Increasing World Prosperity = Bad for America
That is how Don Boudreaux characterizes the likes of Lou Dobbs and Paul Craig Roberts and their views on “outsourcing”.
In short, Roberts alleges that the American standard of living is threatened by the world’s growing prosperity, improved education, better governance, and greater fluidity of capital and resources to move in search of higher returns.
The problem with this, as Don points out, is that the game here is not zero-sum. India’s gain does not have to be America’s loss. It could be that there is a loss, but we also have to look at the benefit to consumers of the services that include the outsourced jobs. Also, there is the increased trade due to the rising standard of living in India and other countries that are the recipients of the outsourced/off shored jobs.
Only by assuming that things like non-human capital is fixed can we get the zero-sum result. That is by assuming that factories, laboratories, phone centers, and so forth are always and everywhere fixed in size. That this notion is false is obvious to just about everybody.
Now this doesn’t mean that outsourcing is neccessarily good, or that there isn’t a net loss to the U.S. However, people like Lou Dobbs and Paul Craig Roberts have not done the research neccessary to come to the conclusion that outsourcing/off shoring is a net loss. Instead they take what can be called a neo-mercantilist viewpoint that outsourcing/off shoring has to be a bad thing anywhere and everywhere.
Also, there seems to be implicit in this veiw that jobs lost to oursourcing/off shoring are permenantly lost. This too is false. Those who have lost jobs due to outsourcing/off shoring will look for employment elsewhere. That is resources are freed up to engage in production that prior to oursourcing/off shoring were not as profitable. This has happened here in the U.S. many time before. The industrial revolution and the advent of farming machinery freed up large amounts of labor that previously had been engaged in farming. Prior to the recent off shoring of call centers there was the decline in manufacturing jobs. This decline has resumed and continuing a decades long trend.
The idea that the economy can be frozen in amber is a ridiculous notion. The economy is dynamic, and many don’t seem to appreciate the implications of that word. It means the economy is changing, and that means that jobs in one generation may disappear a few generations latter. I can understand why Lou Dobbs would not understand this kind of thing, but Paul Craig Roberts is an economist, and the idea of a dynamic and changing economy is somethig economists learn about.