Neoprotectionism Exploded in Ten Pages

Brink Lindsey brings the smackdown. I'd love to see Brink as a guest on Lou Dobbs Tonight, though Dobbs might have to import a pair of cojones from Mexico first.

Comments

[Crazed Indian outsourcer]

Jeff,
You've missed the point entirely. Think of it this ways - do you really care if your call center is in Florida or in Washington State? If the call centre is moved from your local town to another 500 miles away - is this "exporting Florida"?

Here's another tack: does it matter if this job is done by an Indian working here or working back in Delhi?

In any event, setting up a call-centre in India (or Washington state) creates more opportunities for our companies to sell goods and services there.

Dobbs is a pompous ass and it continues to astonish me that CNN gives him any airtime at all, since he has no support from any reputable economist at all.

[Jose Ortega y Gasset]

I am not inclined to invoke the ghost of David Ricardo today, however, I will address your last point. Customers are free to choose. Businesses are free to respond to customer preferences. If enough people covet 24/7 "English as a native language" customer support, I am confident a business will fill this need... for a price, of course.

I am reminded of the American "look for the union label" public relations campaign and the "Made in the USA" tags on clothing. It seems the tags that most influence consumer behavior are those with a price thereon.

One more note, I find the phrase "Benedict Arnold corporations" somewhat confusing. A corporation does not owe allegiance to a given country but rather to its shareholders. If memory serves, Arnold betrayed his country, not his investors.

[Jeff Clothier]

It makes no difference to me, assuming the customer care is identical, which it ISN"T.

It DOES, however, make a difference to those working in field domestically, who have presumeably invested time and resources in acquiring and training for a relatively new field of job that suddenly can be done cheaper, if not better, offshore.

It also makes a difference to those to whom the nation, particularly the virtues of the U.S. political system as over against most others, still makes a difference. Most people will always go for the cheaper item or service, but many of us express our conscience via our pocketbook. The Japanese economy is lagging, in part, because of Japanese consumers' increasing disgruntlement with traditional business practices which are extremely political in nature, patriarchal and conservative. However the virtue they have of respect for and consideration of the line worker is still very much in fashion, I'm given to understand.

What those who think purely in economic terms always fail to understand is that commerce is NEVER a dispassionate subject. The subjective attitudes of those involved anywhere in the transaction, whether they be workers, employees, or most of all, CUSTOMERS, are intrinsic to any economic calculation - but are constantly ignored.

I come from a corporate communications/PR/marketing backgound. If we could only convince HR people and management of what we understand of the human psychology of business, they'd see this outshoring is a PR nightmare.

[Jeff Clothier]

Companies who buy into the labor outshoring/free trade myth are putting themselves in harm's way financially by ignoring the sentiments of their domestic customer base.

And, by taking advantage of the politically-coerced, low-labor-rate political systems of third world nations, they are leaving themselves open to political retaliation here at home - practically begging to be regulated, or for protectionist policies to be put in place. These are the natural, legitmate consequences of "country and our customers be damned, we're going for the quick buck," mentality.

[Jeff Clothier]

Please note that I have not advocated for the passage of one single outsourcing law or tariff. I am, like Lou Dobbs, simply practicing what I preach and using THIS bully pulpit to express my displeasure with a business practice I find increasingly repugnant. That is also an aspect of free trade and commerce.

[Mark Fox]

Jeff: I thought I heard recently that Dell moved a significant portion of call support back to the US due to customer experiences like yours. The corporation tried a strategy, then adjusted, all without (direct) state intervention.

On a recent episode of Dobbs v. Corporations, the president of eLoan explained that his customers preferred, given a direct choice, offshore application processing because of time savings. He also speculated that the corporation would be able to, in future, pass along a cost savings to customers that choose offshore processing. In that case, offshore is cheaper, faster, and preferred. Big Lou had no retort. He could only repeat his mantra that it was a bad practice.

[Jose Ortega y Gasset]

So, what you are suggesting is that you know better than the CEOs who run multinational companies because you more accurately perceive the risks related to "offshoring." This presumes that you better understand the risk of lost revenues due to customer dissatisfication, the risk of protectionist policies and the precise economic benefits of contracting overseas for thousands of companies.

To borrow from a popular commercial, "Did you stay at a Holiday Inn Express" last night?

It is somewhat tenuous to move from personal experience, i.e., buying a digital camera and calling for customer support, to macroeconomic theory. I respectfully suggest that if other Americans shared your sensibilities, Wal-Mart would be far less popular than it is. Feel free to buy in accordance with your conscience. I must remain skeptical, however, of the notion of substituting "conscience" for objective business analysis.

[Jason Ligon]

Jeff,

I think you are taking your angst and supposing that the rest of the country shares it, but you are right, speak your piece and let the market decide.

The flat question to ask is, "Are you willing to lower your living standard, and that of the country as a whole, to ensure that you don't have to change jobs?"

The simple math of it is that labor costing $1000 more per unit creates services and products similarly more expensive. Multiply this $1000 in savings times the number of units, then add that amount to similar calculations that need to be performed by each of your non-traitorous corporations. This is the wealth you are destroying in the US economy.

In one scenario, people can afford a cell phone with customer service reps who are native speakers, and in the other they get a cell phone, non native speakers, AND an extra additon to their IRA for the year. I am not at all certain public sentiment lies where you think it does when all of the cards are on the table.

Lastly, there is an element of unpleasantness in the idea that a college educated workforce in India with test scores (generously) comparable to our own is that much inferior. I wonder what you must think when you walk into a 7-11 owned by non native speakers.

[Jeff Clothier]

Look, gang, I don't resent the "protectionist" label, even though I have refuted it. Be careful, though, about any intimations of racism. It is the repressive political systems, and the resultant phony economies creating these apparent economic benefits to locating overseas, not the citizens of those countries, educated or otherwise, that I am skeptical about.

I was once married to a Guatemalan. There are hideously rich people there and hideously poor people, not much in between. The Guatemalan penchant for commoditizing labor is both demeaning and ultimately distorts their economy, much as the slave/plantation system distorted the economy of the Old South. I submit that the economies of Mexico - whose economy is ruled by an elite class who remain capable of manipulating the government at will - and India - which continues to be a political madhouse despite technological and educational gains, are simply not fit partners for "free trade," in either goods or labor. One simply cannot define an economy outside the political and governmental framework within which it operates.

I applaud Dell for having the sense to realize this. Other corporations may come to that realization, but in the meantime, they can do a lot of damage to people along the way.

I do believe CEOs, CFOs and chairmen are driven to short-sighted, near-term decision making by stockholders, and particularly by stock analysts. Actual production and profit be damned as long as the stock price holds up. Upper management can ALWAYS do with a reality check, particularly because the upper offices are so often shielded from so much of the rest of the world in which their companies do business.

Public sentiment may not be where I think it is. It may not be where YOU think it is, either. I can tell you for a fact that attendance at Democratic events is up enormously. My county convention in Des Moines - where outsourcing and the hiring of illegal aliens is a HUGE issue - had to turn away alternate delegates for the first time since the 70's. You may be right, but I smell something in the air. If the jobless numbers don't turn soon, you may very well have an administration in 2005 much less friendly to management and Wall Street than the one you have now.

[The Lonewacko Blog]

I'm trying to figure out whether Julian's comment is sub-Kindergarten or Kindergarten, but in any case I'm glad that Lou keeps getting under their skin.

"On a recent episode of Dobbs v. Corporations, the president of eLoan explained that his customers preferred, given a direct choice, offshore application processing because of time savings. He also speculated that the corporation would be able to, in future, pass along a cost savings to customers that choose offshore processing. In that case, offshore is cheaper, faster, and preferred."

You have it backwards I believe. eLoan saved money on offshoring, and I think they offered the option of shorter time as an artificial incentive. They were going to start charging for inshore processing. Presumably a few patriotic-Americans would choose the latter even at a slight cost increase, leaving the selfish-Americans to choose the former.

Somewhat related to off-shoring, here's something important:

Homeland Security official dead in Tucson

It's been ruled a suicide by the local cops. But, something seems quite a bit fishy...

[Jeff Clothier]

Here's a question: If outshoring and illegal immigrant labor are such an economic boon to consumers, why don't companies ADVERTISE the fact?

"Saving you money by shipping jobs overseas."

Perhaps I am not giving management enough credit for PR savvy. They know perfectly well what they're doing doesn't play well, so they do it in the dark, generating as little publicity as possible.

Thing is, this isn't a new issue. The old guard blue-chips have been exporting production for years. Outshoring to India worked really well for Union-Carbide. I wonder how many upper management types were in Bhopal at the time?

[xray]

Jeff: where was your digital camera made? Why didn't you buy one made in the USA? Oh.

[Jeff Clothier]

Proving what, exactly, xray? That we've already given up most of our manufacturing, and are working on the service industries next? Please, prove my point some more.

[Kevin Carson]

Jeff,

They're definitely not proud. Some American companies that outshore require their Indian tech support staff to identify themselves to customers as Bob, Bill, Joe, etc., in order to avoid bad publicity.

I've talked more than once to a "Dave" or "Mike" who sounded like his name should be Apu Nahassapeemapetilon.

[fyodor]

Jeff Clothier,

For someone who keeps claiming that he's not advocating any changes in the law, you're sure creating a tempest in a teapot. If offshoring is so stupid, the companies who do it will pay for it. Personally, I've had no trouble getting support from folks with Dehli accents. I thought it was neat, in fact. Asked 'em what the weather was like there! I know I'm violating the ABC - "Always Buy Colorado" - campaign in these parts, but Lonewacko and Governor Owens will just have to swallow my unpatriotic selfishness that treats all humans on earth the same.

[Jeff Clothier]

Proving what, exactly, xray? That we've already given up most of our manufacturing, and are working on the service industries next? Please, prove my point some more.

In answer to your question, I bought it to satisfy the requirements of the publishing company I wanted to freelance for. I have no problem with imports, trade, immigration or international commerce per se. How many times do I have to make the point that I'm not a protectionist.

I simply find it ironic and borderline indecent that in the interests of "free trade," we are taking advantage of the plantation labor policies of coerced economies. We are lying to ourselves if we consider this free, much less fair, trade.

[fyodor]

Jeff Clothier,

xray's point is that when you buy a camera made overseas instead of holding out for something made here, you're doing the exact same thing that outsources are doing, taking advantage of the benefits of the global economy instead of suffering for somebody's idea of principle (not mine). If your response is that you have no choice but to buy something made overseas, who says you have no choice but to buy a camera?? Anything you buy that's made overseas but is not a neccessity for survival would fit the bill.

[fyodor]

"If outshoring and illegal immigrant labor are such an economic boon to consumers, why don't companies ADVERTISE the fact?"

For two reasons. One, at best, the customer doesn't care why the product he buys is cheaper than it might be under other circumstances. He only cares about the bottom line. Sometimes companies advertise that they do this or do that to bring the price down, but that's just to make themselves sound smart. Which brings us to point two, at worst, there's people like you who take offense at the practice. That doesn't mean the rest of us should take offense, but it's a fact of the market that people like you are out there. But that doesn't prove it's not an economic advantage. And like I said before, if you're right and all the folks staking their jobs and salaries and investments are wrong, they'll pay for it eventually. Ho-hum....

[Mark Fox]

Lonewacko: Mr. eLoan described it as a time saving because India has day while we have night, thus it's like having a graveyard shift that doesn't demand a shift differential. Whether it is a cost saving or a deferred increase doesn't affect the final sum: lower price for offshore work. That company does advertise the fact, and reportedly the customers choose offshoring jobs 4 to 1.

On a different episode, Lou was flabbergasted to learn that Indian software has been of consistently higher quality than domestic programming. There are good reasons for management to consider all the potential suppliers: speed, price, and quality. Just because it American is no guarantee that it is the best.

Jeff: Other corporations may come to that realization, but in the meantime, they can do a lot of damage to people along the way.

Corporations damage people? When did customers and labor loose their power of choice to shop and work elsewhere? If you believe the corporation and the state owes everyone a lifetime of security, we are getting close to a fundamental difference of opinion.

[fyodor]

"we are getting close to a fundamental difference of opinion."

I am pleased to see the art of understatement has not been lost!! Cheers!!!

[Jeff Clothier]

Mark Fox, again, you accuse me of that which I am not guilty. I don't think anyone is OWED anything. I simply, again, (sigh) reserve my right to point out the downside of a corporate practice I find questionable. Upton Sinclair did the same thing, and we have better quality meat and more sanitary packaging because of it.

Is it your contention that because offshoring is such a boon, all criticism of it should be squelched?

[Ox]

It's unfortunate that we've allowed "progressives" like Jeff to define this debate, because we inevitably end up where all such debates end up, with the so-called progressive expressing incredulousness that the market doesn't reflect their own worldview. It's just like the Wal-Mart debate. Wal-Mart announces plans to expand in a market, and all the progressive leap in coordinated outrage about driving the overpriced and overrated "Main Street" businesses out of the market, or the loss of union members or the loss of manufacturing jobs or the unacceptable wage or benefit policies of the retailer, but then when the store actually opens, the aisles are crowded and the store can't count the money fast enough. The fact is, the American market will always support good-enough quality at a lower price, and you don't have to look very hard to find evidence of this fact. Nor do you have to look very hard to find outraged do-gooder types who can't believe the average consumer doesn't want to pay more for extra quality that they don't really need.

As a leader in a company premised out outsourcing (located squarely within America's heartland, mind you), I can say that the focus on the wage-related benefits of outsourcing is largely misplaced. The real benefit is flexibility, and the ability to manage staffing requirements on the fly. Dell saves money on outsourcing its call centers, and would do that even if they outsourced to Boise instead of Bangalore.

I also object to this idea that a corporation has some moral obligation to sacrifice revenue for the perceived good of the community or the country. A corporation operating in a capitalist market-driven economy has an obligation to its shareholders and other investors to maximize earnings. That's it. That obligation will, generally, mean treating employees and customers right. A pissed-off workforce won't be productive, and pissed-off consumers won't buy the product. It doesn't, however, mean that individual employees won't ever be displaced or that individual consumers won't be unhappy with the choices the corporation makes. I'm happy that manufacturers have discovered that outsourcing tech support makes economic sense, even if it means temporary displacement of individual call center employees.

[The Lonewacko Blog]

"reportedly the customers choose offshoring jobs 4 to 1."

Look, I have a confession to make. I'm trying to sell some products made in China and, well, I gotta tell you, those "Made with 100% Political Prisoner Slave Labor" labels really make my products fly off the shelf!

"On a different episode, Lou was flabbergasted to learn that Indian software has been of consistently higher quality than domestic programming."

I'd probably be flabberbegusted myself. Do you have a citation to this study? Who made this claim? Where is the raw data, what exactly does "higher quality" mean, etc. etc. I doubt whether Lou Dobbs knows how to program those compyutor things, so your statement don't mean much.

----

Are we importing "suicides?" Check out this news story: Homeland Security official dead in Tucson

[KentInDC]

Jeff,
The Bhopal comment was a low blow. There is a good reason there was not a lot of top UC management Bhopal. Indian regulations at the time required Indians to have majority control of the plant. I don't know about that requirement in particular, but Indians have come a long way in freeing their economy since 1991. Our own government has put a lot of pressure on India to open up its markets and it has complied to a large extent. There is a huge potential in India for American agricultural exports, but the hostility displayed by protectionists and (since you claim not be a protectionist) people who share your views is creating a backlash that could result in a much less friendly government in India. People in India are pretty confused by our sudden flip-flop on the virtues of free trade.

[Jeff Clothier]

Oh, good, so now I'm a "progressive." You people and your labels.

Look, outsourcing is simply the flavor of the month with tech firms, and anybody criticizing it, or pointing out drawbacks are old fuds and progressives. I get it. I've been through Quality Circles, Six Sigma, and now the new efficiency magnet is outsourcing. Great. Super. Have at it.

Just don't whine about the bad press you get about the decisions you make. People's reactions are people's reactions, and some of those are potential customers. You can justify, trot out all the doo-dah numbers you want, and some people will still be pissed off when it turns out not to be the economic miracle of efficiency it's hyped up to be, and people still lose jobs because of it. Are these so-called "efficiencies" being reflected in retail prices? If so, how do consumers know?

Software, call centers, no problem. Ones and zeroes go whizzing through the satellite microwaves. Heavy manufacturing is another thing. There are indications that the political climate in India is becoming LESS stable, not more. Suppose India and Pakistan finally get down to business. Where's the efficiency going to come from then, and what happens when we can't get what we need here because India has closed its borders and fired up the nukes?

[fyodor]

Jeff Clothier:

"Read me carefully. Again, nowhere have I advocated one single tariff, law, tax sanction or anything else."

As I acknowledged. And so I ask, so why all the gnashing of teeth?

"But if I'm right, then I hope the right chickens come home to roost, and the American taxpayers isn't stuck bailing out supposed American companies"

I'm against bailing out any companies, supposedly American or otherwise. If we remain true to our libertarian principles, we stand the best chance of fighting such possibilities. BTW, why do you think companies that outsource offshore will have any better chance to claim such bailouts than those who don't? Usually companies claim a right to such treatment based on spurious notions of "common good." But I can't imagine companies that suffer because outsourcing turned out to be a mistake would enjoy any advantage at the public trough than those who fail for other reason.

As for your reply to Mark Fox, he was commenting on your language, that corporations are doing "damage to people" in their hiring practices. Y'know, when I was a kid, my father was fired when the company that had employed him 20 or 30 years reorganized and found they had he and another doing the same job. My dad made more money, so he's the one who got axed. Was the company doing "damage" to him? Such language doesn't make sense unless you assume some sort of obligation on the part of a company to continue employing people they do already. When you see hiring practices as contracts that renew on a moment by moment basis, you see there is no "damage" when one side declines to renew.

[Highway]

Jeff,

If you're not advocating any governmental policy changes, why do you bring up how many people are going to Democrat events? Maybe you aren't wanting taxes, tariffs, punitive action, but I'd bet most of those people want any government official, most of all the president, to 'do something' about outshoring. And that something isn't politely asking companies to not move some operations overseas. That's your support group, according to the earlier posts.

But the other thing is that people who are 'losing' their jobs need to realize that they no longer have exclusive skill sets. Maybe they did when they went to college to learn programming or software engineering, but they don't now. The reason I don't get paid 30 dollars an hour to sweep floors or make photocopies is that it's not an exclusive skill set. The reason they aren't getting paid what they used to get paid for programming or tech support is that someone else can learn to do approximately the same thing for less. When the available pool of workers gets bigger, the competition goes up, and the wages go down. If the good is inferior, then people will go back to the more expensive one, but the actual inferiority of outshored goods is based mostly on anecdotal evidence so far.

Will other countries put the screws on these companies later? Maybe, we don't know. But a vague uncertainty is definitely not a reason to waste money on relatively overpriced labor now.

[Mark Fox]

Lone: It isn't worth my time to find the transcript. I don't know the software measurement metrics, either. Take it that Lou was shocked, and had no comeback.

Beneath the facts of that case (whatever they are) is some notion that Americans are the best at everything. Why is it even shocking that somebody from a foreign land might be a good programmer? And how does that nationalism inform the debate and shape the policies, none of which Jeff specifically supports.

Jeff: It is one thing to expose meatpacking practices and quite another to demand (non-specifically) the state step in and refashion the industry to its liking. Debate is great. You and Lou keep waving the flag, but please don't limit my choices, vaguely or explicitly. Its beautiful that there's at least a recognition of the idea of property rights in China now. All that trade (and exploitation) has created enough wealth where it matters. Imagine the changes to the Chinese constitution when the population amasses enough wealth to afford open debate.

===
Why are we even offshoring prisoner slave labor? CCA and Wackenhut are American corporations putting American inmates to work. In the modern world, anything you don't fashion with your own hands from your own soil is tainted somehow. We have the luxury of politically-motivated consumerism; each can establish a personal level of acceptable taint.

[SM]

Interesting article on American executives in Indian companies. Make of it what you will.

http://news.bbc.co.uk/2/hi/business/3515662.stm

[Jeff Clothier]

Note that I'm not particularly exercised about trade or labor relations with Europe, Canada or other relatively free economies. (Yes I know the EU is heavily subsidized...)

I am picking on a relatively few nations whose appetite for cosmetic capitalism has stretched beyond their political maturity. I have no doubt there is much money to be made exploiting that situation. I disagree that a corporation's sole responsibility is to turn a profit and show results to its stockholders. It also has a responsibly to do so legally, ethically and morally, or, by definition, it is not business, it is theft.

There is a fine line to be drawn between bringing economic opportunity to third world populations and exploiting their situation for gain. Corporations, for their own sake and for the sake of their shareholders, need to tread that line carefully, and without external gadflies to keep their wits sharp, I fear they are not always capable of seeing that thin line clearly.

Finally, because I have to go transact some good, old-fashioned domestic commerce, If production and support are so much more efficient overseas, why don't these companies move there, lock, stock and barrel? If you're gonna get out, get ALL the way out. Deal with ALL the realities of operating in much less market-oriented economies than the US offers, if operating here is less efficient and more costly.

Labor efficiencies are to be had in these nations because many workers in those economies don't have the luxury of voting with their feet OR with their pocketbooks. Essentially, while crying "free trade" these companies want all the benefits of cahootinizing with repressive third world regimes while still maintaining a civilized, Western face and staying close to the relatively wealthy US consumer - as long as he STAYS relatively wealthy, that is.

Call it anything you like - outshoring, outsourcing, etc. Just don't embarrass yourself by calling it free trade.

[KentInDC]

Jeff,
I think most Indians are gladly accepting the exploitation they have been forced to endure in recent years. I recently read that the average annual pay of Indian engineers is up from $3,500 to $12,000 in recent years (Sorry, but I can't remember exactly what years that covers, but it wasn't more than a decade.). My girlfriend grew up in India without as much as a doll to play with and the only personally owned means of transportation in the family other than feet was her father's bicycle. Several of her siblings now have cars and the worst off of her siblings has home cable and Internet service.

If you are really interested in what has been going on in India in recent years, you might want to read "India Unbound" by Gurcharan Das. So what if India doesn't have truly free trade yet? Neither does the US. Why don't we boycott the US instead? After all, our protectionism and government control are hurting us more than India's.

[Jeff Clothier]

All great points, Ken. So then my last question applies - Why not move ALL operations there? Pull up stakes, pull the CEO's kid out of prep school and get the hell outta Dodge?

[fyodor]

"I disagree that a corporation's sole responsibility is to turn a profit and show results to its stockholders. It also has a responsibly to do so legally, ethically and morally, or, by definition, it is not business, it is theft."

Okay, Jeff Clothier, please tell me, why don't you advocate legal restrictions on this "theft?"

[Jeff Clothier]

In answer to Highway - "If you're not advocating any governmental policy changes, why do you bring up how many people are going to Democrat events?" Because it is a measure, ad hoc, to be sure, of the way sentiment is running - sentiment that might drive protectionist policies in the next administration whether you or I particularly care for them or not. Regulation often comes about in reaction to perceived abuses by organizations - corporate or otherwise.

There is a tipping point beyond which any organization that insists on doing things that don't pass the "smell test" can expect some backlash. My perception is that we are approaching that tipping point now with regard to offshoring and outsourcing to third world Asian and Latin American countries with plantation-style labor markets. It is not at base a racist issue, it is a political and back-pocket economic one.

[Jeff Clothier]

fyodor - I don't understand that question as stated.

[Jason Ligon]

"Finally, because I have to go transact some good, old-fashioned domestic commerce, If production and support are so much more efficient overseas, why don't these companies move there, lock, stock and barrel? If you're gonna get out, get ALL the way out. Deal with ALL the realities of operating in much less market-oriented economies than the US offers, if operating here is less efficient and more costly."

You keep saying "If," as though there were some question about productivity vs. cost. There isn't. What you are asking is that we sacrifice productivity (voluntarily, I know) to "save" American jobs, whatever those are. An increase in price maps to a decrease in demand, and a decrease in demand means less labor of any type is needed. Often, the choice is not between an American job and an Indian one, but between a reduced labor force and a net unreduced labor force.

Choking real productivity for the sake of keeping your same job is no wiser in this case than it was when the luddites destroyed the machines; it is no wiser than Bastiat's window breaking. We should all seek greater productivity wherever we can, else we pine for the glorious days on the farm working with our hands - at full employment.

I note the sliding moral argument that somehow equates Indonesian sweatshops with children cuffed to sewing machines with Indian call centers populated by bilingual college graduates. Government policy in India has an impact on the price of labor, but not as much of an impact as the supply of educated labor.

[Jeff Clothier]

Jason,

I see where you are going, but it is largely non sequitur. Of course there is no question of productivity vs. cost, the question is what drives that productivity - is it real, perceived or coerced, and does the price of labor reflect a truly (all genuflect) free market level, or is it in whole or in part the result of non-economic, political coercion? I say the jury is still out on that with regard to India, and DEFINITELY for China.

Are you saying that you are willing to accept a coercive labor market as long as it drives the price (not necessarily the cost) of labor artificially down rather than artificially up?

[Jason Ligon]

"I disagree that a corporation's sole responsibility is to turn a profit and show results to its stockholders. It also has a responsibly to do so legally, ethically and morally, or, by definition, it is not business, it is theft."

Legally is implied and is verifiable - whose ethics and whose morals are another question all together. I think it is immoral of you to demand that every good I buy cost more than it should just so you can feel like you have a job for life. I think that in so doing, you are costing me tens of thousands of dollars, if not much more. Take the difference in generated wealth I have as a result of cheaper goods each year, stuff it into an IRA, and let's look in 20 years at the average opportunity cost per person. Your complaints may cost me a retirement, they may cost me an operation I could otherwise have saved for, you don't know.

That said, I am content to let the market sort it out just as you are. Machines will be rebuilt, because most people will ultimately see the benefits of high productivity.

[KentInDC]

Jeff,
I am entirely missing your point on why not move everything overseas. It is all about comparative advantage and who does what best at the lowest price. Why don't we grow all crops in Kansas since they do so well with wheat? Because Guatemala is a better place to grow bananas, maybe? We could locate paper mills in India to take advantage of low labor costs, but the Great Lakes and Southern states have a lot more trees and water - any savings in labor would be more than offset by the cost of transporting pulpwood 10,000 miles. The point has been made many times in this thread before: Good CEOs are making decisions on sources based on what they think is the best value. If they are wrong, the market will punish them.

[Jeff Clothier]

"I think it is immoral of you to demand that every good I buy cost more than it should just so you can feel like you have a job for life."

I haven't demanded a thing, Jason. And right now, I am at least nominally self-employed, and like it that way. I defy you to find any demands whatsoever in any of these posts. I simply think that all this crowing about the efficiency of outshoring is like a little boy trying to act defiant, all the while knowing he's doing something at least a little bit sleazy.

"I did it, I'm proud I did it, and I'd do it again."

The people who run these corporations aren't ignoramuses. They know damn well the governments in these countries are corrupt and vulnerable - or even more corrupt and vulnerable than we're used to here. They know they can get the Indian government to outlaw an independently-organized labor union, for example, on the basis of national security or some other such trumped-up allegation, anytime they want.

If the trade in goods, services and labor were TRULY free in these countries, I'd have nothing to say about it, and may the best and most efficient labor force win. All I ask is we don't pretty up this thing with high-falutin' language about open markets, laissez-faire, etc. when we know it's nothing of the kind.

[Jeff Clothier]

I hope you're right, Jason, I really do. Because there are many people here in the U.S., many of them voting Democrat, who DO feel coerced, chained to their desks, or to the line they've been working on for twenty-five years at half the pay they once made. Quoting Hayek or von Mises or Adam Smith at them won't make them change their minds at the ballot box.

You have two choices, you can either allow for gadflies like me exposing the less palatable aspects of this and perhaps effecting a little non-coerced restraint, or you can get the regulation we all would rather avoid when people get just pissed off enough.

Now that I've annoyed you good Libertines, ah, tarians, I have to go play a gig at a ballroom.

"You were always a good man of business, Jacob..."

Scrooge, "A Christmas Carol" by Charles Dickens

[Jason Ligon]

Jeff:

"I haven't demanded a thing, Jason. And right now, I am at least nominally self-employed, and like it that way. I defy you to find any demands whatsoever in any of these posts."

You are arguing about what is moral; I was suggesting that we might not agree. Your position is that companies should stop doing this, and I suppose I could have said, "I find it immoral that you ask nicely ...", but I don't think it was unfair in context.

Use 'free' to mean 'more free'. Egad! Here comes Kevin Carson! ARRRRGH!

Anyway, the reality is that we don't have free markets either, as Kevin would gleefully point out. This does not mean that we can't support less regulation, in net, in trade. Free vs. not free doesn't apply to your position anyway, since you don't support a legislative block. Surely you realize that there are those who do, and the free trade tag is used in discussions with them.

About now, Kevin will remind us that in an optimal free trading society, we would all be happy local farmers paying too much for everything. Something about a mercantilist oligopoly, too ...

[SM]

And Jeff - not a few star anti-globalists (Vandana Shiva etc) are Indian. So you have allies in that "corrupt", "coercive" etc country.

[Mark Fox]

Jeff has congratulated his own genius for exposing what is called "free trade" as something less than absolute. He also brilliantly asserted that the voting public and voting legislators are not so well informed about the global complexities of trade compared to H&R posters. These "revelations" come after many words, all of which deftly avoid offering solutions to what he portrays as a danger.

Perhaps he is running for office?

[Rich]

Anyone else suprised that Jeff's training is in communications/marketing/PR instead of a real field?

[Wild Pegasus]

The West has been furiously outsourcing for over 200 years, making us filthy rich in the process. Just substitute the word "machines" everywhere you see the word "Indians" and "Industrial Revolution" for "outsourcing".

- Josh

[KentInDC]

If a US company hires 100 people in an Indian, Filipino, or Irish call center, it is reported as a loss of 100 American jobs. The lower wages in those countries allow American companies to hire several times as many people to handle calls as if the pool were limited to Americans. The alternative is more expensive products - especially products requiring a lot of customer support such as software - and/or customers spending a lot more time waiting on the phone to talk to a customer service rep who can't get you off the phone fast enough so that he can meet his quota of calls for the day. The good news is that it is virtually impossible to stop this "outsourcing." The bad news is that American businesses will likely be saddled with all sorts of new regulations because this is an election year.

[Jeff Clothier]

Exploded? Hardly. Provided a little palliative care for those in a position to read and understand this rehashing of the same head-pattingly patronizing line the Bush administration has taken toward the export of opportunity, maybe.

"It ain't as bad as you think," is not reassuring, nor myth breaking. What would be reassuring is for the President, Congress, the press and members of arcane think-tanks to start thinking like American wage-earners and not like von MIses on steroids.

One question: Who REALLY benefits from open borders right now, politically and economically. Who, not in theoretical, somewhere-in-the-future terms, but here and now, has the most to gain from the misnomer that is "free trade" between the U.S. and nations who don't subscribe to that principle themselves, but are more than willing to take advantage of the fact that we do?

I imagine among the beneficiaries are "human rights" activists who prefer the term "undocumented worker" to "illegal alien." I imagine corporations - who take quite a beating on these forums in every other respect - who take advantage of the politically-coerced economies of dictatorial regimes such as Mexico and India to avoid the responsibilites attached to being U.S. companies while enjoying all the benefits are pretty happy about it too.

I don't expect protectionism, or government sanction of Benedict Arnold corporations. The "You're either a free trader or a protectionist" dichotomy is a false one. I do expect these companies not to be unduly incented in any way to continue exporting opportunity or to be protected in any way when the inevitable consequences of dealing this way fall.

It would also be nice to have our governmental and intellectual leaders use the bully pulpits of their positions honestly, pointing out both the benefits and hazards of outshoring, and not minimize the damage done to people in the process.

The one party left out of consideration in all of this is the customer. I had to call for some help with my imported digital camera recently. I bought it through a Miami-based electronics firm that promised 24-hour customer support with what appeared to be a domestic 800 number. I ended up trying to understand the New Delhi-via-Oxford accent of an offshore helpdesk worker who, to her credit, did her best to make herself understood while trying to simplify arcane electronic jargon. I, as a customer, did not feel well served in this transaction.

I wonder if anyone is figuring the very real disgruntlement and disgust with the practice of outshoring that is becoming a very real, very legitimate penalty of the practice.

Rock on, Lou Dobbs.

[SM]

"India, China and Mexico lack something that our traditional trading partners have - a political system where peoples' votes actually count for something."

This is typical protectionist rhetoric. Jeff is treating India, China, Mexico (and now Egypt!) as one wicked entity so he can project the worst features of each country around as benefits his argument. India doesn't have a system where votes matter ? News to me. It will also come as news to liberals in India who have been fighting for years to liberalize the economy that they can just shut trade unions down. Trade unions in India wield considerable clout, far far more so than those in the US. They have successfully slowed down and in some cases even prevented the privatization of infrastructure industries (Power generation, telecom, Steel, railways etc), among other fine achievements.
And Jeff - you missed one common trick. You didn't tie free trade to the status of women in these countries.

[Keith]

Whoa, Jeff! Time out!!!

Hosni Mubarak? I begin to see your problem! India is not a relic of the USA's basket-case Cold War client states. As much as I appreciate being an American, it's probably for the best that there were some governments willing to give a "Third Way" anti-colonial finger to both America and the USSR back in the day. But that's another line of thought entirely (... for instance, I appreciate in concept that India historically and ethically does not countenance what America's Big Pharma would consider their ideal patent law... another time, though)

Let me be the first to get you up to speed. We're talking about India, home of a racuous democracy featuring, in the currently-winning corner, Atal Vajpayee's BJP party; and attempting to make a comeback, Sonia Gandhi's Congress party.

I am actually in India right now, so in full disclosure, this issue means a lot to me personally. My company's opened a remote client operations and software development office here. This gets us two competitive advantages with respect to other companies in our space - with cross-national teams, we're becoming practiced at taking advantage of the 24 hours to perform systems implementations for our clients; and, by reducing our costs for the implementation, we can offer lower prices on contracts for our prospective sales.

We're growing fast; from being more competitive, we can sign more contracts faster, and this explicitly causes growth in the US office. We're not shipping my company's US jobs overseas; we're making our company capable of getting more business from potential customers at the margin of finding our solution cost effective.

Sure, our competitors may lose out. But, excepting Oracle they're not "established companies" so it's not like we're General Motors putting thousands of buggy-whip workmen on the streets. And even if that were the case... tell me, will you cry for PeopleSoft's lost jobs when Larry Ellison gives them their pink slips?

You mentioned above that you work for yourself -- do you cry for other PR professionals who charge more than you who can't get your clients? Would you be OK with it if they got your contracts (for more money, mind you) based on some soft attribute that appeals to your current customers?

[flamethrower]

all,

remember this clothier-yahoo didn't know what "comparative advantage" was a few months ago - he "corrected" someone who wrote that: "competative" was his suggestion.

and he claimed that citing adam smith was wrong, but claimed that for music skill that one needs calculus. he talks bullshit out of both sides of his mouth, is ignorant of the facts of micro and macro economics, and is a patronizing little twerp who would be against mechanized farming or the superhighways if they were being developed today.

he is an undereducated, inferior-complex ridden little fool. and he is a little troll that is not worth talking to.

frank

[Jose Ortega y Gasset]

I still say he must have slept at a "Holiday Inn Express" last night.

The best way to improve working (and political) conditions in third world countries is free trade. First world countries hire workers in third world countries. Free trade means these companies compete for these lower wage workers. As demand increases and these workers become more skilled and productive, wages increase. Those like Mr. Clothier who wring their collective hands about a worker making a dollar a day do not appreciate that without the foreign plant, the worker would make 10 cents a day. They also miss the point that free trade will increase this dollar a day over time.

In countries where the working class becomes more affluent, these workers demand more goods and services. The now $2 a day workers spend money that accelerate the local economy. Moving from abject poverty often results in the populace demanding more freedom and a more democratic system of government.

And the alternative? We do not trade with regimes that offend our tender moral sensibilities... and what then? Nothing changes. Free trade would have toppled Castro long before an embargo will. When we export goods and services (and jobs), we also export ideas. Unfortunately, there will always be those people who do not understand economics. There will also be those people who expect it is the responsibility of government to guarantee them a particular job (or industry). See U.S. sugar farmers as an example. From mercantilism to today, it is a perpetual battle.

[fyodor]

Jeff Clothier,

You can't "state" a question! 🙂 What's to understand? I quoted your own charge that offshore outsourcing (to countries with questionable labor practices) is "theft." Then I asked you, since you have repeatedly assured us that you are not advocating restrictive legislation against the practice, well why not, if you think it's "theft"? I certainly think genuine theft should be a crime! Don't you? The reason I'm against legislating against offshore outsourcing is because it is not a crime, it violates no one's rights and is a normal part of the mechanisms of the free market, no different (as I believe someone has already pointed out) from hiring people from another state within the US. If your policies matched your rhetoric, you certainly would be advocating restrictive legislation, which is why you've confused so many people here who have accused you of advancing policies you claim not to be.

And so again, I ask you, if offshore outsourcing is a form of theft, why are you not in favor off legislation making it a crime? I'm genuinely curious.

[Mark Fox]

My my, how some of you ponces prance when your ox is gored. Smug.

My ox was a bit confused, but now he's just bored. Lacking coherent retorts, Jeff has broadened his diatribe. Suddenly he's talking about Egypt and Mexican politics. Wake me when he tells us something we don't already know.

Keith: Thanks for the insight on India. And I agree that is valuable to have nations with differing policies as it helps us assess and understand the effects of any particular policy under non-laboratory conditions. The general revealed rule is that trade makes nations wealthier. Even under statism. The Soviet Union and East Germany were top trading partners and the richest two in the bloc.