Issue: Economic: Outsourcing

[Bryan]

A poster geddesman asked a series of questions for Dr. Paul supporters here:
http://abcnews.go.com/WN/Politics/comments?type=story&id=3239034

He wrote "I keep hearing how GREAT Ron Paul is, but I'm not hearing any details as to why he is so great? I know he's pro life and voted against the war, but that doesn't make him great by any stretch of the imagination."

This is one of the issues listed: Where does Dr. Paul stand on outsourcing?

Can we help him out?

 

[Bradley in DC]

(I feel like I'm taking an exam)

Outsourcing: all economists recognize the net positive gain from the comparative advantage of division of labor and specialization. Outsourcing, in this sense, clearly offers *net* benefits to the businesses which choose to outsource part of their operations. Often this outsourcing keeps American companies competitive in the global competition that would otherwise not survive (Stanley Works ended up laying off many workers in the Northeast after it was brow-beaten into reversing its decision to move its domicile offshore, a related question). Clearly, also, there are winners and losers. In a more dynamic, prosperous economy, those losers would be better placed to find new jobs.

More broadly, the US dollars that flow abroad return here (sometimes after trading hands many times) to boost demand for *other* US products and services (unless of course the dollars stay abroad and we "export our inflation").

It would be useful to illustrate this "problem" with Bastiat's broken window fallacy:

http://bastiat.org/en/twisatwins.html

 

[Carl]

(I feel like I'm taking an exam)

Outsourcing: all economists recognize the net positive gain from the comparative advantage of division of labor and specialization. Outsourcing, in this sense, clearly offers *net* benefits to the businesses which choose to outsource part of their operations. Often this outsourcing keeps American companies competitive in the global competition that would otherwise not survive (Stanley Works ended up laying off many workers in the Northeast after it was brow-beaten into reversing its decision to move its domicile offshore, a related question). Clearly, also, there are winners and losers. In a more dynamic, prosperous economy, those losers would be better placed to find new jobs.

More broadly, the US dollars that flow abroad return here (sometimes after trading hands many times) to boost demand for *other* US products and services (unless of course the dollars stay abroad and we "export our inflation").

It would be useful to illustrate this "problem" with Bastiat's broken window fallacy:

http://bastiat.org/en/twisatwins.html

How many Stanley workers would have been unemployed if Stanley had moved offshore? What good is derived from saving the corporation when in the process, it destroys the economy?

What is the purpose of an economy if it is not to provide gainful employment for the people that built it and the society it serves?

Bastiat's broken window fallacy demonstrates the benefits that could occur within an economic structure, not between two separate and distinct economic structures, as you appear to imply.

That there exists a structure known as the “Global Economy” is a myth, a metaphor or quite simply, a lie and the only people that benefit from propagating this lie are the central banks and the corporations that grew up around them. They serve no economy but their own.

There are but a handful of economists left in this country that fully understands what the term Economy actually means.


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[Bradley in DC]

How many Stanley workers would have been unemployed if Stanley had moved offshore? What good is derived from saving the corporation when in the process, it destroys the economy?

Bastiat's broken window fallacy demonstrates the benefits that could occur within an economic structure, not between two separate and distinct economic structures, as you appear to imply.

That there exists a structure known as the “Global Economy” is a myth, a metaphor or quite simply, a lie and the only people that benefit from propagating this lie are the central banks and the corporations that grew up around them. They serve no economy but their own.

Stanley Works: I don't think you understand the example. No American workers would have lost their jobs if the company had moved its legal domicile (but no production) to Bermuda to escape the US double taxation on overseas sales that it's competitors don't have to pay. This was John Kerry's "Benedict Arnold" company example--he cared more about taxing us to death than the American workers and businesses that were hurt by his demogagory.

Your premises are misplaced. Quoting from Ludwig von Mises, Human Action, Chapter 15: "The Market," Part 1, "The Characteristics of the Market Economy.":

"The market is not a place, a thing, or a collective entity. The market is a process, actuated by the interplay of the actions of the various individuals cooperating under the division of labor. The forces determining the – continually changing – state of the market are the value judgments of these individuals and their actions as directed by these value judgments. The state of the market at any instant is the price structure, i.e., the totality of the exchange ratios as established by the interaction of those eager to buy and those eager to sell. There is nothing inhuman or mystical with regard to the market. The market process is entirely a resultant of human actions. Every market phenomenon can be traced back to definite choices of the members of the market society."

http://www.mises.org/humanaction/chap15sec1.asp

 

[Carl]

Stanley Works: I don't think you understand the example. No American workers would have lost their jobs if the company had moved its legal domicile (but no production) to Bermuda to escape the US double taxation on overseas sales that it's competitors don't have to pay. This was John Kerry's "Benedict Arnold" company example--he cared more about taxing us to death than the American workers and businesses that were hurt by his demogagory.

I apologize for my confusion, I thought the subject was outsourcing (offshoring) and I assumed your example was in response and related to the subject, I didn't know you were actually talking about Stanley Works setting up corporate front offices in Bermuda so as to avoid taxes, which is a different subject.

Your premises are misplaced. Quoting from Ludwig von Mises, Human Action, Chapter 15: "The Market," Part 1, "The Characteristics of the Market Economy.":

"The market is not a place, a thing, or a collective entity. The market is a process, actuated by the interplay of the actions of the various individuals cooperating under the division of labor. The forces determining the – continually changing – state of the market are the value judgments of these individuals and their actions as directed by these value judgments. The state of the market at any instant is the price structure, i.e., the totality of the exchange ratios as established by the interaction of those eager to buy and those eager to sell. There is nothing inhuman or mystical with regard to the market. The market process is entirely a resultant of human actions. Every market phenomenon can be traced back to definite choices of the members of the market society."

http://www.mises.org/humanaction/chap15sec1.asp

Quoting from that same essay:

"The market economy is the social system of the division of labor under private ownership of the means of production. Everybody acts on his own behalf; but everybody's actions aim at the satisfaction of other people's needs as well as at the satisfaction of his own. Everybody in acting serves his fellow citizens. Everybody, on the other hand, is served by his fellow citizens. Everybody is both a means and an end in himself, an ultimate end for himself and a means to other people in their endeavors to attain their own ends."

You cannot construe this to mean or to encompass the entire Globe. There are about 193 separate and distinct social systems on the world, each in service to their own ends. With few exceptions, they each have their own governments, their own currencies, their own economic and taxing structures and their own cultures. They may trade globally but that's it, that's as far as their interconnect-ability goes.

You cannot move industries out of one social system into another and expect to benefit from that transfer. It doesn’t work, and we have 30 years of hard, economic evidence that conclusively demonstrates that it does not work.

What is it going to take for people to wake up to the lie: There Is No Such Thing As A Global Economy.

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[Bradley in DC]

I apologize for my confusion, I thought the subject was outsourcing (offshoring) and I assumed your example was in response and related to the subject, I didn't know you were actually talking about Stanley Works setting up corporate front offices in Bermuda so as to avoid taxes, which is a different subject..

No worries, I mentioned obliquely that it was a related issue but probably should have been more clear.

Quoting from that same essay:

"The market economy is the social system of the division of labor under private ownership of the means of production. Everybody acts on his own behalf; but everybody's actions aim at the satisfaction of other people's needs as well as at the satisfaction of his own. Everybody in acting serves his fellow citizens. Everybody, on the other hand, is served by his fellow citizens. Everybody is both a means and an end in himself, an ultimate end for himself and a means to other people in their endeavors to attain their own ends."

You cannot construe this to mean or to encompass the entire Globe. There are about 193 separate and distinct social systems on the world, each in service to their own ends. With few exceptions, they each have their own governments, their own currencies, their own economic and taxing structures and their own cultures. They may trade globally but that's it, that's as far as their interconnect-ability goes.

You cannot move industries out of one social system into another and expect to benefit from that transfer. It doesn’t work, and we have 30 years of hard, economic evidence that conclusively demonstrates that it does not work.

What is it going to take for people to wake up to the lie: There Is No Such Thing As A Global Economy..

Again, the market is a process not a thing or a place. First off though, debating Mises in the context of a presidential campaign--how cool is that?! Human Action is not an essay but a large book--his life's work in a sense.

We are talking about systems of exchange and trade with each other. To the extent that those exchanges are local, they are local; exchanges within a nation, national; exchanges across the globe, global.

You're right of course, there is no such "thing" as a global economy which I have consistently maintained. There is however, in many cases, a global process of exchange.

 

[Carl]

Again, the market is a process not a thing or a place. First off though, debating Mises in the context of a presidential campaign--how cool is that?! Human Action is not an essay but a large book--his life's work in a sense.

The web page we’re quoting from contains an essay taken from the book, it’s not the actual book, however semantics aside, yes it’s very cool…

You have to keep the process within context and the context is the social system. The process does not and cannot stand independent of the social system it serves.

We are talking about systems of exchange and trade with each other. To the extent that those exchanges are local, they are local; exchanges within a nation, national; exchanges across the globe, global.

You're right of course, there is no such "thing" as a global economy which I have consistently maintained. There is however, in many cases, a global process of exchange.

Good non-committal response, you've been hanging out in DC too long.

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[Bradley in DC]

Good non-committal response, you've been hanging out in DC too long.

Oh, I wasn't trying to be non-commital at all (my DC colleagues who know me would be LTAO right now). I do always try to acknowledge where we agree and where we don't. While of course (market process) exchanges take place within those specific conditions of currency, location, legal and social structures, it is important, as Mises emphasizes, to consider them as *individual* decisions among private actors.

Another classic: I, Pencil from FEE
http://www.fee.org/publications/the-freeman/article.asp?aid=3308

 

[rohellio]

what I got out of that article was: We sometimes make decisions based on the immediate effects, and not on the successive effects. And, this is what our politicians do on a regular basis, as I see it. George Bush did not think about Blowback. That's our biggest problem: politicians who don't do their homework. I think in our legislature, there should be a minimum criteria: A bachelors in economics, or business. How can you make an educated decision, about your constituents well-being, if you know nothing about economics? A medical degree, like Paul has, would qualify because he knows how to take care of people. To require everyone be a doctor, might not be fair, but a minimum of a Political Science degree, I think would be appropriate. A bachelors in Education, might be a good measurement, of a competent and qualified potential candidate.
Instead, alot of them are lawyers, and that's why we have HUGE government because they write laws daily. We have over 4,000 federal laws on the books and let's not talk about how many damned state laws. That's why we live in a Police State. That's why there are 7 million prisoners in the US.( the highest imprisonment rate in the history of the world) These fools know nothing about the economy. Bush tried to run an oil business several times, and they all went under. How can he run a country? Obviously he is incompetent at everything he does. Look at what's happened to this country. They don't have the fore-sight, to see Blowback. That is the most obvious thing Paul could ever point out, but he looks like a genius, compared to who he's standing next to.
Free-Trade always ends the same: in an empire or a revolution, because it hurts so many. We can go to Protectionism for awhile and start Free-Trade again, and it will arrive at the same place again, and shut down again. Why beat a dead horse? If only we would learn from history. Why can we not just do that?

 

[Carl]

I just don’t see the benefit of requiring people to be trained in the dogma that got us to this point in the first place. What we need is a counter balance to the democracy in congress that is killing this country, what we need is the repeal of the 17th Amendment and the restoration of states’ equal suffrage under the Constitution.

But these issues are not on topic to this thread.


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[Bradley in DC]

How can he [Bush] run a country? . . .
Free-Trade always ends the same: in an empire or a revolution, because it hurts so many. We can go to Protectionism for awhile and start Free-Trade again, and it will arrive at the same place again, and shut down again. Why beat a dead horse? If only we would learn from history. Why can we not just do that?

As Dr. Paul points out, he is running for president so that no one is "running the country" but to respect our liberty to make decisions for ourselves.

I assume, for the sake of my argument, that you often go to commercial stores competing against each other for your business and buy things (groceries, shoes, clothing, really cool power tools, books by Mises, etc.). Where was the empire or revolution?

The market process of voluntary exchange is what protects us from empire and revolution. It is the governmental (use or threat of force) interference with voluntary market exchange (on whatever level of exchange including globally) that causes problems. For these reasons, Dr. Paul opposes the managed trade agreements such as NAFTA, etc.

 

[angelatc]

A poster geddesman asked a series of questions for Dr. Paul supporters here:
http://abcnews.go.com/WN/Politics/comments?type=story&id=3239034

He wrote "I keep hearing how GREAT Ron Paul is, but I'm not hearing any details as to why he is so great? I know he's pro life and voted against the war, but that doesn't make him great by any stretch of the imagination."

This is one of the issues listed: Where does Dr. Paul stand on outsourcing?

Can we help him out?

My take is simply that if business were allowed to compete fairly, without cumbersome taxations and regulations, there would be no need for American companies to look offshore.

 

[drinkbleach]

My take is simply that if business were allowed to compete fairly, without cumbersome taxations and regulations, there would be no need for American companies to look offshore.

Could you imagine how frequently people would get sick and die from food poisoning? Aside from that though I think outsourcing is one of those short term solutions, that hurts America in the long run.

 

[Carl]

Oh, I wasn't trying to be non-commital at all (my DC colleagues who know me would be LTAO right now). I do always try to acknowledge where we agree and where we don't. While of course (market process) exchanges take place within those specific conditions of currency, location, legal and social structures, it is important, as Mises emphasizes, to consider them as *individual* decisions among private actors.

Another classic: I, Pencil from FEE
http://www.fee.org/publications/the-freeman/article.asp?aid=3308

I think the problem we're having here is not so much a matter of disagreement as it is a matter of language.

The language of economy and trade have been so corrupted by the monetarist, who are little more than shills for the banksters, that two people can use the exact same words but have two totally different meanings in mind when they use them. It's gotten so bad that we have to resort to drawing pictures to each other just to get our meaning across.

Anyway...

Yes they are individual decisions among private actors, but they also occur within a social framework of mutual benefit.

An example of mutual benefit exchange between economies would be Mercedes of Germany builds a production plant in the U.S. and Ford builds production plant in Germany. This exchange is of mutual benefit not only to Mercedes and Ford but it also benefits the social structures of Germany and the U.S. as both are enriched by this process. This is trade.

An example of one-sided benefit is when a company moves their production out of one social system into another only to produce products for the social system they deserted. The receiving social system gains in employment and taxing but not in the products they are now producing. The loosing social system not only looses the job directly associated with the departed company but also the jobs in the secondary supporting structures and communities that grew up with the company are also affected. The taxing proceeds, all the way up to the national level, are diminished. This is not trade as there is no mutual benefit involved.

What I've described here is, not only, not trade it amounts to economic rape and colonialism.

Now you have a picture of what I consider to be trade and what I consider to be economic rape.

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[Brandybuck]

What is it going to take for people to wake up to the lie: There Is No Such Thing As A Global Economy.

But there is! Wishing it into the cornfield won't make it go away!

I think you are laboring under a misconception that an economy is a system created by the government. It is not, it is something that exists independently of any act of creation. There are tiny local economies, slightly larger state economies, even bigger national economies, and the world economy. If we ever colonize into space, the economy will be that much bigger.

I am a part of that world economy. I work in California but my company is in Massachussetts. I have coworkers in Canada and Russia. We are partnered with a firm in Norway, and have subcontracted work to individuals in Sweden and Great Britain. If we did not do the work we do, then our main competitor in Germany would be doing it instead.

I resent the idea that freedom is about passing laws to limit my trading of goods or services with people in other countries. There is a reason we have borders, but it is not an economic reason. If California can trade with Massachussetts with minimial government interference, then it should be able to trade with Canada and Russia with the same minimal level of interference.

 

[Brandybuck]

Could you imagine how frequently people would get sick and die from food poisoning?

Are you talking about that tainted spinach from California? Most of our food poisoning problems are entirely domestic.

 

[angelatc]

Could you imagine how frequently people would get sick and die from food poisoning? Aside from that though I think outsourcing is one of those short term solutions, that hurts America in the long run.

Considering that only a miniscule amount of food is inspected, I think that the odds are pretty good that things probably wouldn't change.

 

[Carl]

But there is! Wishing it into the cornfield won't make it go away!

OK, if you choose to believe in banker spun fairy tales, who am I to stop you.

I think you are laboring under a misconception that an economy is a system created by the government.

PLEASE! Quote anything that I have ever written that would lead you to make such an outlandishly false assertion.

It is not, it is something that exists independently of any act of creation. There are tiny local economies, slightly larger state economies, even bigger national economies, and the world economy. If we ever colonize into space, the economy will be that much bigger.

Yes there are economies, as in plural, more than one, separate, individual and unique but there is no world economy unless there is a country named World or Global out there.

I am a part of that world economy. I work in California but my company is in Massachussetts. I have coworkers in Canada and Russia. We are partnered with a firm in Norway, and have subcontracted work to individuals in Sweden and Great Britain. If we did not do the work we do, then our main competitor in Germany would be doing it instead.

No, you are part of your local economy, that your company conducts business around the world is irrelevant, immaterial and beside the point.

I resent the idea that freedom is about passing laws to limit my trading of goods or services with people in other countries. There is a reason we have borders, but it is not an economic reason. If California can trade with Massachussetts with minimial government interference, then it should be able to trade with Canada and Russia with the same minimal level of interference.

And I resent the idea that you would create false positions for me to argue against. And your rant just goes to demonstrate that you haven't been paying attention to anything I've written, you're just keying in on certain words and reacting. Plus your logic is flawed.

May I suggest a little reading, maybe some John Locke or John Stuart Mill, even some Hobbs would be a step in the right direction because it is clear that you do not have a clue as to the nature of liberty or social structure.

 

[Bradley in DC]

Could you imagine how frequently people would get sick and die from food poisoning? Aside from that though I think outsourcing is one of those short term solutions, that hurts America in the long run.

It is a socialist fallacy to believe that if the government doesn't do something it doesn't happen. If there is a market demand for, say, safe food, providers of safe food would beat out the competition. In the marketplace, information brokers develop to give consumers easier access to information (think Goodhousekeeping Seal of Approval, or real estate agents). Corporate special interests use the governmental regulatory process (as opposed to market reguation) to "harmonize" standards; this uniformity eases our desire for higher standards (organic foods, etc.) and distrupts the process of raising standards with greater prosperity as consumers who can afford more, demand more.

 

[Bradley in DC]

I think the problem we're having here is not so much a matter of disagreement as it is a matter of language.

Yes, obviously. But important nonetheless to differentiate where the real differences may lie.

The language of economy and trade have been so corrupted by the monetarist, who are little more than shills for the banksters, that two people can use the exact same words but have two totally different meanings in mind when they use them. It's gotten so bad that we have to resort to drawing pictures to each other just to get our meaning across.

Monetarists and Keynesians are all part of the same failed positivist "perfect competion model." Austrian market process analysis offers much better insights--we even share language with Marxists! When F. A. Hayek was teaching at LSE, he used Das Kapital and referred to the middle third of the second volumne as "essentially flawless." Marx generally got observations right, but prescriptions wrong.

Yes they are individual decisions among private actors, but they also occur within a social framework of mutual benefit.

An example of mutual benefit exchange between economies would be Mercedes of Germany builds a production plant in the U.S. and Ford builds production plant in Germany. This exchange is of mutual benefit not only to Mercedes and Ford but it also benefits the social structures of Germany and the U.S. as both are enriched by this process. This is trade.

We're both saying the same thing, yes, I think, in different terminalogy.

An example of one-sided benefit is when a company moves their production out of one social system into another only to produce products for the social system they deserted. The receiving social system gains in employment and taxing but not in the products they are now producing. The loosing social system not only looses the job directly associated with the departed company but also the jobs in the secondary supporting structures and communities that grew up with the company are also affected. The taxing proceeds, all the way up to the national level, are diminished. This is not trade as there is no mutual benefit involved.

What I've described here is, not only, not trade it amounts to economic rape and colonialism.

Now you have a picture of what I consider to be trade and what I consider to be economic rape.

.

Yikes, no, here we part ways, respectfully. As I've said, there are winners and losers to decisions (to all of our consumer decisions as well). While one artificial separation in your analysis may be a "loser" in the transaction, and other the beneficiary, this is part of the creative destruction process that frees resources (labor, capital, land) for more efficient uses that raise total utility.

Following your example (while tone is often lost in these kinds of exchanges, I am explicitly trying to be as respectful to you and your ideas as possible), the social system with the marginal gains adds to NET production gains (assuming, for the sake of your example, that it wasn't a bad economic decision--which of course sometimes happens). Those participants of the "winning" system then gain marginal benefits that become demand for other things. In short, total demand is increased.

Regulatory competition is a good thing. The question is not only one of high tax or regulation, but better tax and regulatory policies. Of course, nongovernmental factors count (increased education or skills in a workforce). It is this dynamic aspect of capitalism that allows former colonies to best former colonial powers.