Excessive Spending - Outsourcing Doesn't Hurt (?!)

In the blog "Cafe Hayek", Don Boudreaux writes:

Among the many histrionics of election year 2004 was the concern that free trade in general, and "outsourcing" in particular, would soon rid America of high-paying jobs.

But now comes this report, entitled "Firms' New Grail: Skilled Workers," in today's Wall Street Journal (paid subscription required). Here are the opening lines:

Difficulty in finding enough skilled workers is hampering the ability of many U.S. manufacturers to serve their customers.

My response was the following:

I'm sorry. What country was that again?

As reported in the Detroit Free Press:

"The Motor City is facing a fearful holiday season after three of the auto industry's biggest companies announced nearly 60,000 job cuts in the past week, with more to follow."
http://www.freepress.com/apps/pbcs.dll/article?AID=/20051122/BUSINESS01/511220317/1002/BUSINESS

There are plenty of highly skilled people being fired (let's not use euphemisms). Okay, blame it on poor management, high labor costs, etc. But the reality is that outsourcing has had a real and significant impact on this midwestern area.

The federal government declared Louisiana a disaster area with its hurricane damage and is pouring billions into it to restore and repair. What is happening to Michigan is far more insidious, but just as real.

Just wait until it hits home elsewhere and see how sanguine the rest of the country is.

The billions of dollars that the "baby boomers" retiring from Michigan spend in places like Florida may be at risk as companies like Delphi and General Motors collapse. Remember, "service jobs" are at the end of the money trail. A few new robotics plants or medical research facilities do not equate to the loss of U.S. owned manufacturing jobs and profits that get recirculated in the U.S. economy.

Ask yourself if our goal as a country is to restructure ourselves to be a source of low cost labor so that we can be "competitive." If not, ask yourselves what those reasonably-paid skilled people will be doing... they won't all be medical researchers or mechanical engineers.

John R. Saul is the author of The Collapse of Globalism

"At the heart of The Collapse of Globalism is a question that's fundamental to economics but often not asked explicitly: Are political decisions meant to be made in deference to the economy and markets, or can we use our political institutions to shield us from some of the harsher effects that markets can dish out?

The argument is that "globalization" isn't a homogeneous process, but is economic interaction that can be... and is... affected by political policies.

In short, in what's meant to be a "world without borders," it's been impossible for people to ignore just how much local economic conditions really matter. In response, some participants in the global economy have begun to realize and exercise some of their local power."

Chicken Little? Think again.

The problem is that "outsourcing" is more than replacing a few people with a few jobs overseas. It is "outsourcing" of supplies and even whole products that are imported and sold as "U.S." brand products by companies like GM and Delphi. Who needs Chevy when we can import "Chery"? Sure, we can gut our manufacturing capability and become a "nation of consumers."

For how long???