For a second, I was struck with dyslexia and misread your title as "Outsourcing the Bogeyman": an analysis of the use of xenophobia in politics ?

Dan, good posting. And, to the Democrats chagrin, right on the money (pun intended). A recent interview with the head of an Indian Call Center (New Delhi?) indicated that the vast majority of stockholders were American, the computers were Dell, the phone system was by Lucent, the cable was American, The lines were installed with American know-how and the computer systems (operating system? programs?) were American. An advantage for the US in both the short and long term? You bet!

Keep up the truth telling.

G.

A good piece. However, as you imply, outsourcing as a fact is not the political issue. The political issue is a perception of caring about the American worker, no matter the color of his collar. Our President seems more concerned about the American holder of incentive stock options.

Congratulations on the publication! However, a couple of points:

1)You quote IDC: "the activities that will migrate offshore are predominantly those that can be viewed as requiring low skill since process and repeatability are key underpinnings of the work. Innovation and deep business expertise will continue to be delivered predominantly onshore." I don't think there's much evidence or logic suggesting that this is always correct. If you're doing it through a 3rd party outsourcer, maybe. But what if you're doing it through a foreign branch of your own company? Why can't an electronics engineering operation in India, or a mechanical engineering operation in Rumania, include as many innovative people as one in the U.S.?

(more)

(continued)

2) And, re Catherine Mann's assertion that offshoring of software production will make SW more affordable to sectors with relatively low penetration (viz construction and healthcare): there are a lot of reasons other than SW price why an industry may have low IT penetration. One of these is lack of standardization as to how things are done, another is an industry structure composed of relatively small entities, which means high selling costs to reach them.

Actually I have noticed the debate shifting recently from blaming outsourcing to blaming productivity, which I think is probably more accurate.

The question then becomes:

Does greater productivity really make us better off? The intuitive answer would seem to be yes, but then we have the contradicting current state of the economy. Namely:

1) High Unemployment.
2) Longer working hours for those with jobs.

I think the real structural shift argument is happening with productivity and whether or not its something we need to plan for when making societies transitions easier.

As you note in your article, the "insourcing" of jobs directly through trade and indirectly through the benefits of efficiencies gained through trade. This editorial from the News & Observer of Raleigh, North Carolina, notes: "The most recent data show 240,000 insourced jobs in North Carolina, with 100,000 in manufacturing." Not bad for a state supposedly killed by free trade.

To the extent that we have the seemingly-improbable combination of:
) High Unemployment
2) Longer working hours for those with jobs,

..I suspect that the cause lies in:

a)The increasing fixed cost of having a new employee (mainly benefits), as opposed to the overtime costs of having employees work longer (for hourly employees), or the additional turnover resulting from pissed-off employees
b)Our failing public education system, which leaves many people unqualified for the openings that do exist.

Re: David Foster's comments :

a)The increasing fixed cost of having a new employee

I completely agree. And its not just the fixed costs, if you are small (like me) you are afraid to hire someone because you might have to fire them...and for some of the little guys I know, that has been a nightmare. Ironically, I think that making it easier to fire people might help the job market!

b)Our failing public education system, which leaves many people unqualified for the openings that do exist.

It isn't just the school system, I feel like a lot of people went into IT for the money, not for love. A lot of people expected I think to learn a little ASP and a little Java and then punch a clock the rest of their lives. They don't love it.

My husband has hired three new IT professionals this month. He hired Indian programmers despite the extra cost and time involved in processing their paperwork (and it is a big deal for his small firm--in money and time) because they were simply more qualified. The stories he had from the interviews made me cringe, Americans who had been unemployed for months came to the interviews completely unprepared.

The people I know who live and breath for the newest and best in programming, who see each project they start as exciting, and are always looking to do things better...they are employed.

Outsourcing is not about call centers.
People who believe that, are people who
are not close to the problem

Drezner and other talking heads on this
subject truly do not understand the problem.

They say, 'well only a few hundred thousand jobs
have been lost to outsourcing.' Oh, that's not
so bad, right? Wrong.

There are a limited number of High Tech jobs in
America -- comparing a software engineer to
someone who makes shoes is absurd.

The software engineer is a strategic asset to the
country. America's place in the world is ensured
by its technical leadership. By exporting
America's most technical jobs, we are exporting
America's strategic advantage.

And I don't mean 'strategic' in the business sense.

Also, these are America's best-paying jobs -- the
$75 to $100,000+ jobs. People with college
degrees, perhaps with a masters degrees, are
finding their jobs shipped overseas to someone
who is paid 80% less.

In America, hard work is rewarded with success.
But no matter how hard someone works in America,
they can never compete with someone who is
willing to do similar work for 80% less.

In the past, when manufacturing jobs were sent
overseas, people said well, just retrain and learn
new skills. But these are the highest-skilled
workers in the country who are finding their jobs,
and expertise, exported overseas.

These are people with good degrees from a major
universities, with substantial high tech skills,
and good paying jobs that contribute $15 to
$30,000 in taxes to the US government each year.

On this issue, America is selling her soul.

Great piece, Dan.

HTW: So offer your services at 75% of normal so that you can compete better. Swallow your fucking pride. I'm tired of reading about people thinking that a college degree automatically means they have a god-given right to earn 100K a year. It doesn't.

Only in America would we have a phrase 'the loony left' (to describe apologetic and powerless moderates) combined with the reality of a loony hard right that chuckles with free-market glee over the dismantling of our high tech sector. Politics in this country is just bogus. Ideology trumps self-interest every time. Such is the power of cultural and political manipulation! In ten or twenty years the insanity of this approach will be evident, but it will probably to too late.

oh yeah, over the next ten years something like 15 million white collar jobs are supposed to be offshored -- you think the job market is bad now? Just wait. We haven't reached full offshoring speed by any means yet.

A good while back when slides were the professional presenter's essential medium, one could use PowerPoint to create a presentation and outsource it to a graphics company to produce the actual slides. Fedex could deliver the slides the next day, shaving a week off of having in-house production services get around to it.

Then one day scandal hit; seems some of the folks at the outsourced graphics company were selling the confidential information in the presentations to competitors.

As America is so beloved throughout the world these days, I wonder how we are going to maintain control over the use of our outsourced information, or to assure that the process of imbedding software defects that we used so successfully against the Soviets won't be instead re-introduced back into the software we are outsourcing?

Will be saving so much money outsourcing our developement that we will have plenty left over to scour it in our own defense? Or will it just be used to further enrich the outsourcers until the business product, defects and all, can be resold to an unsuspecting suitor?

Argh! Did you even read Dan's piece? Contrary to what you may think, THE SKY IS NOT FALLING. If you have a substantive criticism then by all means make it, but repeating the same ominous forecast that dan has just debunked at length is not going to convince anyone.

And what is all this garbage about the hard-right? Are liberal economists like Brad DeLong part of the vast right-wing conspiracy now too? I must have missed the memo...

Andy Danger writes:

"So offer your services at 75% of normal so
that you can compete better."

This is perhaps the dumbest sentence I have seen
in response to a posting; and I've been active
online for over a decade.

Apparently for you, America's best jobs are no
different than a position at Burger King.  And
America's strategic asset of technological
innovation and leadership are worthless
commodies.

Amazing.

Germ, you raise some interesting points.

Foreign offshore firms can use proprietary
business/government information for unintended
uses.

And aside from this concern, US privacy laws
do not extend to India, et al.

I'm simply amazed at how otherwise astute and
intelligent people fail to see the problem here.

Though Lou Dobbs was mocked for it recently in
the WSJ -- this truly is "Exporting America."

We're not exporting expertise in making sneakers,
we are exporting the CORE expertise that allows
America to maintain its leadership in the world.

Questioning whether, "... America's strategic asset of technological innovation and leadership are worthless commodies."

As much as I agree with you, we have been allowing our public schools to be slowly infiltrated by those with an anti-science agenda. Not only are our potential young scientists considered geeks incapable of social skills or physical prowess, they are bombarded by their teachers, administrators, and peers through an indoctrination process designed to dilute rational scientific considerations with faith-based counter arguments.

We wouldn't be the first people to convert their technologial capabilities into a collection of contradictory faith-based populations that do not have the educational foundation to understand what it takes to maintain a modern society.

HTW, if someone else is offering to do the same job you do for a lower salary, whose fault is it if you don't get the job? You can refuse to lower your expectations and hold out for a higher salary, but at that point you're unemployed by your own choice.

Whine all you like, but what this comes down to is arrogant college graduates thinking that their diploma is a free pass to the good life. Reality doesn't work that way. It doesn't matter if the person is American or Indian or Martian: you are being outcompeted by someone more efficient. If your pride is more important to you than being employed, then that's your choice. But don't blame it on the Indians.

HTW, I don't care if someone is American or Indian or Martian. If they're willing to do the same job you are for a lower price, then they deserve to get that job. A college diploma is not an automatic ticket to the good life. If your pride is more important to you than being employed, that's your choice. But don't whine about it.

ARGH. I thought I'd lost my original comment by accident, sorry. Dan can delete that second one (and this).

As much as America's entrepreneurial spirit is positive and forward-thinking, it seems not to be concerned with the potential for subversion.

In an October Technology Review article, Boeing was said to be pinning it's future on the new 7E7 aircraft capable of carrying 200-250 people on extended flights to distant destinations (with greater fuel economy, etc.) What I saw was an even larger terrorist target than we already have!

How many companies require their executive teams to fly in smaller groups to reduce the impact of a carrier crash when traveling to a common destination? How many of us executives live in gated communities and work in executive suites separate from our business operations and that require pass-keys and combination codes to enter? Why is that? How much of it is to prevent hostile employees and investors from easy access?

What is the largest source of theft to companies? Employee theft! Will that be less of a problem when the "employees" are effectively operating as an outsourced firm in a country that an arrogant American government has agitated?

I'm not against outsourcing, but we absolutely need to build in extra controls over quality and product integrity. And we need to assure that every outsourced contract has a backup sufficient to allow us to discontinue the service and switch it elsewhere so we don't find ourselves held hostage by the government that controls our contractors.

I'm looking forward to my new more-highly-paid job assuring that all of the new business hazards brought by outsourcing are being addressed for my employers. And, don't forget, doing it such that we don't spend more than the value we expect to get from outsourcing in the first place!

“Whine all you like, but what this comes down to is arrogant college graduates thinking that their diploma is a free pass to the good life.”

Yes Andy, when you meet someone with a college education and get to know him, you’ll find he’s almost like a real person! He knows the degree is not a guarantee; you are missing the point. The problem is that we enter the work force with the expectation of continually increasing our value until we retire. We plan to learn more, gain experience, apply our skills, buy our house, raise our kids, live comfortably, and prepare for our retirements. This is the middle class personal dream. It has nothing to do with arrogance; that’s your personal bias.

We know that if we aren’t prepared at retirement, our life styles will suddenly get very uncomfortable. But we aren’t prepared for that to happen now, 20-30 years before retirement. Instead of building a nest egg and paying off the bills, we are now trying to decide if we will be able to find an equivalent paying job or if we need to bail out. By “bail out” I mean sell the house and car, reduce the life and health insurance, cancel the kid’s piano lessons, sell the piano, and do all those other things anyone would have to do to be prepared to survive on 1/3 the annual salary they were use to.

It’s a lot like some immigrants here in the USA now. We have cab drivers with Ph.D.s from other countries. Persons bring down minimum wages even though they have medical skills from other countries. If I had the foresight to realize I was going to be left high and dry in the middle of my career, I might have done it differently.

But what do I have to complain about, preparing to live on 1/3 of what I’m used to is still a lot better than those who are refugees due to war or the failure of their governments.

No, it’s not arrogance, it’s depression. It’s having to face the reality that all the years of accomplishments are now becoming worthless. As Bill Murray says in Groundhog Day, “…it’s gonna be cold, it’s gonna be gray, and it’s gonna last you the rest of your life.”

the alleged migration of American jobs overseas

Why not prove your point before you start calling the migration of jobs "alleged".

No economist really disputed Mankiw's observation that "outsourcing is just a new way of doing international trade," which makes it "a good thing."

An economist would point out that when people lose their jobs there are "externalities". Some people are better off because they get goods and services cheaper, others are worse off because, for example, becoming unemployed raises your chances of becoming divorced, becoming addicted to drugs and/or alcohol or committing suicide. These externalities are ignored by people such as the author of this piece who pretend to understand economic issues while pushing their political talking points.

The creation of new jobs overseas will eventually lead to more jobs and higher incomes in the United States

Long-haired preachers come out every night
To tell you what's wrong and what's right
But when asked how about something to eat
They will answer in voices so sweet:

You will eat, bye and bye
In that glorious land above the sky
Work and pray, live on hay
You'll get pie in the sky when you die.
That's a lie

-Joe Hill

Because the economy -- and especially job growth -- is sluggish at the moment

At the moment? At the moment??!!?! Why should I believe or even read a single word you write after that? At the MOMENT?!??!?!??!?! How many years have I heard this crap from people like you? At the moment?!?!?!

But believing that offshore outsourcing causes unemployment is the economic equivalent of believing that the sun revolves around the earth: intuitively compelling but clearly wrong

You could build a whole chapter in a logic textbook explaining the fallacies in this piece. That particular one would be "appeal to authority".

In open markets, greater competition spurs the reallocation of labor and capital to more profitable sectors of the economy

Open markets? Well since these are open markets, the unemployed call center and information technology workers can just relocate to India and work there, where their years of experience will make them more valuable than the newer Indian workers. Oh wait! They can't do that because the markets aren't open. Daniel Drezner, you are simply a dishonest writer. There is no other way to put it.

An open economy leads to concentrated costs (and diffuse benefits) in the short term and significant benefits in the long term.

More pie in the sky when you die.

This practice has been common within the U.S. economy for some time. (Witness the rise of large call centers in the rural Midwest.)

Witness the way American workers relocate to other parts of the country when times are bad where they live. Witness the way Indian workers relocate to the US in search of better jobs. Witness the way US call center workers or programmers would not be allowed to relocate to India. Witness Daniel Drezner be dishonest.

close to 90 percent of jobs in the United States require geographic proximity. Such jobs include everything from retail and restaurants to marketing and personal care

That's great Daniel. I will still be able to get a job at McDonald's or the Gap. Whew. I was worried there for a second. You don't get it do you?

As an International Data Corporation analysis on trends in it services concluded, "the activities that will migrate offshore are predominantly those that can be viewed as requiring low skill since process and repeatability are key underpinnings of the work

Now people with master's degrees in computer science are "low skill". Add "ad hominem" to the list of fallacies. If someone stands in the way of your argument, just insult them. How crass.

According to the Bureau of Labor Statistics Occupation Outlook Handbook, the number of it-related jobs is expected to grow 43 percent by 2010.

There will be pie in the sky when you die. That's a lie.

A study by the Federal Reserve Bank of New York suggests that the economy is undergoing a structural transformation: jobs are disappearing from old sectors (such as manufacturing) and being created in new ones (such as mortgage brokering).

It defies reason that you do not see the reason why there is a rise in hiring in mortgage brokering right now. You are not that stupid, you only think your readers are.

In all such transformations, the creation of new jobs lags behind the destruction of old ones. In other words, the recent recession and current recovery are a more extreme version of the downturn and "jobless recovery" of the early 1990s -- which eventually produced the longest economic expansion of the post-World War II era. Once the structural adjustments of the current period are complete, job growth is expected to be robust.

You're gonna eat, bye and bye, poor boy
In that glorious land above the sky, way up high
Work and pray, live on hay
You'll get pie in the sky when you die
Dirty lie

Thanks to outsourcing, U.S. firms save money and become more profitable, benefitting shareholders and increasing returns on investment.

That's great for the tiny percentage of Americans who have more than a few thousand dollars invested in equities. The rest of us pay for our food by working. And there are no jobs right now, Mr. Political Scientist. An issue you don't address.

And U.S. labor can be reallocated to more competitive, better-paying jobs; for example, although 70,000 computer programmers lost their jobs between 1999 and 2003, more than 115,000 computer software engineers found higher-paying jobs during that same period.

Dan, would you care to explain to me in simple terms what the difference is between a computer programmer and a computer software engineer is? I think this is a distinction without a difference, but perhaps you could explain it to me in simple terms what you think the difference is.

When forced to choose between statistical evidence showing that trade is good for the economy and anecdotal evidence of job losses due to import competition, Americans go with the anecdotes.

Yes, why should we believe in the evidence we see every day that tells us that if we lose our jobs,it will be years not months before we find another one when a genuine university educated political scientist virtually GUARANTEES us that there will be pie in the sky when we die. What are we thinking?

Last Labor Day, President Bush pledged to appoint a manufacturing czar to get to the bottom of the outflow of manufacturing positions.

Care to include in your article what happened to the czar he appointed, or are you research capabilities so limited as to make that impossible?

These examples illustrate the problem with relying on anecdotes when debating the effects of offshore outsourcing.

Yes, your anecdotal evidence has convinced me that relying on anecdotes is wrong. I'll never do it again.

Politicians never get credit for inaction, even when inaction is the best policy.

The "Herbert Hoover" policy. How did that work out, my history book stops in 1928.

The best way to help those actually affected, and to calm the nerves of those who fear that they will be, is to expand the criteria under which the Trade Adjustment Assistance (TAA) program applies to displaced workers.

Wait, are you sure the best way to help isn't actually tax cuts for the rich?

Their arguments, however, must be persistently refuted.

Let me know if you ever find someone who is up to the job.

Saw the link to this post on Volokh's website. Dan, glad you are fighting the good fight. I just had a long fight with a beloved uncle who, while reasonable on most of his views, stubbornly clings to the ideology that trade destroys jobs.

As a fun hypo, I asked him if Mana from heaven would descend eternily starting tomorrow curing world hunger with no effort, if this would be good for our society. Incredibly, he said no! Why? It would cost too many jobs. Incredible.

Andy writes :

HTW: So offer your services at 75% of normal so that you can compete better. Swallow your fucking pride. I'm tired of reading about people thinking that a college degree automatically means they have a god-given right to earn 100K a year. It doesn't.

YES!!! I love what I do...if I ever can't do it here in Chicago because of competition overseas I'll either 1. Change what I do (currently web design and development) 2. Move to a country/state where I can live more cheaply.

Oh yeah, and I would be sorry that can't find a job using your master's degree...except, well I'm not using mine. The world goes on.

HTW..you say "There are a limited number of High Tech jobs in America -- comparing a software engineer to someone who makes shoes is absurd." Why is it absurd? Making shoes requires many jobs at varying skill levels. It requires industrial engineers, logistics & inventory control experts, cost experts, robotics specialists, plant general managers, (not to mention software engineers). Many of these jobs pay in the $75K to $100K level; probably considerably more in the case of the plant GM.

Software is very important, but what justification is there for believing it to be more important than expertise in production technologies?

Germ,

Those cab drivers with PhD's who come from other countries are not driving their cabs because their degrees are worthless -- they are driving cabs because 1) their English is subpar 2) They're new to this country, they don't know the game.

If you're smart enough to program software, believe it or not, you're smart enough to do something else. Same is true for the other master degree holders out there--which in a way could make this wave of outsourcing easier than the one that hit blue collar workers. I am sorry for your current troubles though.

HTW: If you're interested in learning why there are other American hi-tech workers, like myself, who think offshoring is wonderful -- read this. It might change your mind.

My real complaint about outsourcing is exemplified by my two exeperiences so far with 'customer support'. The first was a disaster because the guy had an unintelligible accent and it was impossible to get through to him or vice versa the problem much less the solution.

Second was with Earthlink customer support: I've been with Earthlink for 4 years, I've always had good experiences with their CS people, who have been
uniformly intelligent and useful. This time we got somebody from India who was following a rote check list didn't have a clue as to how to listen to an informed user. We came acropper on step two after "How would you like to be addressed?" with "Please reconfigure your entire system to conform to what I have here." ---"It's been working in this configuration for 2 years. I have run all the diagnostic procedures you are about to ask for. My DSL transfer rate is 6k it is usually 400k, I think there's a problem somewhere on your end. It seems to return to 400k at about 10PM." "Please reconfigure your system and call back when you have done so."

Several cycles of this...these guys may be smart enough but they aren't experienced; don't know how to refer to more skilled people; stonewall efforts to get around them. In other words, pain in the butt and useless.

Comcast will be here tomorrow.

“Software is very important, but what justification is there for believing it to be more important than expertise in production technologies?”

It’s not just software, those production technologies skills are going overseas as well. Get ready!

“If you're smart enough to program software, believe it or not, you're smart enough to do something else.”

Of course, that’s the arrogance of having a degree, right? ;) No, it seems to me that the real concern of those whose careers are derailed by outsourcing is that they have spent a considerable amount of time and effort to get to their positions, and are now facing an extended period of reduced earnings to get back to the same level in a new field. Some of these changes will require a 5-10 year recovery period, a difficult process for those in their 40s, 50s, and above with 20+ years of experience in a field. The impact, I believe, will be significant to our collective psyche over the next few decades; as significant as that produced by those with direct experience in the Great Depression.

“Those cab drivers with PhD's who come from other countries are not driving their cabs because their degrees are worthless…”

Yes, but my point was more related to the sense of frustration that comes from having spent a considerable effort to build a skill set that is no longer valued enough in one’s accessible market to be able to earn the desired living from it.

I’m not there myself, in spite of having to shut down a consulting business and lay off 5o high tech workers last year. Frankly, I’m doing better personally right now without the overhead. But is very easy to see how fast it can collapse and what it will take to build it back up in another field.

Great article, and highly readable. Foreign Affairs was lucky to get it.

I appreciate that our host made the case without reliance on unreliable Department of Labor projections of further US job growth.

For the outsourcing opponents here, I would point out past experience with protectionist measures in Congress is that what comes out will have strange lobbyist-inspired features and be nothing like what potentially displaced workers want. Check out the book "The Fair Trade Fraud."

The information theft problem introduced here by “gram” is interesting. However, I think it comes down to a simple question: do you want to keep working for the US outsourcer in the long term or do you want to risk it all in the name of short term profit?

Perhaps it’s just me but a good relationship with the company doing the outsourcing is essential. Hence not meeting the requirements or handing over crapy work will bring those jobs back to the US pronto. Problem solved. Meanwhile software quality control and assurance jobs will boom. More responsibility usually means a larger paycheck. How about a business checking the work of Indian companies? US companies could outsource it to people with experience (20+) in the US.

Strategic components shouldn’t be outsourced but even here outsourcing of non-strategic components frees up people and companies to deal with the strategic. More competition, lower prices, more opportunities for those who innovate to actually develop their products at reasonable cost. Could this mean a boost to the strategic advantage of the US?

As to how this could be “regulated” :
1) companies act at their own digression dealing beyond the US (minimal government involvement)
2) tighter government control on some SW i.e. no developing outside US (substantial government involvement)

Just my two cents. Keep up the good work Dan.

Sorry, not gram but germ. Ups

I'm posting this from a US call center between calls. I've worked here for over ten years although I was layed off in 2001, two weeks before 9/11, when we were in a recession but no one knew it yet. Do I have a target on my back? Yes. Am I concerned? Not really. Because I understand that the laws of supply and demand, as well as Say's law, haven't suddenly stopped working over night.

Felix, your post is one long smarmy ad hominem; as far as I'm concerned it's SPAM. The only thing you've demonstrated is that, as Thomas Sowell has pointed out, one can't refute a sneer. Good show.

To all the naysayers I say this: the fact that we can't see the future doesn't mean that the future is going to unfold outside of the reality defined by well established and understood economic law. Productivity increases WILL translate into the best for the most unless we start interfering with the markets. Increased productivity is simply where increases in living standards come from. If this weren't so, we wouldn't be lazing around carrying on a conversation via computer, we'd all be out scratching sweet potatoes in the dirt with our digging sticks from sun-up to sun-down as humans have for most of our history.

So far virtually all discussion of outsourcing I've seen, including Daniel's piece, discusses the phenomenon in terms of benefits and incentives and not in terms of capital itself. Benefits (derived from leveraging comparative advantage) and incentives are created when firms are able to save money, whether by contracting out a "job" to a Hindu in India or a robot in Indiana, but what about the saved money? What does it do, where does it go? As per Say's Law of Markets, what it does is increase overall production, and it goes wherever demand happens to be highest at any given moment. And unlike many naysayers would have us believe, there is no indication that there is a huge, over-riding un-met demand in the market for Happy Meals.

"It is worth while to remark, that a product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value.   When the producer has put the finishing hand to his product, he is most anxious to sell it immediately, lest its value should diminish in his hands. Nor is he less anxious to dispose of the money he may get for it; for the value of money is also perishable. But the only way of getting rid of money is in the purchase of some product or other. Thus the mere circumstance of creation of one product immediately opens a vent for other products." (J.B. Say, 1803: p.138-9)

:jackson

There's the diamond in this rough - well said, Jackson.

HTW & germ: Whoever said life would be easy? Whether you feel it or not, you are projecting a massive sense of entitlement. I'm in the same boat, and have been before (I started working with punch-cards and JOVIAL). Train yourself - it's never been easier - in new computer technologies. Take a pay cut. I paid more in taxes in 2002 than I made in 2003. I don't whine about it - I love telling the story. Is my standard of living down? Yes (and I have the credit card overlimit and late fees to prove it). Is it a catastrophe? Of course not.

Re: Strategic/National Security stuff. Don't fight the last war. We haven't lost our ability to build (or contract out) the best war machines in the world. We won't lose our ability to build (or contract out) the best war software in the world (it's going to get even more important). However, the next battle is going to be biotech and/or nanotech. We need to STAY AHEAD.

Everyone has computers and software now. Programming isn't that difficult. There's always always going to be a percentage of the population (human, not US) that has a flair for it. Sometimes those people are going to be our enemy. Who do you want fighting them - Tech College "it's the highest paying career available" graduates or the creme-de-la-creme hackers that love it? Economic competition filters for excellence.

BTW: The difference between "programming" and "software engineering" is vast. If you don't know what it is, you're in the wrong field. For any non-techo-geeks present (are there any?): Programming is typing magic words into a computer in special order to make it do something. Software engineering is designing and building computer systems that meet user requirements; are robust, secure, and scalable; and are econonmically and technically feasible. It involves not only the magic words but meta-knowledge about internal and external environments. The distinction is similar to that between a construction worker (hammering nails) and a structural engineer (designing bridges that don't fall down).

We’re not talking about entitlement here; we’re talking about the impact of outsourcing, particularly in today’s tech sector. I don’t see people EXPECTING to be spoon-fed a lucrative job; I see people in FEARING loss of their ability to MAINTAIN their life style. We saw the impact in aerospace a couple of decades ago, where highly skilled engineers suddenly had to start over. In reality, this isn’t much different than letting older employees go and replacing them with younger, cheaper employees, except these younger (or cheaper) employees aren’t spending their earnings in your local economy any more.

And no, I’m not talking about entitlement, MRSizer. Get that out of your head! As an employer, prospective employees sometimes ask me if there is some kind of probationary period. My answer: “Yes! Every day you work here you are on probation. When your net collective contribution drops below the cost of keeping you on board, get nervous - get very nervous!” And my higher paid employees stay nervous; it keeps them focused on our objectives.

It’s not just programmers facing these pressures. Yes, I had to drop my consulting team. In the rush to war with Iraq last year, business faltered and I couldn’t afford to keep them on. But that just added extra stress to my electrical engineering and software engineering teams. They are fully aware that biomedical products come and go very rapidly these days, and they participate in the selection of contractors to design modules that they could very well have designed themselves. In the meantime, I’m also the main consultant interfacing with our customers; but that’s not necessarily a bad thing for a while if I can keep it up.

But back to the point. Regardless of your positive approach to the situation, MRSizer, there will be many who are in despair. We are hearing from them right now or we wouldn’t even be having this discussion. My concern is for the sheer volume of technical people in our society and the newly available ability to outsource so much of those operations. Not just call centers and programmers, but all throughout our wide variety of businesses and business operations.

From one end to another we underestimated the impact of the war on Iraq. I guess it is our nature to be just as damned sure we’re right about the minimal impact this level of outsourcing will have on America’s stability.

The debate on outsourcing masks an issue which afflicts American Business - the drive to generate greater profits has resulted in reductions in service levels - thin product margins in a competitive environment makes good service expensive and unprofitable.

By definition then whether the call center is in India or Indiana, the inability of corporations to train and mentor staff will result in poor service. Outsourcing merely makes the medciore service cheaper.

shifting the service back to US is not going to make it better - we will then have complaints about the folks in the South who cannot understand the yankee accent or the Seattle twang or the Cajun lingo but service will still suck.

We can all regale each other with stories of our experiences with the the telephone company, cable company or wireless provider. That's not an outsourcing issue - companies are (deliberately?) reducing service levels to reduce calls from customers.

People still don't get it.

I post here as a concerned American, not as 'someone who
is entitled to a high paying job.'  The whole 'swallow
your pride' and 'who said life would be easy' angle is
just nonsense.

My arguments have NOTHING to do with me personally.  Try
addressing the arguments made, and get skip the feeble
attempts at psychoanalysis.

The serious concerns raised which remain to be addressed
with any substance are:

1) Exporting America's strategic asset of technical
leadership and innovation.

Someone said, well learn biotech.  Well guess what, they
learn that in India as well.  (And to say that High Tech
is an asset of 'the last war' is laughable.  It is an asset
of TODAY's wars, and TOMORROW's wars as well.)

But 'weaponry' was really not the point.  The point was
that America's technical innovation and leadership give
America its place in the world.  Exporting this, is exporting
America's place in the world.

All of the analyses I have seen compare commodity stuff like
call centers and manufacturing of T-Shirts, etc.  This really
misses the point.

2) High Tech workers are already in America's best jobs,
the 'learn something else' mantra is ridiculous.

On this someone writes:

I don't care if someone is American or Indian or Martian.
If they're willing to do the same job you are for a lower price,
then they deserve to get that job.

Uh, hello?  Someone in India can live like a king on $10,000 a
year.  Can Americans live on $10,000 a year?

Some proponents of High Tech outsourcing appear to be global
socialists -- an American job and a foreign job are the same
thing.  Perhaps if you're Kofi Annan at the UN, but not if
you're an American.

Should it be America's policy to export our country's best
jobs?  This makes sense to people?

3) Misuse of proprietary business/government information

Germ raised this excellent point

4) Privacy concerns.

With all the whining and paranoia about the Patriot ACT, no one
cares if countless proprietary corporate and government records
are shipped offshore, where US privacy laws do not exist.

Productivity increases WILL translate into the best for the most unless we start interfering with the markets. Increased productivity is simply where increases in living standards come from.

Average hourly earnings in January, 1973, adjusted for inflation: $9.10
Average hourly earnings in January, 2004, adjusted for inflation: $8.33

Source: Bureau of Labor Statistics

More pie in the sky when you die. Workers have gotten more productive. They don't get paid more. And it's been going on for over 3 decades.

Your post is simply propaganda, nothing more.

Dear Felixrayman,

Dan wrote:
According to the Bureau of Labor Statistics Occupation Outlook Handbook, the number of it-related jobs is expected to grow 43 percent by 2010.

In reply you wrote:
There will be pie in the sky when you die. That's a lie.

In the interest of trying to bring the discussion back to logic, I would like to ask Dan or other supporters of the current 'free trade' regime one question in particular.

Dan has cited Catherine Mann on the particular point that in the last three years computer and math related jobs have grown 6%. Let us stipulate for a moment that this is correct.

Considering that time after time, that SHORT TERM job growth projections from both the NEA and other economists have proven off in the last few few years, instead of expecting a sudden departure from trend wouldn't a simple extrapolation be a better guide to future job growth?

If we take Catherine Mann's number as a given, then a reasonable expectation for job growth in computer and math related jobs for the next six years is 12%.

If we are to believe that the BLS occupation outlook handbook predicts a growth of 43%, then that would be 3.58 or three and a half times the rate of growth experienced in the past three years.

I mean, is it really reasonable to expect that hiring in the IT sector to truly expand at three and a half times the present rate? Especially when Andrew Grove has said that Intel has no plans to expand US-based businesses?

Three and a half times? Is that really a reasonable number? What is that projection based on? The late 90's as a guideline to growth trends?

I mean it could happen. But there is NO evidence that it is happening now or shifting in that direction. It would be kind of funny if all the IT CEO's suddenly turned around and said, hey you know what we should start hiring at two or three times the present rate. Just for the hell of it.

I am curious about whether this is the studied position of Dan and the other outsourcing proponents regarding the future state of hiring in America. Do you really stand behind this number?

Just a curious oldman,

Hmmm.

IT jobs to grow by 43% percent? Could someone please explain this?

It really is rather amusing. BLS thinks the number of jobs will grow by 43% and the Gartner Group thinks that 25% will of all IT jobs in all developed countries will be outsourced.

And in the same exact time frame too! Amazing that.

Well. Perhaps we'll have 25% of 143% of today's IT jobs outsourced. That leaves us with a 118% so we're a comfortable 18% ahead after another six years.

I'm certainly dancing the watusi of statistical joy. :)

===============
http://story.news.yahoo.com/news?tmpl=story&ncid=1203&e=10&u=/afp/20040317/bs_afp/us_eu_economy_it&sid=96001027

25 percent of tech jobs to be outsourced by 2010: survey
Wed Mar 17, 5:57 PM ET

NEW YORK (AFP) - One out of every four high-technology jobs in developed countries today may be outsourced to emerging markets like India by 2010, according to a report by the research firm Gartner Inc.

"Global sourcing is becoming a mainstream delivery model," said Ian Marriott, vice president at Gartner, at a Barcelona symposium and released by Gartner Wednesday.

"The potential cost advantages are so persuasive that companies that don't consider it seriously risk doing their shareholders a disservice. Businesses will also be put at risk due to loss of competitive advantage and inability to focus on growth through innovation."

==============

Hmmm.

"Someone said, well learn biotech. Well guess what, they
learn that in India as well. (And to say that High Tech
is an asset of 'the last war' is laughable. It is an asset
of TODAY's wars, and TOMORROW's wars as well.)"

LOL. Well said.

--------------------------
http://biotech.about.com/gi/dynamic/offsite.htm?site=http://www.siliconindia.com/shownewsdata.asp%3Fnewsno=23196%26amp%3Bnewscat=Technology

'India could become hub of biotech outsourcing'
IANS Friday, February 27, 2004

HYDERABAD: Outsourcing in biotechnology offers India a billion-dollar opportunity but the country needs an effective intellectual property rights (IPR) regime to tap its potential, US experts say.

Steve Lawton, vice president of the US Biotechnology Industry Organisation (BIO), said Thursday with strengths like immense talent, strong chemistry technology and research and development, India could become a hub of outsourcing in biotechnology.

Hmmm.

"Uh, hello? Someone in India can live like a king on $10,000 a
year. Can Americans live on $10,000 a year?"

Can you get a four year computer science or engineering degree for $1,700? You can in India.

Hmm

Well I'm reading the main article and all of the referenced works. I think there are a number of discrepencies that I'll write an rebuttal about on sometime this week.

The only question I have for Mr. Drezner is, if he's so certain about his position, is he willing to wager on it?

“U.S. quotas on sugar imports have, in recent years, caused the domestic price of sugar to become 350 percent higher than world market prices. As candy makers have relocated production to countries where sugar is cheaper, between 7,500 and 10,00o workers in the Midwest have lost their jobs -- victims not of outsourcing but of the kind of protectionism called for by outsourcing's critics.”

Dan Drezner is pointing out something that I’ve been foolishly ignoring. Job protectionism always impacts negatively on other American workers. Each and every time, you protect one American’s job---another of our fellow citizen loses theirs! The politician who protects the sugar grower inevitably destroys the job of the candy maker. Dan should have made this point in the early part of his splendid article. It is too important to be buried.

“Yes, but my point was more related to the sense of frustration that comes from having spent a considerable effort to build a skill set that is no longer valued enough in one’s accessible market to be able to earn the desired living from it.”

The world doesn’t owe them a thing. Someone who earned an advanced degree may find their job destroyed even during the best of times. This happened to a number of people in the energy sector when new methods of searching for oil and gas were developed. They literally woke up one day to find that their PhD's were virtually worthless. What did these people do? Some retired and many others returned to schools to update their knowledge.

“My real complaint about outsourcing is exemplified by my two exeperiences so far with 'customer support'. The first was a disaster because the guy had an unintelligible accent and it was impossible to get through to him or vice versa the problem much less the solution.”

I’m sure that what you say is accurate. Sometimes outsourcing will prove disastrous. A number of executives will stupidly outsource work merely to jump on the latest management guru fad. The fact that in a particular case it makes no sense will nonetheless soon become obvious. In the long run, more sensible decisions will be made that will benefit the the overall economy.

"The potential cost advantages are so persuasive that companies that don't consider it seriously risk doing their shareholders a disservice."

Reminds me of managed healthcare. Businesses reduced (for a while) the costs of providing healthcare to their employees. But what the employees actually received was the transfer of healthcare control from doctors and hospitals over to insurance companies. The vast amount of money that goes to running the insurance companies is lost forever to patient medical care. The result is an ever lower expectation of medical care to be doled out by those with a vested interest in witholding it.

Fifty years from now we will wonder how we could have allowed this to be done to us.

“The vast amount of money that goes to running the insurance companies is lost forever to patient medical care.”

The call for socialized medicine will only make things far worse. Health insurance is prohibitively expensive because the insurance companies are forced to pay for people indulging is self inflicted medical aliments. Do you really want to bring down the price of health care? Then you should guilt trip those who eat too much. The fat dude eating three burgers with lots of fries at the local MacDonald’s is screwing it up for everybody else. The same holds true for the alcoholics and mind altering drug users. These folks force the rest of us to pay for their silliness. And yes, why not also criticize the sexual libertines who are now suffering the consequences their selfish choices? Do I sound judgmental? I sure hope so!

David:

Healthcare and insurance is the industry that really does in marketplace ideology. You harumph about socialized medicine. But would you rather have a private nanny figure out who are good people who don't eat at McDonalds and bad people who supersize everything? And what prevents the insurance company from using something like genetic data are sheer arbitrariness to deny people medical coverage, or prohibatively expensive coverage? Or would you have a government bureaucracy determine when an insurance is engaging in good discrimination (eats too much chicken from Popeye's) vs bad discrimination (genetically predispositioned to high cholesterol.)?

And, by the way, germ. Managed care was not that bad an idea, and is really the nucleus of most "socialized medicine" schemes. The problem (and why the costs are through the roof) is that politicians heard from their constituents about bad care decisions (and from all the guys who couldn't get their viagra paid for), and pressured insurers to pay for a lot of things that really should not be paid by insurance.

Hmmm.

1. "The politician who protects the sugar grower inevitably destroys the job of the candy maker. Dan should have made this point in the early part of his splendid article. It is too important to be buried."

Yes that must be true. It can only be incidental that labor, the largest single expense for any candy-maker, is also extremely reduced. Then there are federal, state and local taxes along with social security, workers comp payments and other taxes. Not to mention vacation and personal time along with healthcare. When moving an operation to Malaysia or Indonesia such considerations simply don't apply.

Yet those must be all totally and utterly irrelevant as the price of sugar is really the only determining factor and all others not even worth mentioning.

I wonder what the price of sarcasm is these days....

2. "The world doesn’t owe them a thing. ... Some retired and many others returned to schools to update their knowledge. "

Yes but they didn't have a moving target. In a world with accelerating outsourcing retraining is a moving target. What industries and professions aren't capable of being outsourced?

Well aside from plumbing that is.

3. "I’m sure that what you say is accurate. Sometimes outsourcing will prove disastrous. A number of executives will stupidly outsource work merely to jump on the latest management guru fad. The fact that in a particular case it makes no sense will nonetheless soon become obvious. In the long run, more sensible decisions will be made that will benefit the the overall economy."

Except that people learn from their experience. In this example it was a call center with technical support. Give it a few years and these people will not only have improved their English skills but also their technical support skills. Then what downside is there to outsourcing the call center?

Plus, as more companies engage in such practices, the overall pool of available workers expands dramatically. Then there's the principle that, if all companies are going the same route, what choices are there for customers? If all technical support has been outsourced to India, then you cannot use the location of technical support as a determining factor.

4. "Fifty years from now we will wonder how we could have allowed this to be done to us."

I think it'll only take a few more years, if that at all, before we all see the true costs of outsourcing. We're already starting to see it in anemic job creation. And no. I don't buy the whole "hundreds of thousands of people are starting their own businesses" meme either. It smells like crap, looks like crap and therefore, it's probably crap.

Otherwise known as wishful thinking.

5. "The call for socialized medicine will only make things far worse."

It constantly amazes me the number of ill-informed people who clamor for socialized medicine. For those who look at socialized medicine with rose-colored glasses I have only one comment to make.

There is already socialized medicine in America. It's called the Veteran's Administration.

If you're so hot about socialized medicine then you can go and try your luck with a VA Hospital.

“But would you rather have a private nanny figure out who are good people who don't eat at McDonalds and bad people who supersize everything?”

I prefer that we all guilt trip the individuals who smoke, drink too much, and eat like there is no tomorrow. We are the ones who pay for their foolishness.

“And what prevents the insurance company from using something like genetic data are sheer arbitrariness to deny people medical coverage, or prohibatively expensive coverage?”

That’s why we have laws. I do not believe in total laissez faire. We have a right to demand that insurers abide by certain rules of conduct.

“Managed care was not that bad an idea”

I agree. There is no way that any insurance plane can survive without a certain degree of give and take friction between the insurer and the insured. If we can have anything we want---I will immediately demand that the medical profession provide me with the body of Adonis, the looks of Mel Gibson, and the brain of Einstein.

“...is that politicians heard from their constituents about bad care decisions (and from all the guys who couldn't get their viagra paid for), and pressured insurers to pay for a lot of things that really should not be paid by insurance.”

Yup, and the politicians have got to stop this nonsense. The insurance companies indeed do have to pay for stuff that has nothing to do we per se health needs.

"{would you} rather have a private nanny figure out who are good people who don't eat at McDonalds and bad people who supersize everything"

Er, yes! Dr, squeeze my vanishing "love-handles" and give me a huge discount. I'm sure some insurance providers in a free market could offer a more expensive "no test" insurance for the shy. Retiree's could also purchase a health annuity on retirement that would pay their fees, for the rest of their lives.

An obvious solution to the genetic testing dilema is go for the option for genetic test outcome insurance bundled with every genetic test. You can replace disability benefit by having pre-birth disablement insurance? This should stimulate the market for PIGD, and result in less disabled children, as well as a no financial element to the abortion decision in the case of a disabled feotus.

Socialised medicine is abhorent, it subsidises the premiums of those that do NOT manage their health by upping the premiums and therefore punishing those who do watch their health!

Insurance and the Market are ALLWAYS better than socialised health. I am stuck with the NHS in the UK and it SUCKS!

Rob:

And I have an English relative who came down with an exteremely debilitating disease that got the care she needed through National Health, without having to lose all her assets first. (If she were in the US, she would have blown through her lifetime maximum, then her meager savings, then finally she would have been eligible for Medicaid.)

The fact that we do not have national health, and many other nations do causes a fair amount of marketplace distortion. For example, if haelthcare were paid for out of the income tax, the difference between self-employment and what you can get through simple wages would be less, probably adding to marketplace creativity, rather than contributing to job lock. Also, you'd lose an incentive to outsource. (There...tied this message to the thread topic.)

(Wonder why the cost of prescriptions is so high? It's because the rest of the world sticks price caps on the drug industry. So the drug companies make up their R&D costs on the backs of the US consumer. It's rational corporate behavior, but not exactly a blessing for those of us who live here.)

At some point, the public is going to demand some level of healthcare from the government. This will happen when enough employers bail out of the healthcare business, leaving a bunch of uninsured.

Hmmm.

"And I have an English relative who came down with an exteremely debilitating disease that got the care she needed through National Health, without having to lose all her assets first. (If she were in the US, she would have blown through her lifetime maximum, then her meager savings, then finally she would have been eligible for Medicaid.) "

First off I noticed that you didn't reply to my post on the Veteran's Administration. Nothing like ignoring a good argument because it gores your ox eh?

Secondly I'd suggest you be a little explicit on what ailment your relative has. There are a number of illnesses that are indeed covered by Medicare regardless of age or ability to pay. One of them, kidney failure, is definitely covered as I have first hand knowledge of that.

Third I'd suggest you try finding quality healthcare in the UK when using the NHS. I've read enough horror stories about that to turn me off. Fact is that any sort of nationalized health service is simply more bureaucracy. If you think going to the local Department of Motor Vehicles is aggravating, think of doing so when your life is at stake.

Your example, while it might draw pity from someone less hard-hearted than myself, is largely irrelevant. The fact is that your relative, if in the US, would get far better treatment than in the UK. So what if those assets were depleted? Assets can always be regained, your health is far more fragile and valuable than that.

And believe me on this. If there's anyone on this blog that knows this, it is I. I've dealt with kidney failure for over three years and 22 operations now.

Hmm. If nothing else American hospitals at least have AC. From what I've read we haven't had 15,000+ elderly die off from heat stroke in our hosptials because some damn bureaucrat decided that AC units were not acceptable and no window was allowed to be opened more than 18". Evidently the reason was to prevent seriously ill people from committing suicide at the hospital.

Dan, I've contacted the INS and am proposing that they set aside 25,000 L-1 and J1 visas for foreign free-market economists to come over here and outsource the field to India and China.

I figured you would understand. You can be redeployed at U of C, right?

Yes, Dan, that's irony - meat and potatoes for a guy like me. Meanwhile, here's my take on your article...
http://www.itpaa.org/modules.php?name=News&file=article&sid=339

Outsourcing economists... Come to think of it, I could make some serious cash doing that... ;)
Scott Kirwin
Founder
IT Professionals Association of America
www.itpaa.org

This is turning into quite the interesting debate...

HTW (et alia):
1. This is a problem - I'm just not sure that legislating against outsourcing is a good solution. Today's WSJ had an article about AirBus bidding on the AF contract for new tankers, if the Boeing mess ends up re-opening the bidding. I think this is a REALLY bad idea.

I think you misunderstand, or we simply disagree on, America's place in the world. Our "technical innovation and leadership" are side-effects. It's our system that allows such things to flourish that gives us our place in the world. The system is working well and has not, as yet, been duplicated elsewhere. Virginia Postrel is a good resource for this sort of thinking.

2. You have a point here as well, one that was made to me in an immigration debate: How far are you willing to lower your standard of living? My approach to the "learn something else" issue is to learn MORE about what I already do. I'm not going into biotech - if nothing else I can't afford the time and retraining. But I can become a star in my current field.

Wouldn't the "proponents of High Tech outsourcing" be global capitalists, not "global socialists"?

No, it shouldn't "be America's policy to export our country's best jobs". However, that ISN'T our policy. Our policy is to allow the free movement of capital and labor. It hits our worst jobs (illegal immigration) as well as our best (offshoring).

3 & 4: This is a substantial issue, remember the Pakistani black-mail story? However, it has very little to do with the debate. It's an issue that can fairly easily be solved (treaties, contracts, etc...). It's a red-herring because even if/when it's solved, the debate over offshoring will not end.

Ed:

#1 sugar: Very good points!

#2 plumbing: This is also a problem, but not a new one. The acceleration of change is excerbated, but not caused, by offshoring. I'm in the "do something about it" camp on this one: We cannot survive as a country if we're all giving each other haircuts. I just don't have any good ideas about what that "something" may be. I don't think legislating against offshoring is the solution.

#3 learning: I'm not sure I agree with this entirely. Corporations don't learn well, or quickly. Turn-over rates in India's call centers are very high (WSJ source, no link, sorry) - much like tech jobs in the 90s, here. Not much learning takes place in that sort of an environment, either by corporations or by individuals.

#3 everybody does it: Yes, they do. However, I doubt there are very many consumers who care enough to make purchasing decisions on this information even if everybody didn't. Everytime I see the WalMart commercials with the little smileyface slashing prices I want to edit the video to cut in scenes of closing American factories. No one is stupid enough to not know that those low prices come from China, India, Mexico, etc... They simply don't care. They want the lowest price.

#4 self-employed crap: I tend to agree. It may be making a small difference, but not THAT much.

Scott,

"Outsourcing economists..."

I am an economist and that is exactly what I expect to happen. I think we'll see an IT induced reduction in force in university personnel. The positive impact on the economy will remain despite the negative impact on employment in the professorial fields. Economists could just lie about the economic effects and pretend that protection is in the public's interest?

___

I offer my responses to Ed and Oldman in this prior thread as a blanket response to the general critique of the outsourcing Luddites: http://danieldrezner.com/mt/mt-comments.cgi?entry_id=1166

___

felixrayman,

I cannot locate the series you pulled these stats from (egads the BLS website is mess!):

"Average hourly earnings in January, 1973, adjusted for inflation: $9.10
Average hourly earnings in January, 2004, adjusted for inflation: $8.33"

I do remember seeing something similar. I think this series is equally informative:

Cost of compensation (Cost per hour worked)
1993 Annual 17.88
1996 Annual 18.68
1999 Annual 20.29
2001 Annual 22.15
2003 Qtr4 24.59

Source: http://data.bls.gov/cgi-bin/surveymost

Eitherway, protecting non-competitive industries is not an economically effective way to address the Pareto problem. Frankly, this Luddite campaign only puts the emphasis on a clearly bad solution (i.e., it'll only cost more jobs and further lower employee leverage). If the point is to provide a softball for opponents to knock out of the field then this is the one to pitch.

If you want economically reasonable Pareto improving policy prescriptions, I can think of several that are clearly much better. For starters, reverse taxes for open ended education retraining accounts. Increasing and expanding the EITC. Reversing the previous two decades' de-progression of Federal taxes. All of these would address the Pareto problems without the clear negatives of protectionism.

"Scott Kirwin
Founder
IT Professionals Association of America"

Scott,
Is that a union? That would explain why you're against outsourcing. Difficult to collect dues from workers in India.

Since I mentioned a couple policy prescriptions, there are a few other major reforms that we should probably be looking at to address job shift induced workforce turnover. Chief among these in my mind is the problem of health costs and benefits portability.

To contain costs, people have to do cost benefit analysis in their health care decisions. In our current system, cost is not part of the analysis. To aid prevention routine doctors visits should probably be no more expensive than typical co-pays are today, but tests, prescriptions, et.al. should probably cost claimants no less than 10 percent or so of total costs.

Likewise, insurance should be paid out of pocket and not provided as a job related benefit. To keep costs down for individuals, health insurers should have to offer insurance to all residents in one of the 9 Census regions (states are too small!). Furthermore, insurers should only be able to use a positive list of information in determining risk. This positive list should be limited to things in a person's direct control such as smoking, diet, fitness levels, etc.

To further cut administrative costs, a national list of covered procedures could be maintained with a committee of health professionals adding experimental procedures as they become established. I'm guessing that somebody has already developed a plan similar to this.

Um, Stan you've just proven to me why most economists have never actually had to make a buck. As someone who's had to make purchases based on "scarce capital" and productivity outlays for hundreds of thousands of dollars at a time in a competitive environment let me tell you that "appears cheaper" is nuts talk.

You don't have the option of producing cheaper at the competitor nation's marginal cost UNLESS you move the factors of production. That's called offshoring or outsourcing.

Your cost is absolute. That's the first impact of scarce capital, NOT the returns. You have to be able to afford the price tag of production. And you are always best off maximizing your production and margin. If your cost structure is fixed, i.e. no offshoring available / no mobility of capital and factors of production, you can't increase margin so you can only increase production.

The fundamental theory and truth of capital is that people have to have a lot of money in one place in order to afford the entry costs of production - the initial and continuing capital costs, and the greater the economy of scale you want to capture the greater the absolute amount of capital you need - you're just increasing production even faster to produce a higher return to investment ratio.

You need money to make money in other words.

Your "but because of opportunity costs it will appear cheaper to him." is technically correct but it is also technically irrelevant.

The other option to this is to reduce the fixed costs of one's operation to become cost competitive.

You are completely confusing Opportunity costs which are a relative measurement of gain between different choices, and absolute costs which are the competitive and entry costs in absolute dollars. These never become cheaper unless you drive down the price structure. Products become cheaper because the marginal cost declines with efficiencies of scale. So Intel sells chips for less, or more accurately more for a similar amount of money. It's fixed cost structures in healthcare, workers, plant buildings, machines, etc. does not become cheaper without driving down the local economic equilibrium or a supply/demand gap.

In other words, you can afford to charge less for more if you make a whole lot more, but your startup and maintenance costs aren't likely to decline.

However opportunity costs for market entry and the scarcity of capital are focused almost entirely on these issues - i.e. the local fixed costs of the economies.

You're what? Holding out a textbook to me? As if I haven't read the like before. Dear God man, you're the type I've seen in business before that thinks that if they play around with the numbers they can get "bigger bang for their buck".

Well that's true, if you can afford to get and stay in the game.

But that's what the original theory of comparative advantage addresses - the opportunity costs of production relative to the capital investment needed for factors of production.

The rest of your spiel is similarly filled with economic misdirection. You write "Either capital and current accounts balance or the currency values have to adjust".

Except that of course we are faced with the specter of absolute monetary inflation by foreign countries like Japan printing like mad in order to buy ever more Treasury notes in order to maintain their currency exchange rates and maintain a current accounts deficit.

This moves capital from exporting industries to the government, which is remarkedly less productive, and produces a drag on economic growth. Jobs are not transferred from import industries to export industries if the capital investment does not occur to increase production ... X # of widgets etc.

So yes, the market is "efficient" and will correct the imbalance. Of course, that may involve a huge market "correction", lots of people losing money, the United States constrained by spending and debt service, a decline of living standards and any number of bad outcomes that have already happened to any number of countries recently. The United States is not too big to fail nor is to immune to the basic rules of capitalism or fiscal management that direct other countries.

It's just that it will take an even bigger correction to redress the imbalance. Eventually. Saying that it "will happen" is sort of a form of fatalism. This is like saying, you can't take it with you so why bother getting money? Well in between here and then, makes a big difference, and there are legacy issues to consider.

Sigh. Stan. No, in absolute terms you really do produce more expensive stuff sometimes under comparative advantage. As in more absolute dollars out the pocket out of scarce capital resources. No amount of hand waving "appears cheaper" crap changes the threshold market entry and competitive maintenance costs of production.

That you can imagine so shows that you've probably never had to manage cashflow or keep a business afloat on a finite credit line or cash reserve. Sometimes you really do have to pony up to pay more to make more, because that's the only way you can make a profit EVEN if you are making stuff more expensively than your competitor - because for whatever reason you can't lower your fixed costs to his in the short term (that might involve an even larger capital infusion of investment to capture lower marginal cost)

Dear God man, you've just tried to hand me a textbook to "teach me" that because my competitor makes it cheaper I don't have to spend more absolute dollars to make more money. Sometimes you do. That's capitalism and business.

Oldman,

"Dear God man, you've just tried to hand me a textbook to "teach me" that because my competitor makes it cheaper I don't have to spend more absolute dollars to make more money. Sometimes you do. That's capitalism and business."

Get a grip. I'm holding out a textbook to you because you've continually misrepresented a fairly basic economics concept. The concept is counterintuitive so you are hardly alone. Senator Hollins from South Carolina made a hash of the concept in the Washington Post this past weekend.

I do not know your motivations. I assumed, apparently wrongly, that you would want to know about your error. Instead you continue to make bad arguments in favor of your position. If you aren't using the same definition for comparative advantage as the rest of, say so up front and you'll be less likely to have somebody correct you.

Under the definition of comparative advantage the rest of us are using, in very simple terms. When a foreign buyer pays for a traded good they are paying less than they would at home. Nobody is making the nth product in their home country because they are all making the nth product of something else that is more profitable. It appears cheaper because it is!

Feel free to think you know whatever you like.

I thoroughly disagree with Oldman's post, but I'm going to focus on one specific point that is most clearly wrong.

"Except that of course we are faced with the specter of absolute monetary inflation by foreign countries like Japan printing like mad in order to buy ever more Treasury notes in order to maintain their currency exchange rates and maintain a current accounts deficit.

This moves capital from exporting industries to the government, which is remarkedly less productive, and produces a drag on economic growth. Jobs are not transferred from import industries to export industries if the capital investment does not occur to increase production ... X # of widgets etc."

No. When foreign governments buy treasury bonds, the government does not necessarily issue more bonds. They are purchased on the open market. A large demand for bonds drives down the return, which encourages investors to move their money out of treasury bonds and into the private sector. The total amount of capital at work in the private sector in the United States goes up, not down.

IANAE, so could someone explain in basic English why Paul Craig Roberts is wrong? See 'The Harsh Truth About Outsourcing': "...Outsourcing is driven by absolute advantage. Asia has an absolute advantage because of its vast excess supply of skilled and educated labor. With First World capital, technology, and business knowhow, this labor can be just as productive as First World labor, but workers can be hired for much less money. Thus, the capitalist incentive to seek the lowest cost and most profit will seek to substitute cheap labor for expensive labor. India and China are gaining, and the First World is losing."

Xavier writes:

"No. When foreign governments buy treasury bonds, the government does not necessarily issue more bonds. They are purchased on the open market. A large demand for bonds drives down the return, which encourages investors to move their money out of treasury bonds and into the private sector. The total amount of capital at work in the private sector in the United States goes up, not down."

Umm ... except that government borrowing has not stayed constant, and one of the cited justifications for sustainable growth in public debt is that it has not raised interest rates. If demand for bonds is increased by a need to subsidize foreign exchange rates, then interest rates do not have to rise when supply rises in order to entice buyers.

The government could easily be borrowing just as much from domestic purchasers and then borrowing even more from foreign countries, and with the increased demand interest rates on the yeild curve can stay the same.

Otherwise by your logic private capital investment should have increased by the same amount foreign countries borrowed using the zero sum argument you present during the past few years, and companies have reported holding back on making such investments. In addition, the growth of that capital even when redirected have to be to productive companies.

Warren Buffet and the Economist have noted that the junk bond market has exploded and is overvalued, with much money chasing high returns (relative to low interest rates) in risky and mostly wasted investments - most of the money into these companies finances losses and not business expansion.

So again, we have redirection of capital to unfruitful ends rather than export industry expansion that would create jobs. This has been confirmed by the sluggish job growth numbers.

Also, could someone explain why we shouldn't be worried about, for instance, sending private medical records overseas, or Indians or Chinese putting trojan horses in our software?

Stan,

Let me make it simple for you. There's a reason why discussions of comparative advantage are framed in terms of production - tea vs coffee - or manhours. This is because the costs of production may vary, and these have no bearing on the theory of comparative advantage.

http://www.j-bradford-delong.net/movable_type/archives/000129.html

"This principle has a corollary: we should import not those goods and services that we make less efficiently than other people make them, but those goods and services that we make less efficiently than we make goods and services in general." [emphasis added].

Lower wages does not create comparative advantage.
http://econlog.econlib.org/archives/000362.html

If you don't believe me, maybe you'll believe other economists. The framing of comparative advantage in terms opportunity costs of production rather than expenses is purposeful - it neatly avoids the issue of fixed costs and general costs of production - which you are dragging in needlessly and contradictorily.

Now I've assumed that as an economist you would be up on these simple statements. I am not an authority in your field, but I am technically trained and recognize your argument as clearly contradicting the above. I also have real experience of how production costs impact comparative advantage gains. You've changed opportunity costs from a discussion of production quantity to a discussion of relative costs of production which will vary.

If you don't want to recognize this, then I'm sorry and we'll just have to agree to disagree. However, it doesn't exactly increase my respect for your profession.

It's not simply low wages that create comparative advantage. Wages are lower in India because the overall productivity of the economy is much lower than ours. That disparity in productivity is much less severe in programming. That's why Indian programmers are able to work more cheaply. The productivity (and therefore wages) that they would get in another industry is very low, which depresses wages for Indian programmers well below the wages of comparable American workers.

Dear Xavier,

You're putting real thought into your piece so I thank you for that.

However if you look at how productivity is calculated:
http://www.bls.gov/opub/hom/homch10_e.htm

"Labor productivity = (Output index) / (Hours of labor input)"

What you are really talking about is unit labor costs:

"The computation of labor compensation per hour parallels the computation of output per hour. Unit labor costs (ULC) are computed as labor compensation (C) per unit of output, but are often represented as:

ULC = (C / H) / (O / H)"

Now you might be referring to multifactor productivity which is much more complex and includes capital costs and labor costs as well as labor hours, but essentially the concept is the same.

***

However, all of this is to not justify a relationship between comparative advantage and wage differentials. A lower labor cost does increase multifactor productivity, but it doesn't increase it against other ventures in your own country. This is what I was talking about regarding a fixed cost structure. Indeed the demand for software workers in India is increasing their wages relative to other Indians, and that factor if considered alone would decrease multifactor productivity.

It would also not increase comparative advantage.

This is not an open and shut case however, and I encourage you to follow this line of reasoning, as a very good investigative or research paper could be done on this topic.

However, as stated I do not believe that the way productivity is calculated supports your argument Xavier.

Yet you're so compellingly good at this stuff, Mr. Oldman...

Oldman,

"There's a reason why discussions of comparative advantage are framed in terms of production - tea vs coffee - or manhours. This is because the costs of production may vary, and these have no bearing on the theory of comparative advantage."

The reason comparative advantage is framed in terms of production isn't because costs have no bearing on the theory of comparative advantage. It is to simplify the very complex cost analysis that you have to do to arrive at opportunity cost. In other words, it is done that way to make a very complex idea accessible.

To arrive at opportunity cost you have to know your fixed costs, your competitor's fixed costs, the costs of your products, the price of competitors products, the price of exchange, etc. In other words, comparative advantage depends on just about every cost and price that is out there.

You don't have to believe me. I've reatedly pointed you to your nearest economics text book. Instead of arguing with me, open the thing up! As it stands you are using a different model than the rest of us. Needless to say, it shows in your results.

P.S., you missed Xavier's point entirely.

Hmmm.

"It's not simply low wages that create comparative advantage. Wages are lower in India because the overall productivity of the economy is much lower than ours."

Ummm. No.

Wages are low in India because:

1. Costs are lower.
2. An enormous pool of low wage labor.

Labor is a commodity. The price of commodities is determined by the availability compared to the demand. High demand, low availability results in higher wages. Low demand, high availability results in lower wages.

Productivity doesn't have much to do with it at all.

ed: I think this explains the correlation between the overall productivity of a country and its average wages. http://econlog.econlib.org/archives/000362.html

You say that wages are lower in India because costs are lower and there is a large pool of low wage labor. That's just circular. Wages are low in India because there is a large supply of low wage labor? Are you saying that wages are simply inversely proportional to the size of the population? That makes no sense at all. I don't think you can say that wages are lower in India than the US because there are more Indians than Americans. There is a large supply of labor in India, but there is also a large local demand.

To say that costs are lower is equally circular. I would assume you mean that wages are low because other non-labor costs are low (if you mean that wages are low because labor costs are low then you're saying nothing at all). These other costs are low generally because they depend indirectly on labor costs.

Your reasoning is entirely circular and it does nothing to explain why wages are lower in India than in the US. That disparity cannot be explained without looking at the overall productivity disparity between the two countries.

"Also, could someone explain why we shouldn't be worried about, for instance, sending private medical records overseas, or Indians or Chinese putting trojan horses in our software?"

Posted by The Lonewacko Blog at March 22, 2004 06:21 PM

As far as I can tell economic sabotage and expropriation seem to be legitimate concerns for security and property. On the same token though, shouldn't the rest of the world be worried about the same things? If so what is the appropriate response? Further, do these problems make trade more threatening or less threatening?

Somebody has already commented on the likely impacts for small subcontractors expropriating and selling private information. I'll admit that economic effect may not be enough. (There seem to be plenty of Nigerian scam artists.) There may be a need to restrict the processing of certain private information to U.S. shores unless equivalent or better legal rights can be shown in trading partners.

In reference to trojan horses, isn't economic sabotage self defeating in an economically interdependent world? Even if you could somehow contain the damage to a specific trade partner, your own economy is going to contract equal to the effect on your trade with that country and all of its trade with other countries including the subsequent multipliers. Wouldn't this effectively amount to an economic version of Mutually Assured Destruction? In this instance though your target doesn't even have to have the capacity to respond in kind. You simply shoot yourself in the foot with the same bullet.

Perhaps somebody else here has given this subject more thought?

"Also, could someone explain why we shouldn't be worried about, for instance, sending private medical records overseas, or Indians or Chinese putting trojan horses in our software?"

Posted by The Lonewacko Blog at March 22, 2004 06:21 PM

The biggest security threat is always employees. I don't see any reason to think that non-US employees would be any more or any less likely to betray their employers by leaking information.

The latter worry is very close to the tinfoil hat crowd. We're not offshoring to the Indian government. We're offshoring to various companies. The threat is that one of these companies is going to find it in their best interest to compromise a major software system (if it's minor, why bother?). Why would that be in their best interest? If word ever got out, and it would, they'd never get another contract again. The same is true even if one is a consipracy theory afficianado: It's a one-shot weapon. If the Indian government plants agents in a software company who create back-doors for the government, they can only be used until discovered. The forensics team would identify the culprit and they'd be out of business in days.

How do you KNOW that Larry Ellison doesn't have a back-door into Oracle systems? You can't. So you install the system in such a way that if there is a back-door, or simply a bug, the damage is minimized. We're back to the difference between programming and software engineering.

Despite all my blather, I still maintain this is a red-herring in the debate.

Hmm.

1. "ed: I think this explains the correlation between the overall productivity of a country and its average wages. http://econlog.econlib.org/archives/000362.html"

Again. Wages are determined by the demand and the supply, not productivity. The demand for labor is dependent upon the investment of capital, not productivity. Japan has high wages because of demand, due to investment of capital. Vietnam doesn't have high wages because the demand is low, due to a lack of investment capital.

It ain't simpler than that.

2. "Your reasoning is entirely circular and it does nothing to explain why wages are lower in India than in the US. That disparity cannot be explained without looking at the overall productivity disparity between the two countries."

Again. Wages are low in India because of a deficit of investment capital. Wages are growing in India because of an increase in investment capital. Wages remain lower because the available investment capital is insufficient for the size of the population.

Again. Ain't simpler than that.

3. "The biggest security threat is always employees. I don't see any reason to think that non-US employees would be any more or any less likely to betray their employers by leaking information."

Because using indentity data stolen from HR Block to defraud a bank for $10,000 USD makes sound economic sense in India. In America that is chump change for the potential prison time involved. In India or another third world country, you can retire on that.

I have mentioned fixed costs Stan, but you didn't understand it then and you still don't understand it now. That you now argue because I haven't factored in fixed costs and exchange rates, because I have been mentioning them quite a bit, as a defect of the argument boggles the mind. If you really are an economist, perhaps you will explain the rather straightforward comments I've posted by other economists - instead of ignoring them to focus on issues you botched before and are botching now.

A foreign competitor's labor costs doesn't make any higher or lower the productivity or return on capital for one domestic investment of capital versus another investment opportunity for capital. In other words, how much it costs to make something somewhere else doesn't change how you maximize your production to costs here. It is on this maximization of production to investment of the opportunities YOU have that creates comparative advantage.

The comparison is between all the different opportunities you have for production, not between you and a competitor's production opportunities.

This IS pretty basic econ textbook stuff, as I have quoted, and I'm shocked that you would disregard other economist's words on this topic, sheer logic, and sound arguments ... in order to make hand waving kind of arguments that contradict everything I've ever heard any of your profession say.

I have sourced my arguments, if you still are in whacko land, I suggest YOU revist basic econ and brush up on it.

Oldman,

I did not argue that you:

"...haven't factored in fixed costs and exchange rates...".

I stated that opportunity costs include fixed costs, etc. I mentioned this because you brought up these costs like you were introducing something new. You are very confused. You state:

"You don't have the option of producing cheaper at the competitor nation's marginal cost UNLESS you move the factors of production."

But then you point to any number of ways that marginal costs can be higher or lower depending upon a nation's specific factors of production:

"It's fixed cost structures in healthcare, workers, plant buildings, machines, etc."

I'll add a few additional factors of production that effect marginal costs, education levels, government infrastructure (compliance costs, crime levels, etc.), transportation infrastructure, telecommunications infrastructure, energy infrastructure, etc. All countries on the globe have different levels of each of these. Opportunity costs include all of these myriad production factors.

For many developing countries, labor and land are about the only things that come cheap. India cannot simply create all of the other factors of production overnight. They need capital and time to invest in electrical production. They need capital and time to invest in water treatment. They need capital and time to upgrade ports, rails and roads. Depending upon how important each one of these factors is for a line of business, marginal costs can easily be cheaper elsewhere. Since most of these factors of production are extremely important for business, marginal costs are frequently cheaper elsewhere.

I'll say it again, you are using a different model. Nobody buys something that is more expensive under comparative advantage. They aren't paying more. They simply buy something that they could (and maybe even used to) make for less. They don't make it though because it is CHEAPER to produce something else and trade for the product. The fact that they could produce it for less in an alternate universe doesn't make it more expensive. When they buy a traded product they are paying less! It costs less due to the opportunity costs but it still costs less.

You clearly don't understand the theory of comparative advantage. Your response to Xavier points to ignorance of other basic economic concepts as well. (Hint: try answering Xavier by looking at manhours and GDP per capita.)

I'm sorry that you find criticism demeaning. Since it does not appear that you can receive corrective suggestions constructively, I won't respond to any further dialog from you.

___

Ed,

"Wages are low in India because of a deficit of investment capital."

Stated another way, lower productivity in India is largely attributible to lower capital investment...

"Wages are determined by the demand and the supply..."

Productivity determines the supply and demand. A business cannot pay its employees more than it produces. Consumers cannot sustainably purchase more than they earn.

I think you would find this site very helpful: http://www.oswego.edu/~economic/newbooks.htm

Correction: "Productivity determines the supply and demand." Productivity is one of the determinants of supply and demand.

Hmmm.

"Correction: "Productivity determines the supply and demand." Productivity is one of the determinants of supply and demand."

Really? I thought your argument was that productivity determined wages. Instead now productivity partially determines supply and demand?

So you submit to the point that wages are determined by supply and demand?

:)

Yuppers!

I can now see that outsourcing jobs to other countries is absolutely GREAT for America! You guys won the battle! I'm convinced! I'm converted! I can SEE the LIGHT!

Really!

lol!

-----
http://story.news.yahoo.com/news?tmpl=story&ncid=&e=3&u=/ap/20040325/ap_on_bi_go_ec_fi/economy_7

*Economy Grows at Solid 4.1 Percent Pace *

"The economy added just 21,000 jobs in February — all of them in government — a Labor Department survey of payrolls showed. Job growth has been painfully slow despite better economic activity. "
-----
http://story.news.yahoo.com/news?tmpl=story&ncid=1203&e=1&u=/ap/20040325/ap_on_bi_ge/snow_china&sid=95609868

*U.S. Making Progress on China Currency *

"American manufacturers have contended that China's policy of tightly linking its currency to the U.S. dollar has made the yuan undervalued by as much as 40 percent, giving Chinese producers a huge competitive advantage against American companies."
-----
http://story.news.yahoo.com/news?tmpl=story&ncid=1203&e=3&u=/afp/20040325/bs_afp/us_economy_farm_greenspan&sid=96001027

*Greenspan defends free trade, productivity, despite shifting jobs*

"Greenspan drew on the history of rural American development to rebut protectionism amid deepening concern over the loss of US jobs to countries with cheaper labor such as India and China."
-----
http://story.news.yahoo.com/news?tmpl=story&ncid=1203&e=5&u=/afp/20040325/bs_afp/us_economy_unemployment&sid=96001027

*Weekly US jobless claims rise slightly to 339,000*

"WASHINGTON (AFP) - The number of US unemployment claims rose by 1,000 in the week ended March 20, to 339,000, the Labor Department "
-----

I must admit. You guys have a very convincing argument .....

No Ed,

Supply and demand also depends on technology (new products, substitutes for old products), population, and tastes among other things.

Productivity per capita determines the amount it is possible for people to earn per capita. It is a major determinant of both supply and demand.

Stated another way, supply and demand sets the wages paid, but supply and demand are determined by productivity, population, tastes, technology, etc.

You weren't disagreeing with Xavier. He was talking about how you arrive at specific supply and demand levels.

Ed,

What differentiates structural economic changes from cyclical economic changes? Any idea of what part of the stuff you posted is attributed to cyclical factors and what part is attributed to structural factors. Why are they attributed this way and how strong is the support?

Stated another way, have we had recessions before? How often? What was the cause and how did they end? Have we had job shifts before? How often, what was the cause and how did they end? It looks like you will be surprized at the answers.

Just so you know, recessions occur about every 7 years. (I'm not sure I remember this number correctly but I believe it is close?) This recession is different from most over the last century because an investment bubble led to relative overcapacity in a specific sector of the economy. This bubble induced sectoral recession was followed by a large external shock (9/11). All of this occured at the same time a major economic revolution in productivity was underway. There have only been a few of these major revolutionary breakthroughs in economic technology and they have all resulted in massive job shifts. Good luck.

Hmmm.

"Productivity per capita determines the amount it is possible for people to earn per capita. It is a major determinant of both supply and demand."

So an area completely overrun by rich retirees must be poor because the per capital productivity is low?

lol.

I don't get it!
Not all of us are made to hold top level, top innovative, creme de la creme jobs.
I think most people want a pay check and
not much mental effort to aquire one; we can't all be intellectuals you know. So should we move to China and India to find a job?

Dr. Drezner makes good points, but his paper as well as the comments posted here fail to address what I believe is an important issue.

When billions of people in China, India, and other countries (perhaps including the United States) become wealthier as a result of free trade, their demand for natural resources is going to increase very significantly. Unfortunately, the available natural resources are not unlimited. The only way this planet can support 6 billion people is if a great majority of them are poor (i.e. not living in large air-conditioned houses, driving cars, flying in jet aircraft, trying low-carb diets, showering every day etc.). I am afraid not of loosing my job to someone who is willing to do it for less, but of loosing my life in some war over natural resources caused by greed of those who want to be wealthier even at the cost of making billions of other people wealthier as well.

I have no formal education in politics or economics, and I hope that my fears are naïve and baseless. In fact, I would be very thankful if someone explained to me why this is not an important issue.

Thank you.

I think most people are missing the point when discussing over this subject. Outsourcing only takes place when there is no distinction or trade off on the balance sheets overall in the eyes of managers. This exact factor implies the significance and need for the it in a free, liberal and prosperous economy. Why you ask? because it is the only real pressure that stimulates genuine innovation and progress. Is your job being offshored? Set up a firm specializing in finding expert personel in asia! Win at your own game, do what you do better than others. offshoring is a wake-up call, not the apocalypse of the free world!

And one other thing regarding the last set of posts. The chinese have every right to become as wealthy as americans. They are humans just like the average bloated beerbelly joe living in nebraska. Would not a more equal distribution of wealth, knowledge and power seem a very positive stabilizing factor in international politics? isn't it all about the money and power after all? From iraq to illinois? Secondly it would prove to be a real mirror for western consumerism as it is today. It would surely have to lead to an essential debate about the sheer definition of economic progress. Are we happier than we were 75,50 or 25 years ago?

I read Drezner's Foreign Affairs piece. I'm not impressed. Drezner starts of by telling the reader that he's a free trade ideologue and then tries to convince us that there really isn't a problem with job losses. We're all just delusional and hysterical. Dan, the issue of offshore outsourcing is that the U.S. is losing the value-added better paying middle class industrial/manufacturing *and* the white collar "knowledge age" high-tech professional/technical/scientific jobs. The jobs that are now being created are generally inferior to what is being lost offshore. And, Dan, you left out the important part of the outsourcing puzzle: the guest worker programs supported by corporations and politicians in both major parties. Corporations can now import high-skilled low wage foreign guest workers into the U.S. and replace Americans in their own country. The H-1b and L-1 visa programs are, in truth worker replacement programs aimed at college educated white collar workers. You make no mention whatsover of these programs. They have been so well-liked by corporations that the Bush administration is seeking to include "free movement of labor provisions" in all future FTAs which mean that Third World labor is available without limitation inside the U.S. Dan, I wonder who will bother going to college and listening to your lectures when the value of American education is fully depreciated?