains despite major product groups being produced overseas.
It may be the combined effect of automation and overseas outsourcing, that is causing the lost of manufacturing jobs, but clearly if we weren't outsourcing overseas, the unemployment picture would be better.
So raise the tarriffs, and if we still have a high unemployment due to automation alone. Then we can talk about how to address unemployment in an era of super automation.
If china was buying US goods to balance the trade deficit, I'd be less inclined to raise tariffs. But they aren't they are buying equities and debt, and that's not the kind of "balanced" trade we need.
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