Exporting America by Lou Dobbs

The US Navy is going to have F-14 (Tomcat) aircraft parts made in Poland with US tax dollars. Poland has a long history in aircraft design and production but it bothers me that a US aircraft might be grounded because of interuption in the spares pipeline.

 

The same could have been said in conversations of long ago days. Transition of tribes to city-states was significantly larger in scale than small collectives to tribes. And city-states to nations significantly larger than tribes to city-states.

Human nature is the same today as it was through these other transitions and we managed fine, albeit with definite challenges and detractors. What we face today is simply a relative issue but each new step up has always been relatively larger than the previous.

You are correct that we do not know the details of how, but I am confident that historical context is large enough to cover our circumstances today. While I don't know the details, I am confident the data indicates it is inevitable.

 

True, if we look at the trend of regional economic integration such as the European Union. Established in 1957/(8) as European Economic Community (EEC) and the European Atomic Energy Community (EAEC), is the largest and most comprehensive of the regional economic groups. It began as a customs union, but the formation of the European Parliament and establishment of the euro as its common currency make it the most ambitious among all trade groups. The EU, “set about to abolish internal tariffs in order to more closely integrate European markets and hopefully allow economic cooperation to help avoid further political conflict” (Daniels et. al, 2004, Int. Bus. p.208).

History, since its inception (some are omitted):
1957 – EEC formed (Belgium, France, Germany, Italy, Luxemburg, the Netherlands)
1959 – first step to abolish customs duties and quotas within EEC
1960 – European Free Trade Association established
1961 – free movement of workers within EEC comes into force
1962 – Common Agricultural Policy introduced
1966 – EEC becomes European Community (EC)
1967 - All internal tariffs eliminated, and common external tariffs imposed
1973 – Denmark, Ireland, and UK, joined the EC
1979 – European Monetary system comes into effect; European Parliament elected
1980 – Greece joined as 10th EC member
1986 – Spain and Portugal became 11th and 12th EC members; European Parliament role increased
1989 – collapse of the Berlin Walls
1990 – first phase of European Monetary Union; Germany unified
1992 – EC to European Union (EU) signed; adopted by members in Nov. 1993
1993 – Single European Market comes into force
1995 – Austria, Finland, Sweden joined the EU
1999 – Single European currency, the euro, comes into effect
2002 – the EU announces 10 new countries to join the EU in 2004

The 10 joining countries being Poland, Hungary, Czech Republic, Slovenia, Slovakia, Latvia, Estonia, Lithuania, Malta, and Cyprus. In 2007, Bulgaria, and Romania are expected to be with the EU, and perhaps, Turkey as soon as its human rights record improves.

Don’t forget, too, the regional economic groups such the North American Free Trade Agreement (NAFTA) of Canada, the USA, and Mexico, which cover areas such as market access, trade rules, services, investment, intellectual property, and dispute settlement. And many other regional economic groups in Latin America (LAFTA, ALADI, CARIFTA, CARICOM, CACM), in Asia (ASEANs ASEAN Free Trade Area, and APEC – Asia Pacific Economic Cooperation), the Middle East’s GCC, to name just few. All of these regional groups are aimed at eliminating trade barriers and instituting a common market.

PaulC is right, we are in transition from small communities into regional communities, and eventually into a world community. These regional groups might be economic in purpose, but sooner or later, as the tide change, and politicians find an opportunity, this may turn out to be a political integration, such as the EU.

 

If you've studied intro econ, you know that Dobb's complaints are among the most risible ones, damaging to both consumer welfare and net national welfare. Were talking classical economics here, boys (as in David Ricardo)- not econometrics!

A University of Chicago poli sci prof gives this authoritative corrective:

"The Outsourcing Bogeyman"
Daniel W. Drezner
Foreign Affairs, May/June 2004

"Summary: According to the election-year bluster of politicians and pundits, the outsourcing of American jobs to other countries has become a problem of epic proportion. Fortunately, this alarmism is misguided. Outsourcing actually brings far more benefits than costs, both now and in the long run. If its critics succeed in provoking a new wave of American protectionism, the consequences will be disastrous [cf, the 1930s - Great Depression - "prolonged unnecessarily"] -- for the U.S. economy and for the American workers they claim to defend."

You can read the full story for free:
http://www.foreignaffairs.org/20040501faessay83301-p0/daniel-w-

"Why Your Job Isn't Moving to Bangalore"
By Jagdish N. Bhagwati - Columbia University Economics prof - author of "In Defense of Globalization"
The New York Times, February 15, 2004
http://www.cfr.org/publication.php?id=6767

"The fact is, when jobs disappear in America it is usually because technical change has destroyed them, not because they have gone anywhere. In the end, Americans' increasing dependence on an ever-widening array of technology will create a flood of high-paying jobs requiring hands-on technicians, not disembodied voices from the other side of the world."


I speak with the authority of close experience: my ex-roomate, a chronic pot-smoking law school dropout, went unemployed for two years - then broke, was forced to move home to Detroit.

It wasn't as though he couldn't see the writing on the wall - he had worked three years doing "customer service" - e.g., the Ford tire recall. He'd complain that 18 year-old single mothers would be promoted over him - and that his job would end, shifted to lower-cost Canada. Eventually, it was.

Now, I have no sympathy for this kind of over-educated laziness that drug-haven Boulder, Colorado, specializes in! He loved his pot more than he cared about charting his way to getting and keeping a better job - one worthy of his mind. I mean, he did train in IT! (And a friend with less education, but with the same IT community college training was earning 70k - but even he flunked his piss test for Loral, loving weed too much. Now he shares a basement apartment!)

He just didn't expend the extra effort required to master "skills" like cut and paste! - I kid you not! - losing a job at Level3 for his boneheaded assbackwardness!

SO - I'm not buying what you guys are selling. Getting as good job with a good education in this country isn't rocket science! And Bush isn't keeping these boys from doing much better than they have.

-Orson

 

Yes Orson, trade (outsourcing) is good for everyone in the long run. Apart from not knowing just how long it will take for the rather inelastic parts of our economy to bounce back back (if you will), the effectiveness of the free market system also depends on having a free market. With currency manipulation, and jingoistic banning of goods, as well as other (sometimes) well-intentioned but shortsighted actions, the market might be discounted but it certainly isn't free. Even so, I think the harm done by opposing outsourcing is probably greater than any good that can come out of it. I just don't think it is as simple as you make it out to be.

I don't think that you are picking up what we're laying down either. Some things are sticky and some are liquid. In an imperfect world, kinda like the one we live in, classical economics can (hopefully) be tweaked for a softer landing. Is this less efficienct? Yeah probably, but I don't think we need to embrace social darwinism to tightly.

Tony

 

This sounds like an answer to a policy qiestion that I had on my comp exams today.

 

No offense Orson, but I believe you are being very simplistic. While I tend to agree that outsourcing lower level customer service jobs might benefit our economy in the longterm, a great deal of outsourcing is being done at a much higher level.

While your "friend" might be a pot smoking bum (your words, not mine), this is not the norm for most people whose job was outsourced. Having friends with Masters (one with a PhD from Cornell) whose jobs have been outsourced is sad. These people worked an average of 6 years for their degrees, have tons of experience, and worked an average of 60 hours a week. Software Engineers are an odd breed. Most work very hard and long hours - a lot more than most highly skilled workers. But these jobs were outsourced to save a couple of bucks to India.

(beleive it or not, Indian software is not better than ours. It contains the very same bugs and in a lot of times, it is harder to fix because of the language and terrain barriers)