Sunday, October 10, 2004

What's Wrong With Outsourcing?

Economics has ceased to be an empirical science and has become a religious faith.

The above is the closing line of Paul Craig Roberts' article referred to in my last post. Most of the article is a deconstruction of all the silly pro-outsourcing arguments, demonstrating how outsourcing hurts US employees and the economy, and that both in the low-tech and high-tech sectors. I don't fully agree with his argumentation and focus, but before advancing a different train of thoughts, I highlight some bits with quotes:

The US is losing the ability to manufacture a range of advanced technology products and is now dependent on imports of advanced technology goods from China and Japan. Entire high tech occupations are beginning to disappear in America, with computer engineering enrollments in topflight schools such as M.I.T., Georgia Tech, and UC, Berkeley shrinking by 45%.

I too noted (not on this blog), that what is often touted as one of the last economic advantages of the USA over the rest of the developed world, its supposed dominance in the sciences, 'aint true anymore either. As economics indeed largely turned into blind religious faith, facts are replaced by products of wishful thinking, accepted uncritically, and used as 'proof', to continue policies that further the destruction already reflected by the real data. And thus the religion of neoliberalism (or however Dear Reader prefers to call it) ruins its origin and supposed role model for the rest of the world, too (I wrote more on this here and here).

...All the while the American labor force is being redirected into domestic nontradable services, an influx that depresses wages in domestic services...

This is the creation of a service class, something I wrote about lately.

...As high-tech US jobs move offshore, economists chant a lemming-like chorus: the answer is more high-tech education.

Bill Gates responds to shrinking job opportunities for American engineers by beating the drums for more engineering majors.

...American students are becoming aware of the facts, but economists hold firmly to their fantasy that other new and even better jobs are taking the place of those that have been outsourced. There is no evidence whatsoever in behalf of this claim.

The same contradictory logic is behind the myth of demographics as the reason behind budget deficit problems, something I also wrote about recently.

Now, my critique of outsourcing would focus on what is hinted at at the end of the second-before-last paragraph:

When Intel, Microsoft and all the rest hire Asian software engineers, the US engineers are out of work. US careers are sent abroad and given to foreigners, and with them go the incomes that comprise America's ladders of upward mobility.

I am dismayed whenever a Westerner complains about having to give up his standard of living because foreigners with a much lesser standard of living get his job. I am also allergic of the use of the phrase 'illegal aliens', as employed by Roberts. Such argumentation shows no real concern for the well-being of fellow humans, yet it often comes from liberals and social democrats who pay lip service to universalist goals.

However, such a global 'trickle-down', shifting wealth from the middle class of richer countries to the middle or lower classes of poor countries is a lesser effect of outsourcing. Stronger are other, negative effects: 'shifting' the lack of workers' rights and consumers' rights from poor countries to rich countries, and shifting wealth from the middle and lower classes in both rich and poor countries to the economic elites in both countries. And consequently, having empowered these economic elites, democratic institutions can be corrupted easier, and their power over policy issues related to the economy is eroded.

Undoing the socio-economic reforms of the 20th Century, we head back to a different re-run of the conditions that spawned communism in the 19th Century.


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