Outsourcing and Offshoring Help The Income Pump

Krugman points out 2 ways to transfer income upwards – outsourcing and offshoring

The process I call The Income Pump switched on in the 1981-82 time frame.   Not sure what are all mechanical parts making up that pump, but it has successfully pulled wealth from the huge group of the  lowest incomes and sent it to the topmost rich.  Paul Krugman helped out Friday, Jul 6, by discussing two of the components.

The  New York Times essay by Paul Krugman  (link seem to be deleted JUL18 – read Update, at end of this post)  concerned the effects from the business practice of

Outsourcing jobs  bringing in contract janitors, mail clerks,  those who earn less and have poorer other compensations compared to company staff.        and/or

Offshoring jobs   shutting down factories and rebuilding in some other country, frequently Mexico or especially China where the workers are serfs, prisoners, or semi slaves.

These apply to most of our big companies, and some do both.  Apple Inc. put itself at the top of the list because Steve Jobs bragged on his success.  Everyone likes cheap goods.  The hidden meaning is that we all like having serfs or slaves, as long they are not working near here.

Krugman actually discussed how this works in our economy, and how it works to shift income to the American elites and their betters, the ultras.  Per Krugman:

Outsourcing:  “... one of the main points of outsourcing is to ensure that as little as possible of what corporations earn goes into the pockets of the people who actually work for those corporations.

Offshoring:  “… the right of corporations to do whatever maximizes their profits, even if that means shipping jobs overseas.

Both became really great ideas for our corporate leaders some time ago…

[These form] “… the huge disconnect between a tiny elite and ordinary American workers, a disconnect that has been growing for more than 30 years.”

Krugman has a way of coming right to the point.   BTW – the 30 years needed to grow outsourcing and offshoring is the same as used by the American Income Pump.


Click for Income Pump

My first post on this was Zero Sum Game, and more followed. The income pump is an effect based on the Saez data set that has operated since about 1981 0r 82.  The driving mechanism for the upward flow of income was not in focus.  What was clear that this is not just the result of a few gnomes giggling over a dark fire. There must be a number of processes at work to pump the money to the richest classes, Paul K just added two.

click for more posts on Trade Policy

Many such infectious processes have been around around for a long time — But they share a common feature, all  went viral  within the last  30 years.

Update: 2012 Jul 18   The link to Krugman’s article went AWOL in the last 6 days –  it no longer connects to anything.  So here is an archived copy – straight from the NYT website on Jul 6.  On Jul 17, NYT published a response from David Brooks, but it is no longer shown either.  (See LastTechAge post on Brook’s comments.)


Charles J. Armentrout, Ann Arbor
2012 July 06
Have a comment? Click the title of the post, go to the bottom and let us know
Listed under   Economics     …thread   Economics >   Inequality
Related posts: Click  Index  under the Banner.

About LastTechAge

I am a physicist with years of work in fusion labs, industry labs, and teaching (physics and math). I have watched the tech scene, watched societal trends and am alarmed. My interest is to help us all improve or maintain that which we worked so hard to achieve.
This entry was posted in Economics and tagged , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.