Posted by BrianInSF on July 23, 2005 at 03:17 [69.110.11.30]
In Reply to: Quick word about outsourcing posted by DR on July 23, 2005 at 01:55
Hey Rus, good to see you on hear again,
nice post, it so well articulated I almost don't want to disagree at all.
Anyway, I agree and I disagree and then I agree again.
You bring up some strong point for free trade and the benefits of outsourcing. I think people can often be quick on the draw about protectionism, defending industries past their profitability sapping the local tax base with huge subsidies just to keep the sinking Titanic afloat for an additional twenty minutes, when a free market would have hurt them short term yet in the long term enouraged enough growth to give them a new better job. In small doses it can keep countries from remaining competitive like France whose exceptionaly talented and creative work force devotes a large chunk of their taxes to unprofitable farmers and manufacturers. In large doses protectionism can stagnate a country, like Japam, whose excessive issolationism kept them behind the westen world for hundreds of years despite their uncanny precision productivity.
However, I think it's also right to be very skeptical about outsourcing and free trade. Enacted wisely it can be a godsend, but enacted poorly it can be a disaster. When the meatpacking industry in Chicago unionized because they were tired of seeing their coworkers end up in the meat grinder, the companies found a simple solution. Move out of Chicago, relocating to the less regultated Texas and Colorado they have gotten around unions, not to mention a plethora of safety and health laws.
By moving to distant countries, not only can a company avoid the organized labor of the US, it can, and this is far more relavant, avoid the laws of the US(I should probably say Developed Word). Enviornmental regulation, child labor laws, regular labor laws, these don't exist in many countries around the world, and often a small bribe can get around them(I've heard this is a big problem in Nigeria) I'm not suggesting that every company that outsources does so to sweatshops, but it does happen, and it is perfectly legal.
While often, with skilled labor jobs, such as the IT outsource firms in India, the jobs can in fact pay very well. Many Indian cities are experiencing the growth of a new middle class due to these jobs. Why? Because there are only so many people, even in India, that can do these jobs. Skilled jobs get more monney, but outsourced manufactuing and textiles doesn't work the same way. These jobs require little skill, and there is a huge labor force for a small amount of jobs driving the prices down to rock bottom low. Factory workers being paid well in the US only existed after people fought for it. Even Henry Ford, when he said he was going to pay his workers 5 dollars a day his shareholders sued him; a corporations job is to maximize returns for the shareholder, paying the workers unnnecisarily well is tantamount to embezzling the money. And the labor movement itself fought long and hard to get paid good wages. In many parts of Mexico, the factories were suposed to lift the locals out of misery but has failed to accomplish anything because the pay is subsistance. Again, I'm not disagreeing with you, it can indeed increase the quality of living in LDC's, but only if executed properly.
Also, decreasing prices is a great benefit to consumers, but if the consumer has lost his source of income, he's no longer much of a consumer. The great depression followed the roaring twenties, and prices durring the depression were rock bottom. For the people that still had jobs this was great, for the comanders of industry it was even better. But if you were the average joe on the streat, lower prices meant little to you, cause you didn't have a dime. Large labor pools mean lower labor costs, when the world becomes the labor pool basic economics can tell you that the people who aren't in controll won't do better, but worse. Fly by the seat of your pants free trade executed without any oversite and coordination leads to both poor first AND third world nations. It eliminates the middle class, and does indeed create a kind of marxist nightmare, were the rich get richer, and the poor get poorer.
And I supose this is my ultimate point(I swear I forgot something I wanted to say). It's a recipe for disaster to stick your head in the sand regarding globalization, and just fortify your country in protectionism. Outsourcing is necesary, and it can be a wondefull positive thing for the entire planet; we have to get used to that. However, if we don't execute it properly, ensuring countries have solid labor laws, and legitimate governments among other things, then all the benifits that we could reap from globalization disapeer before our eyes.
I dunno if any of that made any sense, it's late and I'm tired.
Rus, I love hearing your posts, I wouldn't have responded except to such and intellegent articulate person as you. You're posts always challenge me and I apprecaite that. And I tried to rent Winged Migration, but it has yet to be released on video,
Milton Friedman Wannabe
Brian
Email: moboya@yahoo.com