more on Exporting America

[Dave Farber <dave () farber net>]

-----Original Message-----
From: adam beecher <adam () beecher net>
Date: Wed, 07 Jan 2004 15:59:14 
To:dave () farber net
Subject: RE: [IP] Exporting America

Hi Dave,

Hope you're well. This is for IP if you wish.

John Parmater lost me early on in his article on the outsourcing issue, when
he mentioned that despite outsourcing, "jobs continue to grow". I'm not an
MBA either and I only have high-school-level economics, but I was under the
impression that in the order of one to three million jobs had been lost in
America in the last few years (depending on who you listen to). At least
that's what the Bush In 60 Seconds creators seem to think.

In all honesty I'm hung on the issue of outsourcing so I'm not trying to
dilute his entire his argument, I just don't understand this assertion. Did
outsourcing not impact on these job losses at all? Is Bush entirely
responsible? Are the losses a liberal myth?

(I'm being facetious of course!)

adam


+-------------------------------------------------+
| Politicians are people who lie to the press and |
| then believe what they read.       (Will Durst) |
+-------------------------------------------------+



> -----Original Message-----
> From: owner-ip () v2 listbox com [mailto:owner-ip () v2 listbox com]On Behalf
> Of Dave Farber
> Sent: 07 January 2004 00:45
> To: ip () v2 listbox com
> Subject: [IP] Exporting America
>
>
>
> Delivered-To: dfarber+ () ux13 sp cs cmu edu
> Date: Tue, 06 Jan 2004 12:58:10 -0500
> From: John Parmater <jparmate () columbus rr com>
> Subject: Exporting America
> To: David Farber <dave () farber net>
>
> Dave,
>
> I¹ve been thinking about this and decided to write something about it.
> Perhaps it should appear as a blog somewhere, but I¹ve never blogged and
> don¹t know where to place it. So I¹m sending it to you. If you
> don't want to
> print it, perhaps you can suggest where I might place it.
>
> What got me to think about writing this was Lou Dobbs¹s incessant
> harping on
> ³The Exporting of America.²  For a man who makes a living reporting
> financial news, I¹m finding it hard to believe he has so little
> understanding of economics. Mr. Capek¹s letter helped me reach my tipping
> point. Here¹s my article.
>
> Why exporting jobs doesn¹t hurt our economy.
>
> I¹ve been reading for years about the battle between those who fear
> international trade, who say Buy American, and those who say it makes most
> sense to manufacture a product wherever in the world it is cheapest, that
> our standard of living is actually higher when we buy VCRs made
> in Japan or
> Korea and when our cars have components from so many countries that it¹s
> hard to define what a ³domestic² car is.
>
> History has proven year after year, decade after decade, that
> American jobs
> continue to grow, no matter how many products or services we import, how
> many factories American firms build overseas, or how much technology we
> export. A long list of products used by Americans today, products
> which were
> once made only in America, is now made almost exclusively
> overseas. Yet our
> jobs continue to grow. How can that be?
>
> Traditional economic theory explains this. In fact, it¹s explained in Econ
> 101 in most colleges. Yet most Americans, although many are college grads,
> don¹t seem to have a grasp of this idea. Indeed, many highly
> educated folks
> don¹t seem to understand it either. Witness the letter reprinted
> below from
> Peter Capek of IBM¹s Thomas J.Watson Research Center. Mr. Capek
> says: ³Would
> we rather live in a country where everything is 10% cheaper, or where most
> people are employed?   I believe it ultimately is pretty much
> that simple.²
>
> I¹m not sure it is that simple. Even though Mr. Capek points out that  .
> ³Jobs which are offshored, whether manufacturing, call center, or
> technology
> related, don't create a multiplier effect as the earnings are
> spent in this
> country, don't pay taxes in this country,²
>
> it seems that lowering the cost of producing or delivering a product or
> service ripples through the US economy. It keeps prices growing
> at a slower
> rate than they otherwise would. It sometimes even lowers prices.
> That allows
> consumers to keep more money in their pockets or spend it on
> other products,
> which someone must then manufacture and deliver, which creates jobs.
>
> There is a list of advantages of giving work to India, too. If India has
> more money, it will spend it. Part of the spending will go to the
> USA. Part
> will go to other countries, which, when richer will spend more
> domestically
> and overseas, part going to the USA.
>
> It¹s hard to make the case for having the High Cost Producer produce any
> product or service. It makes more sense to have the low-cost producer
> produce each product, then trade with the low cost producer of another
> product. Take an example of two people who make a simple product
> or service
> that they can trade. Suppose most people in town can paint a
> house in three
> days. Suppose you can paint a house in two days. You are the low-cost
> producer. And suppose most people can put a roof on a house in three days,
> but I can put a roof on in two days. Wouldn¹t it make sense for me to hire
> you to paint my house and you to hire me to put your roof on?
>
> If we buy from each other, we each save a day¹s work that we can
> then spend
> doing something useful such as painting another house or putting another
> roof on.
>
> Likewise in trading with India. If India can answer the telephone more
> cheaply and the US can produce engineering services more cheaply, we have
> something to trade which will make us both richer. (And if India
> is richer,
> they can buy more of Mr. Capek's employer's computers and chips, can't
> they?)
>
> If this argument is correct, why is there so much pain and why is the
> counter argument put forth? Because, when workers are displaced, they feel
> the pain of lost wages until they find a new job. But, you say, they may
> never find a job paying as much as they were earning. Sorry, that¹s the
> nature of things. The market is not always willing to pay as much for a
> product or service as it once was. Myriad products decrease in
> market value
> every year. Alas, so do some job descriptions.
>
> Sincerely,
>
> John Parmater
>
> I¹m not an economist, but I do have an MBA from the University of
> Cincinnati
> with a major in finance.
>
> -----Original Message-----
>
> From: Peter G Capek <capek () us ibm com>
>
> Date: Mon, 05 Jan 2004 23:09:13
>
> To:dave () farber net
>
> Subject: Re: [IP] Maybe there's no mystery after all
>
>
>
> A propos of the offshoring issue...
>
>
>
> I think a recent letter in the NY Times summarized it well: Would we
>
> rather live in a country where everything is 10% cheaper, or where most
> people are employed?   I believe it
>
> ultimately is pretty much that simple.  Jobs which are offshored, whether
> manufacturing, call center, or technology
>
> related, don't create a multiplier effect as the earnings are
> spent in this
> country, don't pay taxes in this country, and,
>
> of course, don't generally adhere to the safety and human rights standards
> which we believe are important.
>
>
>
> Even if the difference were 50% cheaper (it's not!), it still
> seems to me an
> easy decision.  Unfortunately, the nature of the
>
> competitive system is such that, once one business in an industry has
> proceeded this way, it's difficult for the others
>
> not to follow in order to compete. Indeed, doesn't the fiduciary
> responsibility of a (publicly held) company require it to
>
> behave so as to maximize the return on its investors capital,
> consists with
> the company's bylaws?   When the decision is,
>
> say, between building a new plant or advertising a current
> product, there's
> room for a lot of opinions in making the decision.
>
> But when the issue is as (apparently) straightforward as paying $X/hour or
> paying 15 or 20% of that amount, as the business
>
> manager, I won't be concerned with the secondary issues of taxes,
> multipliers, employment and so on.   Those won't have
>
> effect until at least next quarter.
>
>
>
>                Peter Capek
>
>
>
> Peter G. Capek
>
>   IBM Thomas J. Watson Research Center
>
>   Yorktown Heights, NY   10598-0218
>
>   (+1 914) 945-1250       IBM Tieline: 8-862-1250          Fax:  X 4426
>
>
> §«,¸¸,.·´`·.,¸¸,.·´`·.»§
>
> John
>
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