Outsourcing: benefits outweigh losses
Considering the frequency and the manner in which it?s been used, you?d think that it?s the country?s latest dirty word, worthy of addition to the famed list previously championed by George Carlin. ?Outsourcing? is on the forefront of the minds of American businessmen and workers, and with good reason, as it directly affects the way we do business. People hate change, especially when it seems like nothing good will come out of it. According to the McKinsey Global Institute (MGI), an independent economics think tank, $1.45 to $1.47 worth of global value is generated from every dollar diverted to be spent outside the U.S. and our country will see a return of $1.12 to $1.14, the lion?s share of the new wealth. This new income will ?allow America to capture economic value through multiple channels.?
Although outsourcing is certainly a complicated issue, it?s one that the American people should resist attaching emotion to, even when they are bombarded with statistics on a daily basis saying X number of jobs are being lost to countries like India, China, Singapore, and others. As a people, we have always favored the short-term outlook to the long-term, and this is yet another example of that flaw.
According to CNET News.com on March 15, our own experts, including Federal Reserve Board chairman Alan Greenspan, say that the trend of outsourcing cannot be stopped and that measures taken to restrict the flow of jobs, such as the proposed U.S. Workers Protection Act will hurt, rather than help, our country?s economy.
?In response to these strains and the dislocations [outsourcing could] cause, a new round of protectionist steps is being proposed,? said Greenspan. ?These alleged cures would make matters worse rather than better. The would do little to create jobs; and if foreigners were to retaliate, we would surely lose jobs.?
While I?m no economist, I am an American who understands the common sense implications of futilely attacking our trade partners instead of preemptively lowering the costs of producing the products we provide to the world. If we delude ourselves into thinking that we can stop a trend that our free market economy has been setting up for the past 50 years, then we?re seriously mistaken.
Although you don?t have to be an economist to understand the value of cheaper labor, MGI says that the long-term effects of outsourcing include reduced costs. This means that more revenue can be passed onto consumers or to investors to reinvest in our economy and redistribute our economic resources into what America now does best: coming up with new ideas, inventions, and new engineering applications. Helping other countries also helps ourselves, in bringing jobs to them, they will then have the purchasing power to demand U.S. goods, which can potentially reduce the recently record-setting trade deficit.
Although economists agree that the long-term outlook for outsourcing is a necessary one and, ultimately, a good one, care must be taken to provide for the temporary loss in jobs that this new shift in our economy will undoubtedly create. The form of that band-aid is what really should be discussed in the maelstrom that is this year?s Presidential election. MGI suggests a type of ?outsourcing insurance? where workers who lose their jobs due to the practice would collect lost wages until the economy was ready to bring them back into the fold.
While I?m definitely no fan of George ?Where-are-the-Weapons-of-Mass-Destruction? Bush, I am forced to admit that this issue has great potential to unfairly damage his chances for re-election. Anyone who was in office would suffer the same fate: Democrat, Republican, or independent. The flip side of the coin is that whoever finds himself in the Oval Office in 2008 will likely reap a windfall of over 20 million new jobs in the U.S. despite a 2.2 million loss predicted by the Bureau of Labor Statistics ,according to The Economic Times on March 17.
Alex Meseguer (amesegue@) is a junior ECE major and The Tartan?s Editor-in-Chief. He welcomes all responsible replies.