Out of Control Policy Blog

George Will on Offshoring

In today's Wall Street Journal, George Will explains the issue beautifully. It is the best piece on offshoring that I've seen...hopefully, some politicians saw it!

Here it is:

The Economics of Progress

By George F. Will

Friday, February 20, 2004; Page A25

It is difficult to say something perfectly, precisely false. But House Speaker Dennis Hastert did when participating in the bipartisan piling-on against the president's economic adviser, who imprudently said something sensible.

John Kerry and John Edwards, who are not speaking under oath and who know that economic illiteracy has never been a disqualification for high office, have led the scrum against the chairman of the president's Council of Economic Advisers, N. Gregory Mankiw, who said the arguments for free trade apply to trade in services as well as manufactured goods. But the prize for the pithiest nonsense went to Hastert: "An economy suffers when jobs disappear."

So the economy suffered when automobiles caused the disappearance of the jobs of most blacksmiths, buggy makers, operators of livery stables, etc.? The economy did not seem to be suffering in 1999, when 33 million jobs were wiped out -- by an economic dynamism that created 35.7 million jobs. How many of the 4,500 U.S. jobs that IBM is planning to create this year will be made possible by sending 3,000 jobs overseas?

Hastert's ideal economy, where jobs do not disappear, existed almost everywhere for almost everyone through almost all of human history. In, say, 12th-century France, the ox behind which a man plowed a field changed, but otherwise the plowman was doing what generations of his ancestors had done and what generations of his descendants were to do. Those were the good old days, before economic growth.

The disappearance of whole categories of jobs can be desirable for reasons other than economic rationality. The economist Irwin Stelzer recalls that John L. Lewis, the fire-breathing leader of the United Mine Workers of America from 1920 to 1960, said that he hoped to see the day when no man would make his living by going underground.

For the highly competent workforce of this wealthy nation, the loss of jobs is not a zero-sum game: It is a trading up in social rewards. When the presidential candidates were recently in South Carolina, histrionically lamenting the loss of textile jobs, they surely noticed the huge BMW presence. It is the "offshoring" of German jobs because Germany's irrational labor laws, among other things, give America a comparative advantage. Such economic calculation explains the manufacture of Mercedes-Benzes in Alabama, Hondas in Ohio, Toyotas in California.

As long as the American jobs going offshore were blue-collar jobs, the political issue did not attain the heat it has now that white-collar job losses frighten a more articulate, assertive social class. But an old lesson applies to this new situation.

The welfare state, beginning with unemployment relief, was pioneered in part by European conservatives, Disraeli and especially Bismarck, to reconcile people to change -- to the frictions and casualties of economic dynamism on which, such enlightened conservatives saw, national greatness would depend in the industrial age. It is sound social policy, and simple justice, that the party benefiting from free trade -- the nation as a whole -- should be taxed to ameliorate the discomforts of those who pay the short-term price of progress.

That is the case for education and job training for persons needing to change their skills. Such assistance is especially imperative when the casualties of change bear no responsibility for their fate -- unlike, say, U.S. steelworkers, whose overreaching in collective bargaining deepened the problems of their industry.

Kerry says offshoring is done by "Benedict Arnold CEOs." But if he wants to improve the health of U.S. airlines, and the security of the jobs and pensions of most airline employees, should he not applaud Delta for saving $25 million a year by sending some reservation services to India?

Does Kerry really want to restrain the rise of health care costs? Does he oppose having X-rays analyzed in India at a fraction of the U.S. cost?

In November, Indiana Gov. Joseph Kernan canceled a $15 million contract with a firm in India to process state unemployment claims. The contract was given to a U.S. firm that will charge $23 million. Because of this 53 percent price increase, there will be 8 million fewer state dollars for schools, hospitals, law enforcement, etc. And the benefit to Indiana is . . . what?

When Kernan made this gesture he probably was wearing something that was wholly or partly imported and that at one time, before offshoring, would have been entirely made here. Such potential embarrassments are among the perils of making moral grandstanding into an economic policy.


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