Arnold Kling  

Debating Outsourcing

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Debating Social Security... Taxes and Social Security...

The link may only work for a day, but Tyler Cowen and John Irons go at it on the online WSJ over outcourcing. I think that Tyler supplies all of the highlights:


Outsourcing resembles technical progress in its economics; in both cases, we procure something more cheaply, whether it is produced by machine or by Indians. We have had dramatic technical progress now for several hundred years. While particular groups take short-run losses, real wages have risen across the board. It is because we shed low-productivity jobs that we move to a wealthier and more-productive set of options.

...Many Indians and other recipients of outsourcing investment are desperately poor by U.S. standards. It is both proper and in our long-term national interest to help India develop into a free and prosperous economy. Indians do not count for less simply because they stand outside of U.S. national borders.

...Poor countries should not have the same environmental and labor standards that the U.S. does; they simply cannot afford them and do not have the requisite legal structures to enforce them. The best way to improve their standards is to help them grow rich, so outsourcing is part of the solution in this regard.

...I'm all for improving the lot of the current unemployed. This is best done by private-sector training, including for-profit education. Our rather bureaucratic government has no comparative advantage in retraining displaced labor.

For Discussion. Is it fair or unfair to refuse to trade with countries that have different environmental standards?



COMMENTS (7 to date)
Matt McIntosh writes:

Unfair of course, and often unrealistic. We have the luxury of environmental standards because of the huge amount of capital we've built up. China and India don't have that, but they're getting there. Trying to enforce first-world environmental standards on second- or third-world countries is just assinine and makes it harder for them to get anywhere.

Lawrance George Lux writes:

It is a wonder how Most support free trade with Countries with lower environmental standards, but feel it is unfair of Countries to penalize the United States for subsidizing Exports. It revolves upon Advantage gained. We should be able to buy the cheaper Goods, but We should also be able to sell Goods under fair market cost for Trade credits. lgl

p writes:

One way to determine if we should trade with countries that polute more than we do is to assess whether we will pay the price of the polution. That is, will it impact our experience of polution.

Having a different standard from the US would be absurd given that we would have to ascertain if the standard did the US direct harm (versus second, third or forth order impact).

iPaul writes:

If we had a body politic committed to making environmental improvements, I could actually write this with a straight face. First, we do use trade policy to encourage countries to be better citizens and I think we should continue to use these economic levers. The economic embargo against South Africa was a worthy endevour. However, we produce something like a third of the world's C02 emissions. Frankly, there's a lot more we could do internally. With that said, we should not condone some of the blatant disregard of human and environmental welfare that takes place in emerging countries. A policy shouldn't foist first world polution standards on economies ill suited for the cost, but sanctions should encourage countries to better handle the disposal and management of dangerous toxins such as PCB's, mercury and arsenic. (By products of Chinese recyclers burning old PC's for their gold content, which happens in the open in large metal trash bins).

Dezakin writes:

I hardly think this is a fair question at all, given that most of the responders on this board, myself included, are skeptical of the environmental issues at best.

Assuming I cared more about environmental issues and believed there were merit to the dangers being trumpeted by so many whom I believe are misguided... then it depends on whether you believe its fair to refuse trade to influence any policy, not just environmental policy.

And thats really how the question should have been framed, rather than preying on the reactionary skepticism of environmental activists.

Kevin Carson writes:

If you're serious about improving the living standard of Third World people, one *real* free market step in the right direction (as opposed to what passes for "free market" among neoliberals) would be to radically scale back or eliminate the intellectual property law that locks Western capital into control of the latest production technology.

Another might be to end the role of the U.S. government in propping up authoritarian regimes that drastically restrict the bargaining power of labor. It's not by coincidence that Wal-Mart's suppliers gravitate toward banana republics and "Workers' states" where independent unions are illegal.

As for comparative advantage in cost of production, that depends on a complex package of costs--many of which are currently subsidized by the U.S. government. When the government subsidizes long distance transportation, and subsidizes infrastructure projects in foreign countries that Western capital depends on to be profitable there, it is in effect rendering the export of capital (and jobs) artificially profitable.

Under a regime of genuine free trade, where business internalized ALL its risks and operating expenses, I imagine a whole lot more of what we consume would be produced closer to home.

Deb Frisch writes:

Of course it's fair.

Imagine a country that imprisoned all men under the age of 30 and forced them to work in a government owned factory for 12 hours a day. Would it be fair to refuse to trade with this country? Obviously the answer is yes.

Similarly, we can and should refuse to trade with countries that abuse the environment.

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