Outsourcing Our Future?

[andyjackson1828]

Dan Gillmor and others are worried that we are outsourcing our future.

Let's begin by clearing away some underbrush.

First of all, the number of jobs in the United States is not set by what happens on the sea lanes--on what exports and imports the container ships carry from port to port. The number of jobs is set in the Eccles Building, by the Federal Reserve, which tries to hit the sweet spot: high enough demand to produce effective full employment, without so much demand that vacancies become so abundant as to lead inflation to run away. Sometimes the Federal Reserve does a good job and is lucky, and we have full employment with price stability. Other times the Federal Reserve is unskillful or unlucky, and we have accelerating inflation or high unemployment. It is certainly true that what happens in international trade affects employment in America. But the Federal Reserve can and does offset and neutralize impacts of trade that push employment away from where the Federal Reserve thinks the sweet spot of full employment is.

So what, then, is the impact on the American economy when Singapore educates its people to become competent network developers, or India educates its people to become competent help-center technicians? It's not that jobs leak away. Remember: trade balances. Indians want rupees, not dollars: they will only sell us as much as we can pay for in rupees, and the only way we get rupees is by selling things to Indians. The things we sell to Indians are either goods and services exports, or capital exports--Indians buying financial assets or real property in America, the sale of which is used to finance domestic investment spending. Either way (if the Federal Reserve does its job) Americans' demand for imports made in other countries is recycled into foreign demand that employs Americans in industries that export goods, export services, make producers equipment, or build structures. This is a consequence of Say's law--an economic principle which is usually true, sometimes false, but which it is the Federal Reserve's business to make as true as possible as much of the time as possible. This means that nightmare scenarios--3.3 million high-tech jobs moving overseas--are beyond the bounds of short-run probability. The current account plus the capital account must balance: if the work that used to be done here by 3.3 million people is to be done there, that means that our export industries here must employ an extra 3.3 million people as well.

http://www.j-bradford-delong.net/movable_type/2003_archives/002014.html

[kcwayne]

1. The last growth industry

The idea that trade is a zero sum game is demonstrably false. The US is a huge net importer of goods and services. As our major industries leave the country to seek out low wage cost and regulation, the unemployment rate in the US will go up to the point where we no longer represent a viable market opportunity for products produced in the gulags of China, India, and other third world nations.

This time it is different. There is no "next wave" industry for us to move into because what is being eliminated is not production inefficiency. We are eliminating the need for people in our economy to produce goods and services since these can be acquired elsewhere for less.

It seems like the last growth industy left in the US is the market for penis enlargement, of which I get 2000 emails a week trying to entice me to buy.

[JohnyCanuck]

2. I like this response

I like the response posted to the original article by a Don Williams

The real problem is that economists are paid to rationalize a government policy which lets benefits flow to wealthy capitalists and dumps costs onto the masses. Economists do not get grants, lucrative consulting contracts,etc by telling the truth, speaking on behalf of the common citizens, or by exposing the corruption/hypocrisy of our political and business leaders.

<snip>

Would US corporations move software development to India if they thought India might be hit at any time by a Pakistani or Chinese nuke? The first thing US corporations do in making foreign investments is to ensure that their investment will be protected by the US government/military. Global trade depends on the fact that military protection only costs the investor maybe $200,000 in campaign donations while the $billions in costs are dumped off onto the US workers ( via stealing $Trillions from their Social Security/Medicare Trust Funds.)

<snip>


(To see more of his comment go to original articlle at link below and page down to see comment by Don Williams at 10:01

http://www.j-bradford-delong.net/movable_type/2003_archives/002014.html