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Thursday, February 12, 2004

Exporting Jobs... is Good?

Posted by Seamus

Bush was in Pennsylvania today trying to put some spin control on statements made by the Chairman of White House Economic Advisors. The chairman said earlier this week that "Outsourcing is a growing phenomenon, but it's something that we should realize is probably a plus for the economy in the long run."

Bush's spin (with Santorum and Specter at his side): "The numbers are good," Mr. Bush told an audience at Central Dauphin High School, near Harrisburg. "The numbers are good, but I don't worry about numbers, I worry about people. There are still some people looking for work because of the recession. There are people looking for work because jobs have gone overseas. And we need to act in this country. We need to act to make sure there are more jobs at home, and people are more likely to retain a job."

But he didn't exactly disagree with his advisor's statements either. This take from the NY Times is interesting: "In Pennsylvania today, the president spoke about the need for educating people for "the jobs that are being generated in the 21st century." Although he did not say so, Pennsylvanians know those kinds of jobs are not, generally speaking, in the coal and steel industries, which were twin pillars of the Keystone State's economy for many decades."

Posted at 04:40 PM in Economy | Technorati


I saw that piece in the Times & am glad you commented on it. The Bush disconnect with economic reality - particulary as evidenced on MTP last weekend - is getting to be stunning. Endless commentators have pointed out that a similar disconnect destroyed Bush's father. Clinton practically blew him over like a feather with his simple, "It's the economy, stupid" line.

Bush's constant proclamations of economic growth remind me of a story a history prof once told us about the murder rate in New York City. Almost every other type of crime can be spun. Cops get called to the scene of a burglary - they can mark it down as a mere "breaking and entering"... and so on.

But murder is different. There's no way to spin murder. The cops find someone dead, and they have to file it as murder. So, back when NYC was a lot less safe than it is today, the one statistic you could always rely on to tell the truth was the murder rate.

Same with politics. You can try to spin an attack on American forces in Iraq as "insurgents growing desperate." You can blame the CIA for misrepresenting Iraq's WMD arsenal. But what you can't do is make excuses for lost jobs. If someone's lost his or her job, they damn well know it. And if you try to tell `em that "things are getting better," they have pretty concrete proof the opposite is true.

So I just hope Bush keeps trying to spin the bad economy. If he came clean, people might cut him some slack. But the way he's going, he can only make things worse for himself.

Posted by: DavidNYC at February 12, 2004 11:46 PM | Permalink | Edit Comment | Delete Comment

I am conflicted about this question (click on my name for more) as in the long run, the labor arbitage that is occuring right now will result in an aggregate improvement of well being. However the short run political points are hanging likely a poorly thrown curve right now. But I do not want the federal bureaucracy to get any other incentives to cook the books. That is the process of political intimidation that resulted in the horrendous use of intelligence which caused the Iraq war.


Posted by: fester at February 13, 2004 07:19 PM | Permalink | Edit Comment | Delete Comment

I hear what you are saying Fester, but I totally disagree. The fact is that there are certain assumptions made here that aren't going to hold over the long term. America has much more to lose than most other nations. If the world were actually to progress towards a free-trade globe (recognizing that there is no such thing as true free trade of course) then all of the benefits that America has economically today would no longer stand. The assumed long-term benefits to the American economy are just that - assumed long-term benefits based on 2004 political and economic realities. But assuming outsourcing of service jobs continues and that markets will continue to open up around the world, our relative class and economic positions of today will no longer stand. This means that our perceived advantages in 2004 will no longer be advantages that will allow us to benefit in the long-term more than our competitors. The more likely result will be that the service economy will go the way of the manufacturing economy. The ability of other nations to produce more competetive manufacturing goods will be joined by their advantage in producing service economy goods. While this may produce long-term benefits to the global economy - the advantages will largely be gained at the expense of today's wealthy nations (of which America is the most economically wealthy). This is, of course, conditional to whatever socio-political changes occur across the globe in the meantime.

Posted by: seamus at February 15, 2004 11:31 AM | Permalink | Edit Comment | Delete Comment

Thank you for a wonderful reply as it is provoking me to great thought. I see that you are silent on the issue of intimidating the federal bureaucracy for issuing reports that are in line with the best current information and theoretical understanding of the present because those reports contain unpleasent thoughts. We both agree that this is a bad thing. (tm)

Now you are right, in a global labor arbitage in a more free market, given information asymetry, transaction costs etc, the US will "lose" relatively compared to China or India in almost any transaction. This matter of relative status seems to be critical to your argument. It is irrlevent to mine. I am more concerned about the absolute levels of wealth in the world. As long as the median American is able to maintain or improve their living standards, I do not care if the US is the richest country in the world or the 10th richest country in the world.

I am worried about a slowdown in the growth of US living standards but not because of trade. I am worried about our debt levels and our future debt obligations due to SS and Medicare. The theory of trade as a non-zero sum game has strong empirical support as long as the trade is conducted between many countries, involving many goods and innovation occurs. Trade that involves only a single good with little innovation will not result in significantly improved long run living standards as we have seen with the oil exporters, and Uraguay's fall from prosperity when its agricultural exports were replaced by synthetics and US agricultural products. However if we are outsourcing goods and service production functions, then we should see aggregate improvement although relative positioning may change.

Posted by: fester at February 15, 2004 12:27 PM | Permalink | Edit Comment | Delete Comment