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Permanent link posted by bytehead @ 2/29/2004 08:51:00 PM    0 comments Links to this post

Friday, February 20

Joshua Claybourn's Domain: Evil Outsourcing  

Evil Outsourcing

In spite of my obvious love for economics, I generally avoid the topic as blog fodder. It's simply too complex of a field to be boiled down to short soundbites. Economics is a science and in some ways its complexity is on par with the scientific field. Reducing it to buzz phrases makes it nearly impossible to explain or defend concepts.

So when President Bush's economic adviser, Gregory Mankiw, seemed to endorse job outsourcing recently, I knew he was in for a hell of a time. I've read a few of Mr. Mankiw's books, including his Microeconomics textbook used in many Indiana University economics courses, so I knew what he was referring to. But I also knew there was no way he'd sound sensible in a soundbite-driven media.

The kind of debate currently resurfacing in the public square, partially driven by the Democratic primary, is not new to America. We saw it when an overwhelming percentage of the population earned its living through farming. New technology that allowed for cheaper and easier farming quickly displaced the majority of the population. People decried the loss of jobs, the ruin of our national backbone, and argued for the need to protect farm jobs.

What was really at work, though, was a move toward industrialization. New technology made new and existing products cheaper and more abundant. Would America have been better off to keep those farmers farming? If not, why? If so, how would the country go about doing that? More recently, America has seen a shift away from industrialized jobs toward a service-oriented job market, and eventually we'll eventually see a shift away from it.

People trade goods and jobs because doing so allows us to concentrate on what we do best, thus raising productivity and incomes. We trade because it allows us to enjoy a higher standard of living (can anyone deny that the standard of living continues to increase?). And we trade because exchanging what we produce with others for mutual benefit is an inalienable human right, whether we trade with a neighboring state or a worker on the other side of the world.

Imagine the United States in its infancy, under the Articles of Confederation, with each individual state noticing that its employers kept shifting work to various other states, and vice versa. Imagine what the country - and the world - would be like if those states had restricted such job movement. Heck, imagine what that would be like today. In spite of economics' complex nature, one doesn't need complex graphs and equations to understand why that would be bad for everyone involved.

Update: Robert Reich, President Clinton's Secretary of Labor, on CNBC 2/18/04: "In the long run outsourcing is indeed a good thing for the economy. But in the very short term we must ensure education, job training, and short term unemployment benefits. But you're right - job outsourcing is a healthy, natural occurrence."

I'm tired of all the cheerleaders (not just those here, but other pundits such as George Will) saying that outsourcing is good for America. Mainly because I haven't seen one cogent discussion about that an average Joe can understand.

Another issue that I see is that the cheerleaders keep pushing that cheaper is "better". OK. If cheap is so much better, are the cheerleaders driving scooters? They're not? Are they even driving stripped down economy cars? I doubt that very much. I predict that quite a few of these cheerleaders are probably driving expensive sport cars. Sounds like hypocrisy to me.

Then there is the greed issue, where the company's officers take the "credit" for the savings and then give themselves extravagant bonuses for their supposed suffering.

A good company should be able to take care of its shareholders and take care of reasonable demands made by society. There should be no or there. Unfortunately, again due to greed, people only want to look at what the current quarter's results are, to hell with anything that might require long range planning. There has been plenty of press about some companies that are considered possible takeover targets simply because they are sitting on more cash than the company is actually worth. If you want to get the most out of the company for the (final) quarter, just sell the damn thing off and distribute the proceeds to the shareholders. That is about where the greed factor is currently.

And finally, the unintended consequences are starting to show. Zipping private data back and forth across continents without any kind of safeguards in place will certainly make sure that the data is no longer private. What is going to happen to the economy when sufficient people are unemployed that the consumer confidence drops precipitously causing another depression?

Say what you want, but the consumer is what drives the economy for better or for worse. Now matter how you dress outsourcing up to make it look good, if it hurts the consumer in a real or imagined way, the benefits can not outweigh the detriments.

Permanent link posted by bytehead @ 2/20/2004 12:51:00 PM    0 comments Links to this post

Outsourcing - opinions, just like a$$holes, everybody's got one  

Shifting employment market inevitable but don’t tell Americans it’s a good thing
Thursday, February 19, 2004
FROMA HARROP

I read that my first job after college is being outsourced to India. Reuters Ltd., the wire service, is hiring workers halfway around the world to report on American companies' earnings, dividends, oil discoveries — anything that could move a company’s stock price. Reuters will now pay Indians a fraction of what it was spending to employ Americans doing my old job.

That’s the wave of the future, we are told. Skilled jobs are pulling up anchor and sailing off. Computer-programming jobs have already left by the thousands. Radiologists on other continents are reading our X-rays and CAT scans.

Intel chief executive Craig Barnett says that approximately 300 million educated people in India, China and Russia can "do effectively any job that can be done in the United States." Bear in mind, there are only 144 million jobs in America.

I offer no easy plan for slowing the trend. But I’ll darn well not celebrate it.

Last week, N. Gregory Mankiw, chairman of the president’s Council of Economic Advisers, stated that outsourcing American jobs was good for the country in the long run. A chorus of economists and financial pundits sang hymns to his wisdom.

A noble exception was Barron’s columnist Alan Abelson. He noted that Mankiw’s comment nearly coincided with a University of Michigan survey showing a sharp drop in consumer confidence. Consumers see a growing threat to their jobs and may be thinking twice about spending more money. And Mankiw’s sunny view of outsourcing only confirms their suspicions that the federal government will do little to ease the pains of globalization.

Abelson then speculated on how outsourcing might apply to the Council of Economic Advisers itself. First off, the three dozen economists who work there earn far more than the $10 an hour paid to their Asian counterparts. Secondly, the Americans don’t do a great job. The council had predicted a net gain of 1.7 million jobs for 2003, when, in fact, the United States lost jobs. And the council’s estimate of 2.6 million new jobs this year is "ludicrously" optimistic. Why not send the council’s research work to Bangalore? After all, Abelson writes, "our putative Indian economists couldn’t have done — or possibly do —any worse."

And what would the out-of-work economists do? They could "simply follow their chief’s advice and find new jobs ostensibly immune to outsourcing," Abelson says. "Peddling real estate, perhaps, or waiting on tables."

Let me add that some Wall Street companies have already sent financialanalysis work to India. It can be easily done.

Thanks, Abelson, for lampooning those cheerful predictions of an outsourced world. The peppy defenses of outsourcing were getting me down. The worst ones contend that it will free us from the scourge of dull work. Janet Yellen, who headed the council in the Clinton administration, says that outsourcing may hurt "the more standardized part of high tech" work, but Americans will keep the high-end tech jobs.

Daniel Pink, author of an article on outsourcing in Wired magazine, echoes her optimism. Pink was recently on C-SPAN blowing a lot of Silicon bubble talk about American "dynamism," "big-picture thinking" and "high concept" employment. He noted that only "routine, relatively standardized white-collar work is going overseas."

Well, that would describe about 99 percent of all white-collar jobs. Not to worry. Pink thinks Americans will be left with the fun work. They’ll be "software experts who can manage international 24-7 work teams." Yep. We’ll all be sitting right there at the controls overseeing global armies of programmers. How Americans get to be the managers goes unexplained.

The problem is, there is no limit to the jobs that can go elsewhere. We no longer can pretend that laid-off factory workers need only take some computer classes and they’ll be economically secure. Their skills, it turns out, are shared by about 300 million Indians, Chinese and Russians.

My job at Reuters was crummy in many ways — stressful, deskbound, often boring. But it taught me things. I had arrived knowing nothing about business and left knowing something. "Standardized" white-collar jobs represent more than paychecks. They offer training, as well.

If outsourcing is the future, so be it. But let’s not play American workers for the fool. Their future doesn’t look good at all.

Froma Harrop writes for Creators Syndicate.

fharrop @ projo.com

Few acknowledge upside of losing jobs to other nations
Thursday, February 19, 2004
GEORGE F. WILL

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.

Sens. John Kerry and John Edwards, who are not speaking under oath and who know that economic illiteracy has never been a disqualification for high office, have led the scrum against the 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, who said, "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 U.S. 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, 12 th-century France, the ox behind which a man plowed a field changed, but otherwise the plowman was doing what generations of his ancestors had done and what generations of his descendants would do. Those were the good old days, before economic growth.

The disappearance of whole categories of jobs can be desirable for reasons other than economic rationality. The economist Irwin Stelzer recalls that John L. Lewis, the firebreathing leader of the United Mine Workers of America from 1920 to 1960, once said that he hoped to see the day when no man would make his living by going underground.

For the highly competent work force of this wealthy nation, the loss of jobs is not a zero-sum game; it is a trading up in social rewards. When the presidential candidates were recently in South Carolina, histrionically lamenting the loss of textile jobs, they surely noticed the huge BMW presence. It is the "offshoring" 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, 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. But an old lesson applies to this new situation.

The welfare state, beginning with unemployment relief, was pioneered in part by European conservatives, Benjamin Disraeli and especially Otto von Bismarck, to reconcile people to change — to the frictions and casualties of economic dynamism on which, such enlightened conservatives saw, national greatness would depend in the industrial age. It is sound social policy, and simple justice, that the party who benefits from free trade — the nation as a whole — should be taxed to ameliorate the discomforts of those who pay the short-term price of progress.

That is the case for education and job training for people needing to change their skills. Such assistance is especially imperative when the casualties of change bear no responsibility for their fate unlike, say, U.S. steelworkers, whose overreaching in collective bargaining deepened the problems of their industry.

Kerry says offshoring is done by "Benedict Arnold CEOs." But if he wants to improve the health of U.S. airlines, and the security of the jobs and pensions of most airline employees, should he not applaud Delta saving $25 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 U.S. cost?

Recently, Indiana Gov. Joseph Kernan canceled a $15 million contract with a company in India for processing state unemployment claims. The contract was given to a U.S. company that will charge $23 million. Because of this 50 percent price increase, the state will have $8 million fewer dollars for schools, hospitals, law enforcement, etc. And the benefit to Indiana is . . . what?

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

George F. Will writes for the Washington Post Writers Group.

georgewill @ washpost.com

I am responding to the two opposiing editorials in the February 19th Dispatch that were published.

I applaud Froma Harrop with her outlook on the outsourcing of America's jobs. It's happening, it's going to continue to happen and there probably is very little we can actually do about without draconian measures.

George Will on the other hand seems to be overlooking some issues to make the outsource such a good thing.

His talk about automobiles has absolutely no bearing on the current situation. The blacksmiths, buggy makers and livery stable operators disappeared. Period. They weren't shipped off to another country to be done cheaper, and new jobs were created in their place such as steel workers and factory workers. In the current situation, programming still needs to be done, networks need to be administrated and X-rays need to be interpreted. And these jobs are being replaced with . . . what?

And as far as the Indiana situation goes, if it prevents $8 million from being spent on unemployment benefits, then I find the extra cost quite exceptable. It's unfortunate that being unprovable, we will never know.

It has been reported in the press that some companies, such as Dell are finding it "better" to move some of those jobs back to America instead of outsourcing them. Dell had too many complaints about their outsourcing of corporate support. And while outsourcing the support may have been cheaper, I believe that Dell has found that providing better support was probably a better goal to be shooting for.

The other problem I have with this editorial is that the main thrust isn't about trying to reduce anybody's fears about outsourcing, but about bashing the Democratic candidates for President. Mr. Will should have had more compelling arguments of why outsourcing is good, not something that tries and fails, and then complains about the people who do complain about outsourcing.

And Mr. Will, since you seem to be graciously equating cheap with better, I'm sure you are driving some stripped down economy car? After all, think of the thousands that you saved by doing that and spending them on something else?

I suggest that Mr. Will's column be outsourced. I'm sure that we can find somebody in India, or China or the Phillipines that loves baseball and has quite an understanding of its history, and is able to write just as well as Mr. Will, and perhaps will even follow his agenda.

Bryan Price

Permanent link posted by bytehead @ 2/19/2004 04:14:00 PM    0 comments Links to this post

Sunday, February 8

And another (hard drive) bites the dust...  

Permanent link posted by bytehead @ 2/08/2004 05:33:00 PM    0 comments Links to this post

Monday, February 2

It's (almost) all over but the shouting...  

Permanent link posted by bytehead @ 2/02/2004 11:21:00 PM    0 comments Links to this post