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Paul Samuelson Challenges Outsourcing 686

Noryungi writes "Paul A. Samuelson, Nobel Laureate in Economics, a professor at MIT challenges the outsourcing of jobs (retinal scan login required) to India and China. Choice quote: To put things in simplified terms, he explained in the interview, being able to purchase groceries 20 percent cheaper at Wal-Mart does not necessarily make up for the wage losses."
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Paul Samuelson Challenges Outsourcing

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  • by Anonymous Coward on Thursday September 09, 2004 @02:38PM (#10203815)
    And here is the Reg-Free link [].

    In the future please use the NY Times Blog Link Generator [] when linking to the soul suckers.
  • Bugmenot (Score:5, Informative)

    by FortKnox ( 169099 ) on Thursday September 09, 2004 @02:39PM (#10203822) Homepage Journal
    (retinal scan login required)

    Is this really necessary anymore? How many people DON'T know about bugmenot []? Hell, there is even a firefox extension to plop it straight into your browser!
  • Depressing trend (Score:4, Interesting)

    by HackHackBoom ( 198866 ) * on Thursday September 09, 2004 @02:39PM (#10203831) Journal
    The western world as a whole is sadly losing more and more of it's technilogical, educational, economincal, and advantages by succumbing to the short-sighted benefits of outsourcing.

    What does America produce anymore? What does any other Western country produce? Food? Consumers? It is Very depressing watching this trend. It's more depressing watching my father-in-law, a damn hard working family man lose his job just because he's getting older to some unskilled person outside of my country.

    I could go on, but I'm not trying to start a flame..
    • by be-fan ( 61476 ) on Thursday September 09, 2004 @02:45PM (#10203922)
      Has it occurred to you that we're losing our edge, not because outsourcing, but because we haven't been working very hard to keep it? Our education system is in shambles, our young people are complete morons, and we as a culture pretty much revile the educated and glorify the average.

      This has been a long time coming, and outsourcing is a symptom, not a cause.
      • Re:Depressing trend (Score:4, Interesting)

        by sql*kitten ( 1359 ) * on Thursday September 09, 2004 @02:56PM (#10204089)
        Has it occurred to you that we're losing our edge, not because outsourcing, but because we haven't been working very hard to keep it? Our education system is in shambles, our young people are complete morons, and we as a culture pretty much revile the educated and glorify the average.

        It's interesting to note how many successful entrepreneurs in the US are immigrants, or first generation children of immigrants. As soon as they become assimilated into US culture, they lose the respect that their families and native culture had for education and hard work, and become average.
        • by Kaa ( 21510 ) on Thursday September 09, 2004 @03:46PM (#10204831) Homepage
          It's interesting to note how many successful entrepreneurs in the US are immigrants, or first generation children of immigrants.

          Well, that's natural. Think about it -- immigrants are the people who were smart enough, active enough, entrepreneurial enough to leave their country and move to the US. Is it really surprising that they tend to do well?
      • by archen ( 447353 )
        It's actually a lot like the olympics. The United States consitently fields a huge ammount of great athletes and manages to win a bigger portion of metals than any other nation. Yet the average American is fat (and often lazy). The best and the brightest in the US have managed to drag the rest of us to the top of the pile, but in the end even that can't turn the tide forever. Especially when the people at the top gut the infastructure to support such a system, for their own gains.

        It's the generational g
      • by MattyCobb ( 695086 ) on Thursday September 09, 2004 @03:02PM (#10204188)
        Has it occurred to you that we're losing our edge, not because outsourcing, but because we haven't been working very hard to keep it? Our education system is in shambles, our young people are complete morons, and we as a culture pretty much revile the educated and glorify the average.

        Oh yes. The US education system is just god awful. Worst in the world. Terrible even! Same with the rest of the wester world! Thats why everyone wants to come over here to go to Harvard or Yale or MIT or Oxford or Stanford or even our high schools. Oh and we haven't been trying hard either. God knows NOT A SINGLE PERSON in the US innovates or starts a new company or attempts to advance technology anymore. Pfft. Way to troll!

        If outsourcing is a symptom of anything its corporate greed. They can save millions by paying unintelligable people to stumble along with english over the phone and have their customers take it up the arse. It has nothing to do with education. Its economics... which I belive is what the article is about...
        • Re:Depressing trend (Score:3, Informative)

          by be-fan ( 61476 )
          Hmm, I knew this would come up. When I say "US education system" I'm talking about the one most Americans go too --- our public K-12 system. Only 21% of Americans have taken any college courses, and only 15% have a college degree. The other 80-85% attend our attrocious public K-12 schools.

          Yes, our university system is one of the best in the world, and we have a couple of top-notch high-schools, but it's not the Harvard and Yale folks who are out of a job...

          PS> Oxford isn't in the US.
          • Re:Depressing trend (Score:3, Informative)

            by Erwos ( 553607 )
            You're wrong, actually. About 50% of Americans 15 years and older have some college. Go to the census website and take a look at the 2003 stats for education.

            110.327 million of people 15 years and older have _some_ college, at the very least. That's out of 225.25 million, which means the total percentage is 49%.

            • Re:Depressing trend (Score:4, Informative)

              by be-fan ( 61476 ) on Thursday September 09, 2004 @04:28PM (#10205452)
              I foo-bar'ed the statistics. My numbers (from the 2000 census) are exclusive. Ie: the 15% with a bacholers degree does not count those with higher than a bacholers degree. In all, 24% (as of 200) of Americans had a college education.

              The actual report is here if you're interested.

              In any case, that still means that that 3 out of 4 Americans do not have a college education, which means the criticisms about our K-12 system are valid.

        • Thats why everyone wants to come over here to go to Harvard or Yale or MIT or Oxford or Stanford or even our high schools.

          Please tell me you know Oxford is not in the US.
      • by hopemafia ( 155867 ) on Thursday September 09, 2004 @03:11PM (#10204317)
        You've hit this one right on the head....

        And it isn't just a US issue, it's occurred throughout history...because it is simply a matter of human nature.

        When a culture has to struggle to survive, there is motivation to work hard and think hard, and this (combined with some good fortune) makes the culture thrive. Then, when the culture becomes wealthy and comfortable, they get lazy and greedy and sit on their asses, usually until disaster stikes and the culture collapses. This is the reason that the rise and fall of civilizations is cyclical.

        The trick to having a long lasting "up" phase is to catch the early signs of the downswing and get your collective asses in gear before it's too late. For the US, whether that happens is still to be seen, but so far what I've observed is people sitting around complaining about "rights" and "entitlement" rather than doing anything.
    • I'm comforted by the fact that one day, maybe soon, the whole house of cards that is the "global economy" will come crashing down. Perhaps then no one will profit when a tree is cut down or someone gets cancer.
      • I'm comforted by the fact that one day, maybe soon, the whole house of cards that is the "global economy" will come crashing down.

        Which event, if it ever happens, is likely to lead to poverty and starvation for billions of people. I am glad you'll be comforted by it.

        Perhaps then no one will profit when a tree is cut down

        Perhaps then you'd better start learning how to live without such things as books or toilet paper right now...
    • by FerretFrottage ( 714136 ) on Thursday September 09, 2004 @03:06PM (#10204256)
      America [US] is becoming land of the mediocre by the decree of our own government.

      "No child left behind" means no child gets ahead. Sure there are exceptions, but my wife who is a teacher has to teach to the lowest common denominator. It frustrates her because due to "social promotion" she has 7th graders who can't read/write at a 4th grade level. Now imagine being an above average student in that class where the teacher has to talk "down" to and teach to the "slowest" kids. Due to budget cuts (hey, tax cuts don't come for free), after school clubs and honor level classes are being trimmed if not entirely cut so many of the "smart" kids are being taught at a 4th grade level/pace since there are no classes/teachers for them. No wonder they lose interest in school and just start reading /. .

      • by CommanderData ( 782739 ) * <kevinhi AT yahoo DOT com> on Thursday September 09, 2004 @03:28PM (#10204548)
        Yes that is a big problem. My wife's oldest son (from a previous marriage) came home after school this week and complained that it was soooo booooring. When asked why we found it was because they are re-hashing the same stuff over and over for the idiots out there. There's no challenge at all for kids who could benefit from it.

        I think I must have lucked out when I was a child. I had a computer programming class back in the mid 80s. I'd already taught myself a lot prior to that. The teacher was able to see that when he'd assign a task for the week and I'd be done in 10 minutes. Instead of forcing me to continue doing the same classwork / homework as everyone else, he would "challenge" me to create programs to do various things like evaluate expressions typed in as strings, and so on. By the end of that year I had created an entire graphical "paint" style application with mouse control, and drop down menus that ran in DOS from 5.25 floppies. Nothing like it was available at the time for IBM computers, I had to use interrupts to get data from the mouse!

        Now that this post has drifted off topic, I'll close with a thank you to Mr. Roberts for giving me that time to explore and grow instead of being beat down to the lowest common denominator level. It meant more to me than you'll ever know.
    • by Cordath ( 581672 ) on Thursday September 09, 2004 @03:17PM (#10204397)
      The West certainly hasn't lost any of it's skills or expertise. It's developing countries that have, well, developed! The West may have blazed the trail for our current world economy, for good or for bad, but it was only a matter of time before other countries started catching up. Unless artificial market restrictions are employed this trend will see the wealth of the world spread out over more and more nations rather than concentrated in just a few. While it may suck for the West, it's good for the majority of people in the world.

      The only question is, how do we deal with this? Do we throw our hands up in the air, say we had a good run, and walk quietly off into the sunset? Do we impose artificial trade restrictions that turn us into hypocrites? (Yes, this is the current tactic. It's already being done. Free trade is great so long as you're more free than the rest.) Our best bet is probably to try to compete better by improving our education system and finding new ways to encourage research. (Read: Overhaul the cumbersome copyright/patent system so you don't need a team of 20 lawyers and a fat bankroll for bribes in order to invent something remotely useful.) So long as we're ahead on the tech curve we'll get business. Unfortunately, other countries can do this too and they just happen to have a lot more people than we do.

      Yep. It sucks to be the West right now, but it does give one hope for all the backwards shitholes on the planet. How you feel about all this depends entirely on how selfish you are I suppose. Ask not for whom the bell tolls and all that.
    • For the last few centuries the west has been living off the cheap labour of the rest of the world. But now increasing parts of the rest of the world seem to be breaking free and are able to earn enough to live with some dignity. Whether or not this change is of our choice, this will force us to live like truly civilised people, not like feudal lords who've come up with the clever trick of hiding their slaves on the other side of the world so that we can more easily pretend we live in a world of freedom and
      • Uh, wrong. The desire for feudalism was never the common man's... read this []

        This is about turning the non-serfs in the USA into serfs. You can't be a feudal lord, if there is a large middle class, as have existed in the US for a long time now. Unfortunately, those causing all this are hiding in the obscurity.
    • by Mateito ( 746185 )
      Where do you buy your groceries? Do you always buy "made in America"? Do you drive an American Car? Where are your computer components from?

      The US is an expensive country with great opportunities, but people see cheaper prices overseas and think "I should pay less too". So they do.

      This has a knock-on effect. In order to compete, retailers have to lower prices, which means manufacturers have to lower prices. If an manufacturer doesn't lower prices, the retailer sources off-shore, because if they don't, the
      • Suddenly, all the local manufacturers are out of business, laying off US workers. People start complaining about the off-shoring of jobs, but they still want goods at the lowest possible prices... because without a job, they can't afford the more expensive alternative.

        However, we're at a disadvantage. We have 150 years of unionization and improved working and environmental conditions, not to mention a respect for human rights. If the Chinese had to respect their workers and their rights and their environme

  • by Anonymous Coward
    Instead of all this whining and bitching about outsourcing, wouldn't it just be easier to actualy justify your pay? After all, what logical person is going to pay for something when they can get the exact same thing for half as much?
    • This is not as easy as it used to be. In the good ol' US of A it has been shown there are declining education levels and at least where I have worked declining productivity. We need to remain compeditive and that just ain't happening.
      • In the good ol' US of A it has been shown there are declining education levels and at least where I have worked declining productivity. We need to remain compeditive and that just ain't happening

        With outsourcing the education problem deepens because the of the dent in the taxes that support American schools.

        I've been watching too much Lou Dobbs. I think I'll go get a hobby.
    • CEO's are the ones that benefit from the outsourcing. The cost savings aren't passed to the consumer. With that and job loss it doesn't make economic sense.

      They're laying off some consumers of their own brands and then not passing on any benefits to the rest of the consumers.
      • by Civil_Disobedient ( 261825 ) on Thursday September 09, 2004 @03:47PM (#10204842)
        ...and then not passing on any benefits to the rest of the consumers.

        What's worse is, while a small minority benefit from these policies, not only do they not pass the savings on to consumers, but society in general. The systems that were put in place after the turn of the century (and to a greater extent, FDR) to force beneficence from those who are lucky enough to fall into privilege is slowly being eroded by lower taxation on the wealthy and the elimination of the estate tax -- effectively, we're creating a hereditary oligarchy of extremely rich people that will only become more concentrated as the years progress.

        And tho those who hold the erroneous notion that we live in a "fair" society, thus "If I make the money, I should keep the money," I ask you to consider the phrase "It takes money to make money." There is an inherit advantage to having money already, at the starting gate if you will. Lower interest rates on loans, (hell, loans in general), an easier supply of capital to pursue your dreams, better access to quality education -- the list goes on and on.

        What cracks me up are Conservatives who think we should reduce programs aimed at all those "lazy poor people" because they haven't done anything to deserve them, yet see no contradiction in the "lazy rich people" who can survive on inherited wealth and never do a lick of work.
      • No, you don't understand. The companies benefit from the outsourcing *at first*. Those that do it make more money. Then other companies do it. Then some of them pass on the savings to consumers ***and they make more money***. The other companies can either allow that company to take business away from them, or they can also pass on the savings to consumers.

        Do you see how this works? Initially every improvement results in extra profits. In time, those profits get competed away in a free market. That
    • by kcdoodle ( 754976 ) on Thursday September 09, 2004 @02:57PM (#10204115)
      I am not ready to move to a third world country to compete.
      Paying someone from India one third of my pay would give them a very good standard of living in India.
      Maybe we should pay the CEO's their equivalent wages of a small business owner in a third world country?
      Better yet, lets go to New Delhi and choose the first ~535 (or so) people off of the street and replace Congress with them. I am sure they will work harder and cheaper!
      No really. What is wrong with making a good wage for a good job in your own country? The money my boss pays me gets spent in this country (mostly - I dont drive imports). When I spend money in my own country, it iunvigorates the LOCAL economy, which in turn, give LOCAL people mnore income and eventually spurs demand for more products so my company's CEO can make more money.
      This offshoring is the filthy rich big business executive's way of quickly lining their pockets with money so they can cash out quick and retire.
      They don't give a damn about the long term.

      I am done ranting now...

      I live the greatest adventure anyone could want. - Tosk the Hunted
      • The money my boss pays me gets spent in this country...

        The money your boss pays overseas workers gets spent in this country as well.

        If the U.S. could just give foreign workers paper money and get foreign goods and labour in return, it would be laughing. However, at some point those paper dollars have to come back to the U.S. in exchange for U.S. goods and services. U.S. dollars have no other value than their ability to purchase U.S. goods.

        What makes foreigner companies willing to accept U.S. dollars is

    • by composer777 ( 175489 ) * on Thursday September 09, 2004 @02:58PM (#10204118)
      Try doing this in the real world, where an Indian can live on 10% of the salary of an American. It's not reasonable to expect people to somehow be able to work ten times as hard. There are limits to how hard people can work.

      I agree that as Americans, we are being hypocrites by whining about our own problems if we don't at the same time address the problems of the 3rd world that we allow our corporations to exploit. Isolating ourselves, and focusing only on ourselves and our own needs is exactly what makes us so easy to exploit. There is another reason that we shouldn't allow corporations to take over 3rd world countries, it robs their citizens of the opportunities to control their own destiny. Further, the solution to this problem is not to write our congressman, and it's not inside any one country, the solutions lies in joining together with those who are being oppressed outside our country.

      The problem of corporate globalization, as well as it's solution, lies outside the borders of any single nation state. It's time for us to realize this fact.
      • A deeper issue (Score:5, Interesting)

        by Mark of THE CITY ( 97325 ) on Thursday September 09, 2004 @03:29PM (#10204554) Journal
        Any place where the price of real estate consistently outpaces income is setting itself up for cost disadvantages. This has long been true in the coastal metro areas of the USA, and is now happening in non-metro areas, such as San Luis Obispo.

        In 1969, my parents sold a nearly new 3 bedroom house in rural New York state and bought a new 4 bedroom house in a San Diego, CA, suburb for the same price. In both cases he could, as a high school graduate of no academic distinction who held a factory foreman's job, obtain a loan of about 2.5 times his gross pay. His commute to work was about 1/2 hour.

        In 2002, in the Bay Area, with a tech masters degree, I'm limited in choice to a one bedroom condo with an 80 minute commute. Homes are available, but only to those with astonishing credit who are willing to live with the fear that comes with a 2% down payment and 'creative' financing.

        Spiraling land values should be regarded as a crime, because they force startups to locate away from research universities.
        • Re:A deeper issue (Score:3, Interesting)

          by composer777 ( 175489 ) *
          Yes, this is definitely an issue with markets. Markets tend to promote what is called a speculative bubble. What happens is that if enough people buy that good, not out of need, but because they believe the price will go up, then the price in fact does go up, but not because the good is more valuable. It goes up because more people are buying it. Think of it as a positive feedback loop. This ends up creating gross price inflation. The other problem is that, the more prices inflate, the more potential
    • by code_rage ( 130128 ) on Thursday September 09, 2004 @03:19PM (#10204418)
      I think Marx said that a capitalist is a person who will sell you the rope with which to hang him.

      Outsourcing also inevitably results in skill erosion here in the US and skill development overseas. For example, if you outsource a software job by lobbing a requirements spec over the wall, just reading that requirements spec gives the vendor a better idea of the sorts of skills and ideas needed to do it themselves next time.

      So, the split incentives of capitalism may result in general losses in economic value. That's why the economy is regulated. (Samuelson did not prescribe protectionism, and I don't think that's the right answer in low-skill areas, but perhaps educational subsidies and R&D credits, etc.)
    • Cost isn't everything. Sometimes quality matters as well. And quite often- so does supporting your local economy even when it appears to cost you more, because in the long run it will mean less taxes for homeless shelters.
  • Easy answer... (Score:5, Insightful)

    by belgar ( 254293 ) on Thursday September 09, 2004 @02:41PM (#10203856) Homepage
    ...stop making decisions in your purchasing habits based solely on price (aka Wal*Mart shopping), and encourage those around you to do the same. Support a heterogenous shopping environment where quality, service, support AND price are all factors in the purchasing decision, rather than the first three being secondary considerations.

    The corporate mentality of cutting costs to increase revenue and profits is a reaction to the market's demand for lower prices, not the other way around. My $.02.
    • Which is precisely why I shop at places like Whole Foods for my Groceries and at many specialty shops for my various other needs.

      Quality, Service, THEN price.
      • I am selling a bag of grapes, fresh off the vine. These are the finest grapes you will ever see. Also, with your purchase, I will wash your car every day, as long as you or I shall live. Only 10 million dollars.

        You did say quality, service, then price.
    • by ( 804718 ) on Thursday September 09, 2004 @02:44PM (#10203907) Homepage
      My $.02.

      Good comment but still too expensive.
    • Re:Easy answer... (Score:5, Insightful)

      by gwernol ( 167574 ) on Thursday September 09, 2004 @02:54PM (#10204054)
      ...stop making decisions in your purchasing habits based solely on price (aka Wal*Mart shopping), and encourage those around you to do the same. Support a heterogenous shopping environment where quality, service, support AND price are all factors in the purchasing decision, rather than the first three being secondary considerations.

      That's a blanket answer that doesn't hold up to detailed scrutiny. The priority of price, service, quality and support varies depending on what I'm purchasing and what my goals are. For low-cost commodity goods I care more about price than about service. Most people don't care that Wal*Mart have crappy service because they can save a few bucks on toilet paper. I don't want my loaf of bread to cost $20 because it comes with a "free" technical support phone service. But when I buy a computer for mission-critical work I care a great deal about the quality of the goods and the support services that come with it, and price is at the bottom of my list.

      One size does not fit all in purchasing decisions. The great thing about a free market is I can choose what criteria to consider depending on my own circumstances and needs. I happen to shop at Whole Foods Market rather than Wal*Mart because that fits my income level and lifestyle, and I'm a fou-fou liberal eliteist. If I was earning minimum wage you can bet I'd be glad Wal*Mart was there to provide me with life's necessities at affordable prices and the quality of the service be damned.
      • Re:Easy answer... (Score:3, Insightful)

        by QuantumRiff ( 120817 )
        The thing is, Even if you were earning minimum wage, you'd probably be better off than someone Working at Wal-Mart.. I do not shop from them, because I don't like the way they treat their employees. Bare Minimum wage, no overtime, no benefits (or if you get benifits, it costs about 1/2 of your paycheck after your taxes), no respect from management, and very, very shitty conditions..
  • Wal - Mart (Score:5, Informative)

    by Aggrazel ( 13616 ) <> on Thursday September 09, 2004 @02:42PM (#10203861) Journal
    Love those pickles []

    Walmart, by itself, can combat inflation. However, at what cost?
  • by psychotic_venom ( 521968 ) on Thursday September 09, 2004 @02:42PM (#10203872)
    It's easy to understand that buying cheap or from out of town or out of state causes problems with your local economy, so outsourcing (effectivly buying some things from overseas), causes problems.

    But the general public will never pick up on this. They are the 5 year olds that are offered 1 oreo now or 2 in 30 minutes and they take the 1 oreo now. That's how the American public will function, and continue to function unless the media drills it into them that it's a Bad Thing and they see the tangible difference in their pocketbooks in a reasonable amount of time.
  • As usual (Score:3, Insightful)

    by cpct0 ( 558171 ) <slashdot.micheldonais@com> on Thursday September 09, 2004 @02:43PM (#10203880) Homepage Journal
    This is the kind of crappy document that makes me think there is a future for our planet. No really.

    This is always good to have someone say it is better for our own good to have as many jobs as we can in our own country (I'm from .ca) ... but it is ludicrous to think that companies will do things for a Greater Good. What will they do? They will want to make as much money as possible and who can blame them?

    So we have outsourcing of our running shoes in these paradise islands where the only escape is 6 months of hard unpaid labor. Who think that this will NOT be the case for everything else, including computers?

    In Quebec, we have doctors and graduates quitting the place for bigger bucks elsewhere in the country. Everyone says it's best not to but who to blame them when you can get 400K US per year elsewhere and 100K CDN in here.

    Same thing ... saaaame thing ...

    I love thinkers.
  • by zulux ( 112259 ) on Thursday September 09, 2004 @02:43PM (#10203889) Homepage Journal

    I was reading the english translation of a Japanese business plan (Orient Watch Compant), and the Japanese word for 'outsourcing' was translated into English as "Hollowing-out."

    It's an interesting viewpoint: The English word 'outsourcing' imploys that it's just a business transaction - while the Japanese translator used a phrase that has connotations of taking out the core of a business and discarding it.

    Perhaps - there's some truth in that idea.
    • Of course, you should remember that those connotations probably don't exist in Japanese, and that's who they use the word they use.

      Symbolism from one country doesn't always work in another...a creative writing teacher from Mexico once told me a story about the phrase "Don't put all your eggs in one basket." In Mexico, the word for eggs (juevos) is also a slang term for a man's when he heard that phrase for the first time as a boy, he replied "But that's where God put them!"
  • It seems outsourcing costs money and resources as well as saving some. Language, time zone, cultural differences and geographic distances all contribute to the costs. But the resources used to overcome such obstacles are seldom recorded separately, and so do not show up --- leaving the management believing that they have saved money that they have not, in fact, saved.

    But it is just a gut feeling.

  • by Mateito ( 746185 ) on Thursday September 09, 2004 @02:45PM (#10203913) Homepage
    retinal scan login required

    I read that as rectalscan. I didn't know they were sufficiently unique.

  • California agrees (Score:5, Interesting)

    by MikeMacK ( 788889 ) on Thursday September 09, 2004 @02:46PM (#10203934)
    being able to purchase groceries 20 percent cheaper at Wal-Mart does not necessarily make up for the wage losses.

    They've been saying this in California for awhile []

  • It's all in 401k's (Score:5, Insightful)

    by fred911 ( 83970 ) on Thursday September 09, 2004 @02:47PM (#10203954)
    The baby boomers retirement income is all invested in 401k's. Social security sure can handle that generations retirement needs if their 401k's aren't flush. They're allowing todays companies to buy cheap labor to accomplish this goal.

    Tomorrows economy will be servicing the baby boomers with income from their 401k's, and developing IP.

    If you think their is trouble now, what happens when social security can't pay what's owed 20 years from now, and the 401k's are valueless.
  • we can't even specify things well enough to get development done on time inhouse, and the there is "threats" of outsourcing ..
  • While I am not against job exportation ("outsourcing"), its net benefit is to lower the wages in the exporting nation. This will have some long-term negative effects - such as lower buying power and a lower tax base.

    For less socialist countries this impact is lower. Everyone, however, uses government services (federal roads, police/fire officials), so these "fixed" costs need dealt with.

    How well these are offset with population growth is the real factor of impact. If the population growth is in the lower
  • by ElForesto ( 763160 ) <elforesto @ g m a i l . c om> on Thursday September 09, 2004 @02:51PM (#10204016) Homepage

    Let's not forget that Dell brought back one of its call centers from India due to excessive customer complaints. I've also read that the lower cost of labor overseas is often outweighed by lack of individual action, time zone differences and culturally-caused communication problems. I've heard from several people in ATSI (a telecommunications association) that some clients came back after getting really poor results from offshoring.

    Simply put, offshoring is not as clear-cut as everyone makes it out to be once you take in a lot of intangebles. I don't worry too much about it because, sooner or later, the inflation in wages will make offshoring too expensive to consider. It's already made India much less attractive as the one-time costs are taking longer to recoup.

  • by tobe ( 62758 ) on Thursday September 09, 2004 @02:52PM (#10204028)
    Precisely what everyone's been arguing for in over the last 20 years..

    So, like, maybe it's *not* the best way to run an country...
  • Obvious (Score:3, Interesting)

    by mrchaotica ( 681592 ) on Thursday September 09, 2004 @02:52PM (#10204034)
    I don't know why there's all this confusion about outsourcing, since it's really very simple: Right now, the US (and other developed countries) have an economic advantage. By definition advantage means "we're better off than some others," in this case, non-developed and developing nations. If we want a "global economy," that necessarily means evening everything out, and losing our advantage.

    You can either have everybody equal, or "us" better off than "them." It should be obvious that you can't have it both ways!
    • Re:Obvious (Score:3, Interesting)

      by thpr ( 786837 )
      If we want a "global economy," that necessarily means evening everything out, and losing our advantage.

      But the question is in HOW it evens out. Does it even out by bringing down the average living standard in the US, or by bringing (significantly) up the standard everywhere else? He states that there is no guarantee that such trade has a net advantage to the USA; by similar logic, there is no reason that the process of outsourcing has to drag down the average living standard in the US.

      This is a fascin

  • by Cryofan ( 194126 ) on Thursday September 09, 2004 @02:53PM (#10204043) Journal
    The reason why so many people have accepted as blind faith the axiom that free trade is automatically good is that the Big Money has funded more economists, columnists, talk radio hosts, etc. This vast Big Money media has for decades used words and slanted, biased, flawed studies to create a worldview friendly to "free" trade, regressive taxes, and an ever-smalled social safety net, along with increased illegal and legal immigration.

    Samuelson is a reminder that there are lots of economists who think free trade is a scam. But the average American rarely hears from them. Why?

    After 3 decades, the Big Money media machine owns many of the ideas in your brain, and owns the public debate. They bought the public debate with 2 billion dollars of foundations and think tanks. See more about the Tentacles of Rage from Harpers magazine article this month. []
  • by code_rage ( 130128 ) on Thursday September 09, 2004 @02:53PM (#10204046)
    According to the article, economist Jagdish Bhagwati (a former student of Samuelson) agrees with the theory but says it is not all that significant in practice. Speaking of the labor force that can compete with Americans for high-value IT jobs, he says:
    "You have a lot of people, but that doesn't mean they are qualified. That sort of thinking is really generalizing based on the kind of Indian and Chinese people who manage to make it to Silicon Valley."

    This may be true now, but Samuelson's argument is about whether the past benefits of global trade will inevitably continue. This has nothing to do with the current state of affairs. When you look at the structural issues, it does seem likely that outsourcing of high-value jobs is here to stay. There will probably be some slowing of the trend eventually -- it's easy for the Chinese economy to grow quickly, because it's "underutilized." But as their economy matures, it will slow down. Of course, by then, they will have taken many more American jobs.

    The other issue is that even where there is no direct competition, the low cost of Chinese and Indian skilled labor can depress American wage growth indirectly. Even if your job cannot be outsourced, a general wage pressure is present, and employers will use the *threat* of outsourcing to press employees for more work.

    • Even if your job cannot be outsourced, a general wage pressure is present, and employers will use the *threat* of outsourcing to press employees for more work.

      That's true, we have budget meetings, and wages are always the primary concern, never the fat pork projects, or CEO million dollar bonuses, or overpaid vendor accounts. (Which CEO's seem to take jobs at that vendor later...)

      The big problem is outsourcing in another country also strips money from the local markets. If you buy all the resources loca
  • Fast Company article (Score:5, Informative)

    by sometwo ( 53041 ) on Thursday September 09, 2004 @02:55PM (#10204070)
    "The Wal-Mart You Don't Know
    The giant retailer's low prices often come with a high cost. Wal-Mart's relentless pressure can crush the companies it does business with and force them to send jobs overseas. Are we shopping our way straight to the unemployment line?" : l []
  • by JayBlalock ( 635935 ) on Thursday September 09, 2004 @02:55PM (#10204075)
    Ok. Businesses are constantly in competition. They're all striving to produce (theoretically) better products at lower prices. This causes competition, the best product wins, the consumers win, blah blah rah rah.

    Suddenly, globalization cheerleaders are saying that businesses HAVE to be allowed to ship jobs off to overseas countries because if they can manufacture their widgets for pennies on the dollar, that results in lower product prices and more consumer spending, etc etc.

    And nevermind all the people that get laid off in the process.

    So why the assumption that suddenly companies have to be able to shaft their workers if they want to stay competitive? Virtually all the history of manufacturing in the world is the history of innovative PROCESSES. From the printing press, to Henry Ford's assembly line, to Wal-Mart's inventory tracking. One company comes up with a really great new way of doing business, other companies in other fields pick up on it, and everybody REALLY wins.

    It seems to me that allowing companies to outsource and offshore and cut wages whenever they please is a cheat. It's a bandage. No one learns anything, no new processes are invented, there is no ACTUAL progress.

    There's just a competition to see who can stream the most money into the most poor countries, often, at the same time, propping up repressive governments *cough*china*cough* that are responsible for the huge poverty (and ergo, low manufacturing costs) in the first place.

    For this reason, I have no problem with so-called "protectionist" policies at all. Instead of allowing business to take the quick, easy, and ultimately destructive path, they have to actually INNOVATE - as they have so many times in the past - and come up with new ways of doing business. THAT, to my mind, is putting your faith in business.

    Otherwise it's just allowing them to find creative new ways to reinvent feudalism.

    • Every advance you list as good was initially opposed for exactly the same reason you oppose offshoring. Consider how many people were put out of work by the assembly line! But the net change is that global resources are used more efficiently, and everybody is happier.

      In the case of offshoring the benefits are distributed more widely than ever before, so it's not surprising that some jingoists aren't seeing them (they only look at their home country anyhow). But even the jingoists have to admit that having
    • The trouble with this idea is that when you allow protectionism, you give companies another way to compete -- by controlling the protectionism in their favor. So instead of concentrating on creating good products at a good price, competition forces them to compete to control the government. This is a perverse incentive, and generates results EXACTLY the opposite of what you want from protectionism.
  • by Prien715 ( 251944 ) <> on Thursday September 09, 2004 @02:59PM (#10204133) Journal
    His argument is flawed for three reasons, one moral, one selfish, one pramatic.

    1) Why is an American job better than an Indian (or other foreign country job). From a global perspective, the best outcome is a maximization of jobs and real wages. Sure Indian programmers get paid $10/hr (well I do too and I work in the US in IT but that's beside the point), but $10 buys more in India.

    2) Trade is bi-directional If we were to restrict outsourcing of labor, other countries will may complain to the WTO resulting in sanctions. Even thinking as a completely selfish nation, I do not think the sanctions would be worth the slight boost to productivity.

    3) Some companies need outsourcing to survive Numerous company CEOs have reported that without being able to outsource some of their IT section, their company would've gone under. In essense, the company outsources maybe 300 lower skill IT jobs to save 1000 higher skill IT jobs in the US.
  • by mysterious_mark ( 577643 ) on Thursday September 09, 2004 @03:03PM (#10204201)
    First of all brilliant article by Prof. Samuelson. I've long recognized that the assumptions used by the pro-outsourcers to be flawed, the Keysian model that assumes a free flow of labor, and capital, that does not account for immigration laws, environental impact, and tax structure. A recent survey indicates that companies who use outsourcing are only saving around 20 to 40 percent, if they save money at all. This is roughly equivalent to the de-facto tax breaks obtained by outsourcing in avoiding payroll taxes. In other words the only reason anyone on average saves money outsourcing is because they avoid US payroll taxes. One would think that the current administration would be concerned about the loss of tax revenue, instead they have proclaimed that outsourcing is all good, and the lack of tax revenue is irrelevant because according to the VP 'deficits don't matter'. The good news is the outsourcing problem could be easily addressed by repealing the tax break, and forcing companies to pay taxes on outsourced labor. At least Senator Kerry claims he will address the outsourcing issue, if he is sincere, I'm sure there are things that can be done to change the tax structure to at least improve the situation. We can all go out on Nov 2 and vote to fire the current administration who financial recklessness threatens us all, and who's mantra seems to be 'Outsourcing is always good' and 'deficits don't matter'. M
    • Immigration laws, environmental impact, etc. are drags on the model, but they do not invalidate it. They only reduce the amount of benefits that we should expect to see from outsourcing. Also, outsourcing of intangible goods and services is a relatively new phenomenon -- with practice, I think we can expect to see better gains when the circumstances are right.

      Listen, I'm pro-outsourcing, pro-globalization, and very anti-Bush. Why? Here's a quote from the article:

      ... Mr. Samuelson and Mr. Bhagwati agree
  • DUUUHHHHH! (Score:3, Interesting)

    by Not_Wiggins ( 686627 ) on Thursday September 09, 2004 @03:09PM (#10204290) Journal
    You mean it doesn't matter how cheap you can make something, if someone doesn't have a job to purchase it they WON'T?!?

    DEAR GOD! What will we do about an economy now?!?

    The outsourcing of high-paying jobs (heck, even low-paying jobs) does nothing but "appear" to help the economy in the short term because people still have savings to purchase goods at "reduced prices." But once that money dries up, it doesn't matter if that laptop is $4000 or $40 because people will be spending their money on catfood to survive.

    Ugh... really... we need to move AWAY from a consumer-driven economy.
  • The Next Big Thing (Score:3, Insightful)

    by Solder Fumes ( 797270 ) on Thursday September 09, 2004 @03:14PM (#10204348)
    Look, we're just the unlucky ones who are caught between waves. America leads the world in general technology advancement. When the rest of the world catches up, we let them do that job and move on to something bigger. It happened with textiles, it happened with machining, it happened with electronics. Now it's happening with knowledge work.

    Screaming bloody murder about outsourcing is just saying you want progress to stop. You don't want the rest of the world to catch up, you want to stay in your sweet spot and not have to learn any new skills. I for one don't want our current state of technology to be the end of all progress. Think. Invent. Expand. Let the other countries do the repetitive programming and design jobs.

    I believe this in spite of having been unable to find a permanent engineering job for two years. It just that no good thing lasts forever, so you start looking for the next good thing.
  • by Kefaa ( 76147 ) on Thursday September 09, 2004 @03:15PM (#10204378)
    Did you notice that the people who finally speak out for/against a policy generally wait until they are no longer impacted by it?

    Today the globalization hounds must beat the drum that globalization is good. Innovaton is lost and companies cannot figure out how to make a product or service more valuable so they make the cost of providing it cheaper.

    In 1820 transitions occurred over time. To become a "global player" it took literally decades to move an industry to that level. During that time the industry workers transitioned. In current examples, the transition will occur in less than a decade. With Y2k,and the internet we built the infrastructure to make transition nearly immediate.

    Now, add countries that would like the US work, but do not share US values. For example, India while more than outsourcing jobs, runs one of the most protectionist regimes in the world. Try, as a non-Indian to start a business and you will be kept out at the government, economic, and even social level.

    The idea that we should not protect ourselves against such countries is ludicrous. This is like saying we should not stop terrorists because, by us not being terrorists they can see the benefits and will become outstanding citizens. (What drugs are these people taking?)

    In the end, we are replacing 65K+ jobs with 30k+ jobs. Samuelson is correct ""If you don't believe that changes the average wages in America, then you believe in the tooth fairy," It does not take an economist to figure out that with only half the wages, the impact is on the entire economy. Two income families that bought two cars, can only afford one, or certainly not two new cars. Home buyers that had combined incomes of 130k, now have 70k to use as their financial base.
  • by Colonel Panic ( 15235 ) on Thursday September 09, 2004 @03:16PM (#10204380)
    In their paper, Mr. Bhagwati and his co-authors write that such an assessment of the education systems of India and China "almost borders on the ludicrous." In an interview, Mr. Bhagwati said, "You have a lot of people, but that doesn't mean they are qualified.

    The problem is that management doesn't seem to care if they're qualified or not. If they can save a buck (or many bucks in this case) they seem to overlook the qualifications.

    Some of the jobs being offshored would have lots of requirements stated in explicit detail if advertised here in the US (such that it would be virtually impossible to find anyone who has all of the required skills) , but when they're sent to India those requirements tend to get overlooked... "You've got a BSCS from Bangalore Uni - you're hired!"

    The thinking on management's part seems to be that they can make up for lack of technical skills by throwing more (cheap by US standards) bodies at the problem.

    Eventually they'll realize that this doesn't work (and anecdotal evidence suggests that this is already beginning to happen).
  • by macserv ( 701681 ) on Thursday September 09, 2004 @03:24PM (#10204495)
    ...Mr. Bhagwati, Mr. Panagariya, and Mr. Srinivasan are optimistic about offshoring to India.

    My unemployed IT friends; Mr. Smith, Mr. Schultz, and Mrs. Mackey; do not share in their optimism.
  • by Greg@RageNet ( 39860 ) on Thursday September 09, 2004 @03:27PM (#10204530) Homepage
    I'd like to type out how bad I think this internationalization stuff is for the US economy as I sit here in a cafe sipping columbian coffee made in an italian coffee maker poured into a chinese mug, while typing on a japanese laptop connected to a tiwanese access point. Oh, I just forgot, I left my norwegian cellphone in my german car in the parking lot. Be right back!

    -- Greg
  • by hey! ( 33014 ) on Thursday September 09, 2004 @03:40PM (#10204717) Homepage Journal
    The economic theory, which is perfectly sound, says that yes, wages will drop here, but prices will drop too. In the end it should be a wash.

    The political reality is that companies use their clout with the government to create firewalls between countries so they can price their goods differentially in each country. Witness the FDA getting hot and bothered by people importing their drugs from Canada, and of course our long time favorite here, DMCA and DVD regionalization. The result is some people get the benefits of globalization and the benefits of protectionism combined; others get the costs of each combined.

    It's just goes to prove what my old uncle Ivan, who was a cynic first and radical second, used to say. "Kid, nobody believes in capitalism. Nobody believes in socialism. It's socialism for me, capitalism for you!"
  • by behindthewall ( 231520 ) on Thursday September 09, 2004 @03:44PM (#10204803)
    I will RTFA after work hours, when I have time. However, most of the discussions and comments regarding outsourcing and regional specialization miss what I find to be an essential point.

    Human beings have diverse sets of abilities, let alone inclinations, that support our complex social structures. Not everyone can do everything themselves, especially as society has grown more complex, and so we've developed individual specializations that allow complex social structures to be supported, with all the benefits these supply. Doctors can be such good doctors because they don't have to tailor all their own clothes, let alone grow and harvest the cotton, sheep, and oil wells they come from.

    And this is not just reflected in the "elite" we all envy. There are extroverts who want to be face to face 24/7, and introverts who would like a private office, or to work by themselves out in a field. There are those who are extremely verbal, and those who are extremely visual. Those who are a whiz with a contract, and those who can keep even the most decrepit machine "alive" almost by intuition.

    As we shift jobs over national boundaries and overseas, we disrupt the balance of work within a society. The jobs move, but the people are not free to follow them. Further, we essentially sell out the rights of people performing those jobs by moving them to locations where those rights don't exist. We've all heard about the labor practices in China and many other countries where manufacturing has grown. Even if a U.S. manufacturing working could move there, there would be strong disincentives.

    With all this talk of "retraining", I become frustrated. Even were it to be effectively supported, not everyone is cut out to be the banker or lawyer that some think this country should become full of. 30 years ago, we needed a lot of manufacturing capability here, and people who enjoyed doing that. 50 years ago, the family farm was still a mainstay of society.

    These aren't just a matter of training. They are also a matter of basic personality (whatever the details of defining such). And such things don't just change overnight, or in the span of one generation. There are people of a different mindset borne into this society who, by our very laws, deserve a place within it.

    It's on the collective backs of all of us that the "elite" have become the elite. Some of them may be very gifted, in ways that are ostentatiously rewarded. But they didn't achieve this glory on their own.

    And yet, we divorce ourselves of much of the infrastructure supporting those less "glorious". And we expect this to have no serious repercussions? It is a breach of social contract.

    And before you say "who cares", laissez faire, or Darwin, see how long you survive when the garbage piles up into a health hazard. Or when those with no future decide that yours has been achieved at their cost. With nothing to lose, things can get very ugly. As they have in the past.

    Or, see how long it is until the rest of the world realizes they don't need American bankers and American lawyers. As their social structures solidify, especially their legal codifications, ours will become superfluous.

    A healthy society is one that is sustainable. What we are creating is not.

    The world will get by, in the long run, but this country may become, in the meantime, a far different place, and one far less reflective of the ideals too often used as a blind in selling this shortsightedness.
  • by crovira ( 10242 ) on Thursday September 09, 2004 @04:12PM (#10205211) Homepage
    The redistribution of wealth comes at a premium from base.

    If the base is high, say between the US and Canada (not Mexico yet,) or across most of the EU the changes mean that "A rising tide lifts all boats." Economies progress to a higher level by building on what came before.

    If the base is low, say between India and the US, the flow is the same, (economics as thermodynamics) but the changes means that you get burnt by the __rate__ of the transfer.

    In effect, you have a redistribution of poverty, not one of wealth.

    The current immigration policies of the US (and Canada and the EU for that matter,) albeit prejudicial, flawed and exclusionary means that the __rate__ of the transfer is occuring at a tolerable pace.

    The current phenomenon of __foreign__ out-sourcing (out-sourcing ''per se'' is not is a major problem since the expense base is directly comparable and commensurate,) is the cause of all the arguments.

    The comparative advantage of some labour costs is __too__ great because you're comparing Apple to oranges.

    The annual GDP PER CAPITA of Malaisia or India is so much lower than the US (or Caqnada or EU,) GDP PER CAPITA that instead of conferring an advantage, (which it ''does'' do in absolute dollar terms,) it leads to a reverse flow.

    The wealthy get poorer instead or the poor getting richer.

    I find it amusing that our politicians, who are so concerned with competing on ''a level playng field,'' are more interested in squeezing the money to be made from the difference between the poor and the rich.
  • by Sloppy ( 14984 ) on Thursday September 09, 2004 @04:36PM (#10205566) Homepage Journal
    (Thanks, BugMeNot!)

    But doesn't purchasing cheaper call-center or programming services from abroad reduce input costs for various industries, delivering a net benefit to the economy? Not necessarily, Mr. Samuelson replied. To put things in simplified terms, he explained in the interview, "being able to purchase groceries 20 percent cheaper at Wal-Mart does not necessarily make up for the wage losses."

    I was looking forward to reading his explanation (especially since I disagree) but it isn't there. The article /. linked to is just a tease. It's an article about an article, with the meat apparently appearing in something "Journal of Economic Perspectives". Bah. Come back when you're ready to play.

    So without any new input, I'll just jump into the flamefest, and say that as an economic "problem", outsourcing is identical to technological advancement. If a computer takes someone job, most Slashdotters would cheer. But if that replacement's name is Apu instead of Bender, suddenly people are screaming. I ask: WTF is the difference?

    And outsourcing labor is not only equivalent to a tech advance -- it actually is one. Before you had comm technology so that an Indian could take a tech support call from an American, before you had transportation infrastructure that could move goods at high speed over vast distances, service and manufacturing couldn't be outsourced. But now it's possible. The tech advance is that somebody looked at a spreadsheet and said, "holy crap, we can actually do this now."

    Protectionism is ludditism. Yummm.. now that's some good flamebait. :-)

"Yeah, but you're taking the universe out of context."