Friday, March 05, 2004

More on free trade

Here’s the latest on the free trade argument started here. The following is a rebuttal to David Orlando’s most recent post. I will rebut his arguments in the numbered order that he presents them:

1. Outsourcing means job displacement: Yes! This is true. Also, mechanization means job displacement. Here, let me rephrase what you said so you can see what I am getting at:
   
   When factories move abroad, they take the jobs with them.
   
   Ok, why not
   
   When factories become automated, they take the jobs with them.
   
   You see, if you want to prove that outsourcing destroys jobs absolutely (that is, gets rid of jobs without causing more jobs to be created elsewhere) you can’t just point to the jobs eliminated by outsourcing. You have to explain why automation creates jobs and why outsourcing doesn’t. I can’t think of a reason, but if you can I’d love to hear it. Please try to understand.
   
   The second part of your argument is a little better (but still wrong):
   
   Meanwhile, the money that was formerly spent by outsourcing corporations in the US on wages and facilities is now being spent abroad.
   
   Yes. And one of either two things happens: Either the foreigners spend the money on US goods or they don’t. If they do then even you understand that this is beneficial. If they don’t, the US is basically exporting paper dollars, and importing actual goods and services. This is a good thing because hell, a tiny strip of paper for a bunch of produce is a great trade. Put another way, (in a world without the Federal Reserve Board) this would lead to national deflation: all the money in your pocket is now worth more (products being sold in the US are now competing more vigorously for the fewer dollars left in the US). In the real world the decreased threat of inflation allows Alan Greenspan to adjust interest rates for higher employment. You do understand how the Federal Reserve Board works, right?
   
   
2. Outsourcing creates dependence: Again, we agree. I will again point out the virtues of making other countries dependent on us. I know that some right wing kooks entertain nightmare scenarios of the Chinese installing backdoors in all that technology we bought from them. Ask yourself this: How much less likely is it that China and the US will go to war ever since China started to liberalize its economy? How big a role did free trade have in that? Another question: how many jobs are you willing to lose because of this fear? 100 thousand? 200 thousand? That’s the choice we face. If you are really afraid of Chinese computer programs, support open source software. I don’t see why you have to drag China’s paper, steel, machine parts and food exports into this.
   
   
3. Outsourcing stymies innovation: This is a simple point you seem particularly unwilling to understand. Yes, the outsourcing of a particular industry makes innovation in that field less profitable. Why should I care? The point of innovation is the effect it has on the amount and quality of stuff we have. It is not a goal in and of itself. As detailed in 1, outsourcing mimics the good effects for all practical purposes. Keep in mind, the choice isn’t “outsourcing or innovation”. It’s “outsourcing or sinking money into paying scientists to sit around maybe figuring out a way to innovate”. I’d rather have those scientists working on ways to invent processes that can’t already be done cheaper in other countries. You know, genuinely new and unprecedented capabilities allowing us to produce at levels we would not have been possible before under any circumstances, outsourced or otherwise?
   

You really amaze me with your ability to produce sentences that are exactly wrong. Take this one: “At once, the economy is losing jobs and not developing technology.” No, the economy loses jobs because the Federal Reserve Board overestimates inflation, not because we suddenly have a more efficient way to turn money into goods (or because foreigners are buying more of our products, or because dollars are going up in value). And no, there is no reason to believe that the money that would have been invested in the outsourced field will not be invested elsewhere. Maybe they’ll invest less, maybe more! What we can be sure of is that there is even more money to invest and that cheaper outsourced goods may open up new areas to invest in.

You may be surprised to find out that I myself am working on a product that is only economically possible because a certain type of sensor is being cheaply produced in Australia. If you’d rather keep those sensor jobs in America my business partner and I will happily sell our product in Australia and countries with which it has free trade agreements.

posted by Tommaso Sciortino at 9:55 PM

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