Offshoring and Outsourcing are good — Brooks

“Offshoring and outsourcing has been good for American productivity.”  So says New York Times David Brooks, in his 2012 Jul 16 essay (published Tuesday, Jul 17, in the NYT Op-Ed section).  This is in direct confrontation to Paul Krugman’s July 6 column.

An amazing thing happened on the way to this post.  As always, there should be a link at the NYT website to the column published yesterday.  Not there!  Wednesday’s NYT has letters to the editor about Brooks’ essay praising both offshoring and outsourcing, but what is being shown NOW at the NYT site is The Capitalism Debate, a scrub-job full of sections & snippets  from the original; supporting Romney in spades, but omitting the disturbing words.

This LastTechAge  post is about what Brooks actually published, had printed, and received comments on.  Here is Brooks’ actual More Capitalism, Please, released to NYT publication on July 16;  his real thinking. (This PDF was made from the newsprint copy.)  If you agree with Tom Freedman and Rush Limbaugh, you’ll love this.

We rechecked the LastTechAge  post on Paul Krugman.  Hey!  The NYT link to Krugman is not there, either!  We just updated our post with a PDF of Krugman’s essay,  If you are curious, click over to our last post.  … Call me suspicious —  If you get calls from a bunch of  ultras, wouldn’t you pull the stuff they didn’t like?  After all, it has been two generations since Watergate,  and things go better with Koch.

US business leaders see the world as a garden of opportunity … hired foreign workers to lower labor costs … globalized production reduced computer prices by 25% between 1995 and 2002 alone” (Brooks’ words)

See our post on Krugman:   how we all truly enjoy serf/slave labor so long as it is not near us.  Brooks sees this as a positive thing.

We are very Keynesian about this: Take jobs  and income from the people, and how can you expect them to buy your goods? Henry Ford knew this 100 years ago, when he paid his workers twice the going wage. (Lots of things you might say about old Henry, but he understood strategies for success.  Much clearer than the Steve Jobs mentality.)  The real answer, of course is that we cannot continue closing factories in the US and maintain an upwardly mobile society.  5 years ago, I visited a small business.  Waiting for the boss, the lead engineer commented that he and ‘all the people he knew’ held credit card debt maybe twice their salary.  Could this example be unrelated to offshoring?

Hiring foreign workers has, on the balance, been good for American employment levels.”  – Brooks asserts this from “studies.”

6 or 7 years ago, I was at the Eaton Co. plant on Rust Road in Saginaw Michigan.  I went with some sales people as technical support. What we walked into was moving day.  Oops. The US engineer told us that Eaton was in the middle of transferring that plant kit and caboodle to Mexico.  She had just trained her Mexican counterpart in the basics of her job, and after she helped him finish the crating, she was to be let go. The vast majority of the plant workers were already gone.  I asked why she was being so nice to someone who was taking her job, she said “COBRA.”  (This is the temporary US support plan to workers who suffer involuntary loss of jobs.)  Had she refused, Eaton would report that she had resigned and she would have lost any transitional support.

We would have to read Brooks’ studies very very  carefully to understand his point.  Maybe a trained engineer plopped in the dumpster ultimately resulted in increase in household maid servitors?  ‘Dunno.

Offshoring and outsourcing has been good for American productivity.”  Brooks conclusions are courtesy of an IMF study.

I suspect that study measures the balance sheet sent to Boards of Directors, with productivity measured by increases in stock prices, and sizes of bonuses. This would be a scam, not home-based productivity improvement. Years ago, smart workers could get ahead by using any current success in the present job to get a higher paying position elsewhere.  While I was in San Diego, one engineer did this 3 times in 3 years, returning to General Atomic 2 job levels higher then when he left. Higher rank meant more ways to demonstrate your productivity.  But if you apply for a job after being laid off, you nearly always get one with a lower rating, lower pay, and loss of ability to show what you can do.

Finally, global hiring has been fantastic to the global poor.

This is part of the economic zero sum game.  I have not been successful in describing this to friends, I am certain that I could never convince David Brooks or Tom Friedman.  If you are giving semi-serfs a low paying job, maybe it keeps them from starving.  But maybe not.  In China, do the workers in factory dorms actually benefit?  Whether or not, most of the people we share a country with must lose income.  Ultimately all 7 billion of us on Earth (expect for that ultra 0.01%) will reach a poverty equilibrium. Marginally better for the 6.7 billion out side the US, much worse for the 0.3 billion Americans whose lost livelihood dissipated into the massive external populations.

If the US really wanted to help the global poor, we could supply low cost food, and provide social services. Everywhere. In perpetuity.  This would make them healthy enough to improve their own counties.  After a couple of decades, the “3rd world” countries would be dynamos of activity.  Let’s see.  Only needs about 10 or 20 thousand each year per person, maybe our big hearted near-monopolies would supply this?  I can just image David Brooks advocating such a thing!

click for more posts on Trade Policy

David Brooks has  come out strongly in favor of continuing the destruction of US manufacturing capability (the offshoring thing).  He also favors hiring contract labor to do the jobs corporate workers do (the outsourcing thing).  Contract laborers never have control over their lives,  have no loyalty to their current job. What is the point in doing a meticulous job for people who make no commitment and provide a barely livable income.  Product quality goes by the wayside.  Full time employees are amazingly loyal, stand behind their managements and loudly sing their corporate anthems (unless they have been horribly mistreated).  Outsourcing kills all this.


Click for Income pump discussion

LastTechAge stands firmly behind Paul Krugman and Keynesian economics in the debates over offshoring and outsourcing.  Brooks slopped whitewash over his real thoughts, and his current writing is all conservative reasonableness.  But his true thinking shows through at times. Offshoring and outsourcing are part of machinery behind the income pump


Charles J. Armentrout, Ann Arbor
2012 Jul 19
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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.
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