Viewpoint: Real Traitors In A Global Economy. Are Those Who'd Fetter U.S. Firms

by John F. Gaski

(Viewpoint):Every so often we witness the meltdown of a public figure. Recall Nixon, Howard Dean’s scream or boxer Mike Tyson’s bite of an opponent’s ear. CNN business anchor Lou Dobbs has been committing the journalistic equivalent of biting someone’s ear off in public.
The host of “Lou Dobbs Tonight” has transmogrified from serious reporter to hysterical mountebank over one pet issue: foreign job outsourcing.

He has joined the chorus decrying the trend of U.S. businesses moving some operations offshore to economize on labor.

So what’s the problem? Doesn’t business have a responsibility to enhance profits by using resources efficiently? Not according to Dobbsians. To them, getting such “cheap labor” is illegitimate, even unpatriotic. They apparently feel American business has an obligation to give charity jobs to uneconomic workers.

What’s wrong with that? The Dobbs position is dispatched by metaphor: When the car was invented, thousands of buggy-whip industry employees lost their jobs. Should government have outlawed car manufacture 100 years ago? Automation in general has sent many assembly-line workers into unemployment lines. Should automation therefore be prohibited by regulation?

The answers are obvious. Technological advancement causes short-term pain along with greater long-term gain. Technology, as implemented by business, may produce short-run unemployment. But this effect is dwarfed by jobs created over the long run through improved productivity.

This “outsourcing” phenomenon embodies the same principle.

Business is motivated to secure low-cost labor resources. Often offshore workers serve this interest of U.S. firms. Yes, our corporations seek “cheap labor,” in the pejorative locution. (Sometimes U.S. labor resources serve the same end for foreign producers. “Insourcing,” anyone?)

Why not prohibit such a job-dislocating practice by law to preserve American jobs? Because that would be economically myopic. What would happen if offshore-outsourcing U.S. firms were no longer allowed to do that? Our hamstrung firms would no longer be competitive in world markets.

Those entities would then be forced to downsize or even go out of business, thereby eliminating many more jobs!

Also, foreign governments would retaliate, prohibiting outsourcing to the U.S.

Because the amount of U.S. job insourcing is much greater than the outsourcing (did you know that?), this would produce a further loss of U.S. jobs.

Yes, let us choke U.S. business out of business. It is the perfect liberal egalitarian remedy: Let all the formerly employed be equal in their unemployment and misery.

At least the Democrats would then have a higher unemployment rate to use as a wedge issue while making the world safe for French corporations.

Self-evident economics notwithstanding, Dobbs drones on, traducing our economy.

The whole U.S. economy? Yes, Dobbs’ sensationalized list of outsourcing companies now numbers over a thousand! The ironic lesson is lost on him: If something means everything, it means nothing. Lou’s litany of “Benedict Arnold” companies is a fair proxy for the whole private economy, so his point disintegrates into gibberish.

Anyway, the evidence says this is pretty much a nonissue. The proportion of 2003 U.S. job losses attributable to foreign outsourcing was only 1%, according to the Bureau of Labor Statistics.

That is 1% of gross layoffs, not 1% of the labor force! This is why outsourcing is a small price to pay for the long-term bounty of efficiency and employment gains.

Another way of looking at it: In an average year our economy loses about 10 million jobs gross, of which around 100,000, or 1%, are due to outsourcing. So how can our country stay in business? Because the economy also creates 11.5 million jobs in an average year for a net gain of 1.5 million.

That frames the true perspective. Apparently, American business does pretty well for American labor.

Ironically, the offending party is the one that has recklessly slandered U.S. businesses that are merely performing their economic mission.

Dobbs has injudiciously alleged that numerous U.S. firms are “Benedict Arnolds” of the economy. This is just anti-free trade claptrap, and it could bring a new round of recessionary protectionism.

Ultimately, Dobbs is hoist on his own petard. If anyone is betraying our economy it is Dobbs, especially considering the damage his propaganda can do in terms of inducing erroneous public perceptions and, in turn, support for bad policy.

The sound you hear is onrushing overregulation, trade war and macroeconomic contraction. Perhaps you can think of other demagogues who railed against convenient domestic demons.

I suspect I speak for many former fans as I express the utmost disappointment in Dobbs, now exposed as a modern-day subversive in the Benedict Arnold tradition.

Gaski is an associate professor of marketing at the University of Notre Dame.

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