Outsourcing

They say all politics are local. Ok, fine. Voting that way is right and good. In fact, when we vote based on what we think might be good for "the other guy", that is, beyond our own experience or knowledge we often make mistakes. When I was still a liberal, I supported Democrat Tsongas for President because I thought he would be good for businesses. I know better now.

The Democrats promise to help people and many Americans vote for them in order to help others. They believe the Democrats when they say that things are bad for this or that group. Of course, some group of people is always doing worse than another -- that is always true, by default, since the argument is by comparison. Moreover, there will always be some group of people which needs help. We should be careful, though in voting one group of people the power over us in order that they might help another group.

Outsourcing is one these issues. If you or you someone you know has lost his/her job to outsourcing, then you have a reason to support democratic policies intended to remedy this. I do not beleive that these policies will work. I am just saying that you would be voting locally and that is a good start. But, we should all try to vote with some understanding. Outsourcing affects far fewer of us than it seems from the media coverage and it is not always a bad thing anyway. As usual, the liberal take on the issue is wrong and panders to our protectionist instincts. I submit the following:

Why We Have Nothing to Fear from Foreign Outsourcing

The United States continues to enjoy tremendous advantages in global IT competition. Our domestic economy is one of the most free, flexible, and open in the world. Our telecom, transportation, and utility systems deliver dependable service. Our talent pool of scientists and our university research facilities are second to none. Entrepreneurs can obtain financing for their ideas and intellectual property protection once they are developed. Relative to many other systems of government, ours is transparent, predictable, and dedicated to the rule of law. Our domestic market is the largest in the world. Those inherent advantages of doing business in the United States cannot always be offset merely by lower labor costs elsewhere and are especially important in those aspects of production that require creative freedom and specialized skills.

U.S. companies are also discovering the limits to outsourcing. There are perfectly good, market-driven reasons why U.S. companies will continue to do most of their IT work onshore if not in-house. Foreign outsourcing can generate costs of its own, such as the need for more travel, training, and management oversight. Depending on the type of project, those costs can eat into if not entirely erase the costs savings from lower wages abroad. Sending work abroad can also risk the loss of control of sensitive personal and financial data and copyrighted material. It can mean the loss of control over time-sensitive aspects of a project or becoming too reliant on outside firms. As some U.S. companies have discovered, it can result in reduced quality of service if the providers are not sensitive to cultural differences or lack specialized information expected by customers.

The increase in outsourcing is neither and unemployment is low

Another non-issue sure to grow tiresome in a few more months is the maniacal anxiety about imports of business services -- a trivial pursuit that would have gotten no attention at all had it not been deviously mislabeled as "outsourcing." That is not what outsourcing means. Outsourcing means having business services done by specialist firms rather than inside a manufacturing or financial firm.

What uninformed politicians and journalists mean by "outsourcing" is importing services. They would have you believe the United States has suddenly been importing many more services. Yet the increase in service imports last year was precisely zero. From 1997 to 2000, by contrast, U.S. service imports grew 9.7 percent a year.

If Sen. John Kerry had hoped to make a big political issue out of an unemployment rate that is likely to be below 5 percent by election time [It is actually 5.4 now], he had better start trying to change the subject as soon as possible. And his never-ending wisecracks about Herbert Hoover could backfire, too, because Hoover enacted the same policies key Democrats now recommend -- namely, higher tax rates and tariffs.

Outsourcing is good for America

If a capable radiologist in India can read x-ray pictures at a quarter of the cost of doing so domestically, important health care services can be delivered at lower cost to everyone, putting a brake on exploding medical costs.

The outsourcing of services to India counts in the U.S. balance of payments as an import of services. If we are going to start importing large amounts of such services, these imports must be paid for by exports of something. The dollars being spent by firms to purchase these services will come back to the United States either in the form of demand for U.S. goods (our exports to India) or foreign investment in the United States. As McKinsey has noted, "[service] providers in low-wage countries require U.S. computers, telecommunications equipment, other hardware and software. In addition, they also procure legal, financial, and marketing services from the U.S

If unemployment is still way low, then how bad could job loss overseas be? And, they say that the jobs which are replacing the lost jobs are paying less. But are they? The ITAA says (among other positive things) that real wages have and will continue to rise due to off shoring jobs since the effect is to make our home economy better.

Conservatives know that the free market works only when it is adaptable. We are the party of change; we are the party that believes in the future. Yes, some will have to find and possibly train for different jobs. This flexibility is what makes the American market so damn good. Embrace it. Remember, America is the greatest force for good the world has ever known. Our poorest jobless citizen is rich beyond belief compared to most of the world (and compared to most of human history too). In this country if you lose your job and are willing you can find another one. It is our free market which allows this. It is our free market which allows us to be that force for good. We should protect our economy against leftist policies because in so doing we protect ourselves.