Thursday, July 5, 2012

Great WP Business Columnist Steven Pearlstein of the WP Gets It Right on Outsourcing Jobs – There Are Winners and Losers

Guess Which Group Mitt Romney is In?

The current Presidential campaign will feature a debate on the role of international trade, outsourcing of American jobs to foreign countries and the role of Mitt Romney’s Bain Capital in all of this.  The discussions are likely to be far more emotional than factual, as each side tries to paint the other as evil and malicious and destructive of the American economy.

One of the really good business writers these days is Steven Pearlstein who writes irregularly for the Washington Post.  Mr. Pearlstein has a rather long commentary in which he summarizes and describes the issues about as well as it can be done.   First of all Mr. Pearlstein describes how what today we regard as outsourcing has been going on ever since there was an economy.  Producers at the very beginning of organized economic activity started to outsource some tasks to people outside of their business.

Rearranging where and how work is done has been going on ever since the first shepherd and farmer decided to trade milk for wheat on a regular basis. Outsourcing is merely an extension of the age-old story of specialization and exchange, whether it is done within a village or country or across national borders.

And here is the critical observation that he focuses on.

Outsourcing has always been controversial, whether its purpose was to get around unions, take advantage of low-cost labor in other regions, or simply tap the greater expertise and efficiencies of large contractors. Whatever the reason, somebody invariably loses a job as somebody else gains one, sometimes overseas, and sometimes at far lower wages. The resentment seems to grow exponentially with geographic distance and the gap between the original wages and the new ones.

And the critical result of all of this is this.

Over the years, there have been hundreds of studies that purport to prove that global outsourcing has been a net job creator for the United States — that as a result of shifting work overseas, more jobs were created back home than were lost, even though the jobs and the workers may not be the same.  (emphasis added)

So what we have here is the classic contrast of macro economics and micro economics.  At the macro level international trade and specialization is a good thing, benefiting all participants.  At the micro level it can be a terrible thing, dooming a worker whose job has been eliminated and who does not have the skills, training or experience to get another job in the ‘new’ economy to a life of economic deprivation. 

And it is this last part that is the true failing of the Mitt Romney’s of the world.  They are the winners, which is ok to some extent (though maybe not to the extent of hundreds of millions of dollars taxed at very favorable rates) but there are thousands of losers, men and women whose economic livelihood was destroyed by actions of Mr. Romney, Bain Capital and others.  The total lack of willingness to recognize these victims, to fail to understand their plight and to refuse to make even the smallest effort to help them is the real reason to condemn Mr. Romney and his ilk.

A progressive economic policy will do two things.  It will encourage and support free and open and competitive markets world-wide.  And it will set up and implement programs to provide maximum assistance to those who through no fault of their own are damaged by that policy.  Conservatives of course feel differently about those people, they don’t know them and they don’t care about them.  They only care about their higher profits and their lower taxes. 

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