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August 04, 2004



It's productivity! Those damn Machines!


I might be misinformed, but I've mostly heard Kerry/Edwards proposing tax breaks for companies that don't offshore their jobs, which directly addresses the cost of doing business in the US. I haven't heard them propose tariffs.

Am I wrong?


They haven't proposed tariffs as such, but given where the Bush administration is leading with corporate tax breaks, that's not a great differentiator for the Democrats. The word tariff is taboo, but what has been proposed by many Democrats (especially, and undertandably Dick Gephart) seems no different. I have a hard time seeing how even tax breaks are going to convince a company to do business somewhere where the workforce is extremely expensive and no more competitive than anywhere else in the world. That may work for a national company thinking about moving some jobs offshore, but it certainly will not work with multinationals for which the US is just another geographical vertical.

I'm more concerned with the idea being pushed by both parties that Americans have some right to jobs just because they happen to live in America. That has the smell of entitlement, and a sense of entitlement won't help anyone become more competitive in the global workplace.


I would take the "entitlement" stuff with a serious grain of salt. It's political suicide for any democratic candidate to openly support globalization, which doesn't change the fact that everyone knows that protectionism and tariffs simply don't work any longer. Look beyond the rhetoric. There is no swimming against this tide. In my opinion, more efforts need to be directed towards supporting international labor movements to combat exploitation of cheap labor and international environmental regulation to stem the degredation that results from people overharvesting the world's natural resources. I believe that American jobs have value because American workers losing their jobs affects the economy of the country. Chronic unemployment has serious societal costs including increased burdens on our police, our hospitals and our schools. Still the rhetoric of entitlement plays well but ultimately means nothing. Multinational companies will continue to get away with paying as little for labor as they can and no government can stop them. That's just the reality.


Come-on Zoë! Competitive? One of the reasons some Americans, not all, have the right to a Job is because there are no international standards. The ILO notwithstanding,(even it has no teeth) there is no entity that enforces minimal work-standards-- WTO doesn't count, it enforce "other things". Now Western Industrialized countries are being penalized for offering, for the last 50 years, safe work environments, fair wages, and too often generous benefits.

Of course we can't compete with labour markets, not necessarily with our skill sets, which are awash with cheap labour. I don’t think any self-respecting citizen of the West wants to compete with a 12 year old boy who sews soccer balls or tennis shoes or polo shirts with his teeth for 16 hours a day in a dark warehouse, while barely squeaking out a living wage.

I’m not talking about proportionality in absolute wages, but a great deal of this competitive labour market is exploited. Are these countries more competitive and, subsequently, more deserving of jobs because they care little of the health, safety, and viability of their working citizens? And, let’s not deluded ourselves into thinking that these companies will protect the well-being of cheap labour in these countries. I hope that Americans would be entitled jobs in the country they live in because, you know, it kind of makes sense for the future of the America. When North Americans start believing that “being competitive” is tantamount to whoring yourself and dissolving most of the gains made during the past century the labour rights struggle, then I better start practicing my sewing.

T: Central

I'm not sure of the best place to point you, Carleton (help, people?), but you might do well to read a little about 3rd-worlders for whom "sweatshop" jobs represent a significant INCREASE in the quality of life.

Not to say we should ignore working conditions, but the assumption that implementation of labor standards HELPS 3rd-world workers seems to be contradicted by a great deal of data.

(I'm thinking Marginal Revolution and Nick Kristof might have more substantive things to say on this topic)


But when I say "labour" I'm not talking about stitching soccer balls with expolitative labour. Unfortunately that will continue as long as consumers care more about buying cheap goods than where their soccer balls come from and how they are made. I'm talking about white collar jobs that are leaving too - if the US can't compete in sales and marketing, then something is very wrong.

I absolutely agree with you that the US labour force shouldn't be trying to compete with the cheap unskilled (or even mid-skilled) labor in other countries because it never will be able to. Instead it should be intent on competing on the highest most cutting edge levels, and the only way to do that is to make sure that everyone has access to the best possible (and most modern) educational opportunities, NOT by giving tax breaks to companies and talking about breaking away from trade agreements.

I just got off a conference call with an American software developer whose sales and marketing line on the balance sheet had decreased a huge amount over last quarter because their headcount went down by 50 people in the US, and up 75 people in all other geographies to "consolidate costs". If even these higher level white collar jobs can easily and more cheaply be done by someone halfway around the globe, then you shouldn't start practicing your sewing - you should go learn how to sequence DNA.

What worries me about the political candidates we see now is that they aren't emphasizing the benefits of the safe environments, fair wages and educated workforce available in the States. Instead there is a knee-jerk reaction - "these are our jobs! we need to keep them here!" without any substantial addressing of the underlying reasons WHY these jobs are leaving. As Alan said above, this plays excellently to the populace but is doomed in the long run.


Also, what TCentral said, although that is no excuse to not fight tooth and nail to get their labour standards up.

For example, as I saw in Georgia, when 94% of the population in a town is unemployed and probably has no chance of being employed any time soon, there's no way of getting their living and labor standards up (much as then desperately need it). And that's in a country where most people are very highly educated, literate, and the natural resources of the country are nothing to sneeze at.


Your points are well taken Zoë and TC. However, they rely on a few dubious assumptions. First, if wishing made it so, all children enrolled from K-12 would be getting a first rate education with the mathematic, scientific and technological competency necessary for an innovative work-force. Greenspan recognizes this, though finds it difficult to reconcile this with the current state of educational policy.

Second, clearly the quality of life of 3rd worlders has increased, I do not deny that, and, again, I’m not looking for proportionality in wages or universality in working conditions, but the data I’ve seen—as well familial anecdotes—suggests that the increase can hardly be considered substantial. Moreover, relative to the standard of living in some of these countries, the increase barely covers subsistence. But I should apologize for considering the moral dimensions of this issue—it doesn’t pay to be mawkish these days.

Third, while most may think otherwise, outsourcing isn’t the job killer. Productivity and technological innovation is the job killer. I think it’s a good job killer because it will, hopefully, create new market segmentations. This is where a technologically competent labor forces and leads the way in innovation. What that really means, I couldn’t tell you, as I’m sure many other can’t, try as they might.

There will inevitably be dislocation, and I’m for comparative advantage as much as the next free-marketer, though the feasibility of reeducating the unemployed and underemployed while, at the same time, restructuring the educational system seems, in a word, undoable. That is not to say that we bear with inefficiencies in certain domestic markets through erecting tariffs, yet it seems like one concedes too much in trade negotiations that are, by design, inherently flawed—that’s not even to speak of the premises they operate on.

Nonetheless, I provisionally agree with the points made. White Collar jobs outsourced means that wage equilibrium will depress American wages, in order for American White Collar techies to compete (all things being equal, though American techies are currently more productive). The equilibrium is essentially a race to the bottom: who can work the fastest for the cheapest. I don’t think we should be using the word “compete” as though there are immutable rules to this game—if there are rules at all. If I were President (or Dictator), and both houses of congress were under my party control, I’d reform the inscrutable tax code; increase the size, restructure the format, and enhance the enforcement powers of the IRS; and, most chiefly, re-think education policy so that Americans are never left wanting in the tumult of globalization.

Tangent: why is it that one ends up self-censoring themselves when they want to say the problem is corporate excess and venal profiteering? And that a prevailing ideology is pushing a bit of this priestly infallibility of Globalization is so obvious. Why can’t someone say this without sounding like a crank? I guess I don’t want to sound like a crank….too late.


Well, my dad may be special counsel to the IRS next year - I'll let him in on your advice ;-)

About your tangent, two things:
a) see "The Corporation", if you can, and if you can't, see my upcoming review on The Gadflyer which I'll cross reference. Lots of musing about globalization, multinationals, etc.
b) No one ever said globalization was such a great thing, but it's here to stay so we might as well figure out how to use their powers for good not evil :-)

john mcmunn

Not easy issues, but a little historical perspective may help. One hundred years ago, the vast majority of America's work force was in agriculture. And the nation was much less well fed. To get to here, many farmers were dislocated and the national culture transformed. For many, over several generations, painful adjustments had to be made.

The real 600lb gorilla lurking in the current debate is whether we Americans will indefinitely continue to have by far the world's highest living standard. My guess is that living standards in the developed world will inevitably level out over the next generation or two, as we have seen occuring in Europe relative to, say, England vs. Spain and Italy over the last 20 years.

That said, we do need to re-examine our tax code with an eye to this issue and to always seek to improve our comparative advantage in areas where it exists. JSM


Hi Mr. McMunn - welcome to the site :-)

What's interesting is that Spain, Italy and Portugal have only been able to draw level with England because of the open borders and fiscal rigour required by European Union membership, as well as the financial reapportionment organized in Brussels. I would be fascinated to see if the US decides that it is in our interest to enter into broader multilateral trade agreements or if we go back down the protectionist road.

What's encouraging is when Italy and Spain drew level with France and England, there was no backsliding - France and England didn't suddenly have a worse standard of living or lower wages. These sorts of things tend to help everybody equally - everyone's boat floating up together as the water rises and all that stuff.


My take on it is not so much that Americans have more *right* to a job than Botswanans as it is that it is the job/duty of America's government to look out for the needs of Americans more than Botswanans.

T: Central

"to look out for the needs of Americans more than Botswanans."

This is another thing we don't really talk about. Most Americans would probably agree with this proposition, as stated. But asked as "If we protect these jobs, then one-hundred thousand people in this country will continue to live in poverty you can't even imagine," I think the answer might be different for a lot of people. Of course, it's a matter of degree, not black and white, and the policy questions aren't as simple as "tariff or no tariff."

It's probably NOT terribly funny, but some part of my brain just juxtaposed "humorous skit" with "outsource Fox News jobs to Botswana." I hope this isn't my one great idea...

Nick J

I think Kerry's proposal is less about ensuring American jobs don't go oversees and more about stopping U.S. companies setting up elaborate corporate tax structures that allow them to label much of their profit as "off-shore profit" and not pay the going rate of federal tax. I think that the cost of labour in the third world is so much less than in the United States that tax incentives for doing work oversees are only a small percentage of the cost saving (anybody have a link for this info?). There are many companies, however, who are using nominal foreign activities to evade U.S. corporation tax, and I think that's what Kerry is trying to clamp down on. Slate's Chatterbox (the end of the article is the most interesting) has an interesting take on this, http://www.slate.com/id/2099016.

Matt Stoller


A lot of the problem has to do with credibility. Free trade in goods and services is a good thing ONLY if there is some sort of redistributive policy for the losers. Otherwise it is morally ambiguous, but more importantly, the political support for loosening tariffs evaporates because the losers are loud and organized. In the 1990s, Clinton did a lot of promising that NAFTA would create jobs, which it did, but failed to follow through on the necessary redistributive policies that are the second part of the deal. There's also the issue of free global capital flows, which are a whole different beast and probably a destabilizing force, but hey, that's a different discussion.

Anyway, to your point about trade. Bush lies about everything, and Kerry has to deal with the legacy of Clinton. Closing off borders is clearly dangerous, but just who now has the credibility to promise effective free trade? No one, because the institutional and organizational links between the universal health care and retraining folks and the free traders don't exist. They should, but they don't.

Matt Singer

Jobs? Who needs a job? And, honestly, who likes their job?

Regardless, Stoller has some good points. The problem with redistributive policies is that they are still in an imperfect solution. What we will likely see in the US as a result of globalization is a second move toward urbanization, at least in what is left of rural America (places like Vermont, Montana, and Wyoming) where natural resource jobs are drying up. The problem is that urbanization destroys communities, separates families, and destroys lifestyles. It's not just about an income. It's about where the income can be gained.

I've always lived in the larger cities in Montana and been tied more to the professionals than the farmers and miners, but the rural areas are hurting and are increasingly desperate.

It's not a matter of a right to a job. And I don't really think it should be interpreted as such (this is similar to quiet xenophobia charge leveled against Dems by a number of free-traders), it is a real fear among real Americans. Take a drive to a place with depression-level unemployment rates and tell those people that they don't have a right to a job. It may be the right policy solution, but don't tell me it isn't tough.


Whether you want to call it a "right" or an "entitlement" or anything else, we've organized our society in such a way that barring an extraordinary level of acquired or inherited wealth, you have to work in order to survive (what public welfare programs we have left are for people who are unable to work for various reasons, mainly youth, old age, and disability); so I would think that society has a corresponding obligation to make sure that paying work is available to everyone who can do it. The US has almost never recognized such an obligation, certainly not before the closing of the frontier (when we would give people "free" land instead of work to support themselves), and only briefly during the Depression. Otherwise we've come up with reasons to tolerate unemployment and to rationalize the connection between unemployment and destitution (lack of work is entirely a personal failing, and not at all a flaw in our economic organization).

One other point: many of the countries in which garment sweatshops are flourishing are in southeast Asia and central America, which coincidentally are regions in which the US encouraged and supported military and paramilitary violence against left-wing and even not so left-wing popular movements, including independent trade unions. We shouldn't ignore that history when we make judgments about what's best for Guatemalan teenagers. Yes, stitching clothes 80 hours a week is better than being hunted down by right-wing death squads; but if we were the ones arming the death squads, we might not want to take too much satisfaction from that fact.


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