I’d planned on “propheteering” this week on what the future holds, but realized I needed to take a step back first, to look in more detail at one more fundamental aspect of the economic morass. It’s an important facet of the debacle that has me stymied: outsourcing.

The paradox of outsourcing jobs is that it provides cheaper goods which preserves wealth. However, for a more upscale economy to compete with countries that have minimum wages a third, or a tenth of its own, jobs will inevitably migrate overseas. This reduces the available jobs at home, increases unemployment, and reduces wealth. Where is the sweet spot? I don’t know. Competing on a level playing field would involve abolishing the minimum wage and allowing salaries to seek their own levels. Not only is this unfeasible in this country, good arguments can be made that it is undesirable. A return to the sweatshops of the barons of industry in the late nineteenth century is hardly a step forward.  Alternatively, we could abandon the notion of free trade and resurrect the tariff system, so that countries permitting “substandard” working conditions construed as an unfair advantage would be disadvantaged against American-made goods. In this global economy, however, this would cut both ways, with a likely boycott of American products as well as reprisals in kind. It would also decrease the purchasing power of the American consumer, forced to buy more expensive foreign or domestic goods.

John Stossel, a libertarian political analyst addressed this topic in a recent op-ed piece. He argues that the “buy American” idea is foolish. He quotes an economist at the Hoover Institution, David R. Henderson, as remarking that almost all economists agree that the idea is nonsense. Henderson says that buying things where they’re cheapest frees up more of our resources to buy other things, and other Americans get jobs producing those things. Henderson illustrates the point by taking the concept to its absurd conclusion: “If it’s good to Buy American, why isn’t it good to have Buy Alabaman? And if it’s good to have Buy Alabaman, why isn’t it good to have Buy Montgomery, Ala.? And if it’s good to have Buy Montgomery, Ala. …” Stossel goes on to says that fair trade coffee costs more because the bureaucracy takes a premium that should have gone to the farmer.

With regard to the sweatshop issue, Henderson says, “[Foreign workers are] better off taking those jobs. … The mistake Americans make is they think they would never work in a sweatshop and therefore they say these people shouldn’t. Well, no one’s offering those people green cards. Those people are stuck in those countries. They’re choosing their best of a bunch of bad options. And when you take away someone’s best of a bad option, they’re worse off.”

All of these points are sensible. The problem is, Alabama still has laws that require high standards and much higher hourly wages than many of their international counterparts. And when we free up our resources by buying cheaper, say, Indian goods, will we have enough new, innovative industries and products to entice customers beyond our borders to turn to America for our products?

Until the standard of living rises in many of these third world nations, I don’t see an easy answer to this quandary. It appears to be a fundamental roadblock to anything but an economic decline in this country for the short to medium term.

Depressing, isn’t it? However, after every depression, emotional or economic, comes the sunshine after the storm, if we can just keep dry enough during the downpour. And that’s what I’d like to speculate on, next rant.


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