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Home Publications Blogs Beat the Press Post Misrepresents Story on Outsourcing

Post Misrepresents Story on Outsourcing

Wednesday, 17 October 2012 05:04

A Washington Post fact check on the debate commented on a debate question on outsourcing:

"But economists are unanimous that trade, including outsourcing, is hugely beneficial to economic growth at home and abroad."

This is highly misleading for two reasons. First, economists are unanimous in agreeing that trade could have major distributional consequences. And some prominent economists, such as Paul Krugman, have argued that the recent pattern of trade for the United States has had negative distributional consequences for large segment of the U.S. workforce.

The second reason that it is misleading is that economists are unanimous in believing that in the context of below full employment economy, like the one we have seen the last five years, a larger trade deficit implies lower growth and fewer jobs. In this context outsourcing hurts the economy.


Comments (3)Add Comment
written by Nassim Sabba, October 17, 2012 8:19
It is very curious that we feel, including myself, that redistribution is a good goal within a country, but not globally.

Free trade, in its true meaning, would provide global redistribution, which for now, seems to be stifled by trade in low paying jobs only. I wonder if real free trade was implemented, if then skilled workers would not be upset and demand protection. I am afraid probably I would.

I suspect I don't mind redistribution within the US because I have not much competition in my field, but internationally? I am doubtful if I could keep up.

Nonetheless, it has to happen. It needs to happen. It will be uncomfortable for a while, but eventually it will pay back enormously as more people reach better standards of living.
nassim...i point this out all the time
written by pete, October 17, 2012 10:10
Trade does increase output, and as Dean points out then there then the dicey matter of distribution of the gains from trade. What is happening now is that growth/trade have led to increased inequality, while the bottom end has seen gains in income, it has not gained as much as capital. This makes sense since capital is the scarcest global factor of production.

Intracountry redistribution matters only as a bribe to keep the riots down. Roosevelt and Johnson knew this well and were able to pass new deal and great society plans. These have served to maintain a minimum income for U.S. citizens at far above global GDP per capita. Those with a global Rawlsian social welfare function find this distasteful, since there are many many dying outside the U.S. from outright starvation, lousy water, mud huts, etc. But, if bringing the minimum living standard in the U.S. closer to global GDP, and focusing on global redistribution would lead to a Chavez-style leader, we would certainly be in deeper doo doo. So we redistribute the gains from growth/trade.
Ask yourself: Is South Korea stupid?
written by Alex Hamilton, October 18, 2012 12:08
All of the countries of East Asia have been depressing the values of their currencies since the onset of the global recession. Is this because their leaders are stupid? Of course not. Increasing net exports helps accelerate recoveries, and most of East Asia is BOOMING! There is no global recession, and except for a really brief period from Nov. 2008 to Feb 2009 there never was one. Argentina, Israel, South Korea, Singapore, Poland, they are all THRIVING! It's only ridiculous English speaking countries like the UK and US that are in trouble.....

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.