You Decide

Always decide for yourself whether anything posted in my blog has any information you choose to keep.

Wednesday, April 19, 2006

 

American jobs and global economy

"Dobbs's Disciples

By Donald Boudreaux 

Source Tech Central Station Daily 

"Economist Paul Craig Roberts has joined recently with the likes of Lou Dobbs and Sen. Charles Schumer to denounce so-called "outsourcing" -- that is, the importation of services.

 

Roberts is aware that, throughout history, free trade has raised the living standards of ordinary people. But, he says, this historical record is irrelevant to today's world. He explained the reasons in a January 6, 2004, New York Times op-ed written with Sen. Schumer and entitled "Second Thoughts on Free Trade":

 

"First, new political stability is allowing capital and technology to flow far more freely around the world. Second, strong educational systems are producing tens of millions of intelligent, motivated workers in the developing world, particularly in India and China, who are as capable as the most highly educated workers in the developed world but available to work at a tiny fraction of the cost. Last, inexpensive, high-bandwidth communications make it feasible for large work forces to be located and effectively managed anywhere."

 

In short, Roberts alleges that the American standard of living is threatened by the world's growing prosperity, improved education, better governance, and greater fluidity of capital and resources to move in search of higher returns.

 

Roberts' argument is deeply flawed. Its most fundamental defect is his implicit assumption that the world's stock of non-human capital is fixed.

 

Suppose for the moment that the world does possess only a fixed amount of capital goods -- a fixed amount of factories, robots, machine tools, industrial chemicals, and R&D labs. In this case, Americans would indeed suffer from improvements in foreigners' work ethic, education, and emancipation from their governments' misguided regulations. Some capital goods that today are here, raising the productivity of workers in America, would relocate tomorrow to other countries whose citizens can now use much of this capital more effectively than they could in past. As capital flees America, the productivity of U.S. workers falls because these workers will be partnered with fewer efficiency-enhancing capital goods. Americans' only hope of keeping much of this capital from fleeing would be to accept lower wages. Workers suffer. Capitalists get filthy rich.

 

But one of the defining features of the modern world is capital's expansiveness, its non-fixity. Capitalists the world over know that in every place governed by a rule of law and marked by a reasonably free market, a strong work ethic, and a spirit of commerce, profits can be made by employing workers there. And this employing of workers is done by creating capital in those places.

 

As people in China and India become freer, and as advanced technology enables them better to serve customers in America, some jobs currently done in America will indeed be 'outsourced' to these distant lands. But America's loss of some capital to foreign countries creates opportunities for other investments in America.

 

The reason is that as some capital and jobs leave America, workers -- along with some supply routes and capital equipment remaining in America -- are freed up to work at other tasks that in the past were insufficiently profitable. By freeing up this labor and capital, outsourcing increases the profitability of new investment opportunities. These diligent and honest workers, along with some capital equipment, remain in place, willing to work, all in an economy and culture friendly to enterprise. Perceiving these profit opportunities, entrepreneurs sweep in and create new capital, capital that never before existed and that would not be created were it not for the fresh opportunities opened by outsourcing.

 

And this new capital creates not only new products for consumers to enjoy but also new jobs for domestic workers.

 

Don't think me Pollyannaish for predicting that new capital and jobs eventually will be created to replace the capital and jobs attracted abroad by outsourcing. My prediction is based not on fanciful wishes, but on the fact that the capital drawn away from America by outsourcing was profitably invested in America before new foreign opportunities attracted it away.

 

Why was this capital invested here in the first place? The reason is that property rights in the U.S. are secure, taxes are reasonably low and predictable, corruption is minimal, and American workers are well trained and hard-working. Also, producers and consumers in the U.S. have direct access to history's greatest legal, physical, and economic infrastructure. So when particular goods and services become more profitable to produce elsewhere -- because of the principle of comparative advantage -- these features of the American economy that prompted the initial investment don't disappear. They remain. And they prompt entrepreneurs to create new capital and jobs in place of the departed capital and jobs.

America grows richer, not poorer, as we trade openly with a freer and more prosperous world.  "

 

Don Boudreaux is Chairman of Economics Department at George Mason University.  "

http://www.tcsdaily.com/article.aspx?id=041706C


posted by konane  # 9:04 AM
Comments: Post a Comment

<< Home

Archives

October 2020   September 2020   August 2020   July 2020   June 2020   May 2020   April 2020   March 2020   February 2020   January 2020   December 2019   November 2019   October 2019   September 2019   August 2019   July 2019   June 2019   May 2019   April 2019   March 2019   February 2019   January 2019   December 2018   November 2018   October 2018   September 2018   August 2018   July 2018   June 2018   May 2018   April 2018   March 2018   February 2018   January 2018   December 2017   November 2017   October 2017   September 2017   August 2017   July 2017   June 2017   May 2017   April 2017   March 2017   February 2017   January 2017   December 2016   November 2016   January 2013   October 2011   September 2011   August 2011   July 2011   June 2011   May 2011   March 2011   January 2011   December 2010   October 2010   September 2010   August 2010   July 2010   June 2010   May 2010   April 2010   March 2010   February 2010   January 2010   December 2009   November 2009   October 2009   September 2009   August 2009   July 2009   June 2009   May 2009   April 2009   March 2009   February 2009   January 2009   December 2008   November 2008   October 2008   September 2008   August 2008   July 2008   June 2008   May 2008   April 2008   March 2008   February 2008   January 2008   December 2007   November 2007   October 2007   April 2007   March 2007   February 2007   January 2007   December 2006   November 2006   October 2006   September 2006   August 2006   July 2006   June 2006   May 2006   April 2006   March 2006   February 2006   January 2006   December 2005   November 2005   October 2005   September 2005   August 2005   July 2005   June 2005   March 2005   November 2004   October 2004  

Powered by Lottery PostSyndicated RSS FeedSubscribe