Read this article the other day. Since I was an econ major in college, I've always supported the concept of free trade. While it can be painful for short periods, I believe it is best for economies in the long run. http://businessweek.com/technology/content/aug2004/tc20040811_9584_tc024.htm The whole article can be found above, but here's the highlight. "A recent study by economic think tank McKinsey Global Institute has found that every dollar a U.S. company spends on outsourcing results in $1.12 to $1.14 in additional work here. Foreign investment for setting up U.S. subsidiaries and plants doubled, to $82 billion, between 2002 and 2003, according to the Commerce Dept. That means 400,000 new jobs, most of them tech-related, figures the Organization for International Investment, a trade association based in Washington, D.C. Over the same period, outsourcing has taken away about 300,000 U.S. jobs, according to tech consultancy Forrester Research. So, on a net basis, foreign outfits have actually added some 100,000 U.S. jobs. " p.s. Lou Dobbs sucks.
An interesting topic, although I am somehow not surprised that McKinsey would come to such a conclusion, considering that outsourcing and the promotion thereof constitutes a significant proportion of their business. A lot of recent research indicates that the theoretical benefits from free trade (which are undeniable on that level) have yet to translate into real world results -- and there is now theoretical research that seriously questions old assumptions. I wish I had more time to get into this.
Good find... nice to see some numbers.. btw, I'm an econ major myself.. any good publications you'd recommend being worth subcribing to... economic related ...
I've seen the study (benefit of being an alum, i get a magazine) and while I wholeheartedly support free trade, think the analysis seemed somewhat suspect. For those interested, I think you can see the full study at the McK website. Some of the underlying assumptions and what finally gets em to the benefit calculation seemed somewhat optimistic. I think the difficulty is that they tried to prove something in a quantitative manner using real world data, which is usually difficult/impossible.
I work for a company that outsource a major portion of their IT overseas. The overseas company did "hire" people to work at out site but they were all sent from the overseas country. So technically they did create U.S. jobs but they did not fill them with out of work Americans. I also think the results appear seriously flawed
Ummm... Okay? Bye. Nice discourse and fact-based rebuttal, btw. Sam "the video game character" Fisher learned me how to write kurreckly.
Bye-ROC it, before I send you away, if you want a shot at me, why don't you explain for me in a 200 words or less how comparative advantage works, in your own words, so as to demonstrate you have a rudimentary grasp of the building blocks of a basic economic theory of international trade. While you're at it, also learn to spell "rebuttal" You've got an hour! Get to work!
Does this report track the new jobs created overseas (that 10 years ago would have been US jobs) in addition to the jobs where the US workers train their replacements?
Not that I feel you're in a place to beg such school work from me, but here's my "shot" Mr. Sam"Elitism-is-king"Fisher... Basically if the Beavis country were good at producing a fart better than the Butthead country, and the Butthead country was better at a belch than the Beavis country, then those countries could trade each other those aroma producers and it would lend itself to smells for all, at a lesser production cost do each side. Seriously, say China has more natural ability to produce tea, and America more natural tobacco. Well, China needs to seriously weigh the advantages of trading with America for it's tobacco, if they want tobacco... and can most likely use their inherit over abundance of tea as a bargaining chip. Basically, countries should specialize in, and capitalize off of, industries and areas of economy that they would have advantage in when its compared to the country they trade with. This leaves it to their trading partner(s) to produce those other products that they need. In other words, in the areas at which they have natural, inherit advantages. This way , Beavis and Butthead, China and America, produce products which they have relative, inherit, natural advantages in, and they can sell or trade those products to the others, and likewise import the goods that other countries can produce cheaper, or at least faster (money = time, ya' know.... Trade increases, in theory, and all Beavis and Buttheads included in the process wind up better off for it all.. They compare their advantages... comparative advantages.. first coined by some Rico Ricardo guy. Pretty cool, huh, Beavis?
While a better answer than I expected, I'm afraid you didn't meet the one hour time limit. F Actually, I take that back, I'll give you the ADD extension and deem your response as timely filed. Anyway, if I read your response correctly, it seems to me like you are describing a situation in which the two trading partner share a complementary absolute advantages as well as comparative ones. If China is better at tea, and the US is better at tobacco -- then of course they should trade. What I was asking about was comparative advantage, especially in a situation like that of the US w/regard to many of its trading partners. In other words, what if the US is better at producing tea and tobacco than China? What happens then? You have another hour.
I'm not gonna keep jumping through the monkey hoop for the likes of a poo-slinger like you, Fisher. Taking into account that it was well within 30 minutes after I read your "challenge" and that I was dead on in a basic description of comparative advantage... as you said... I fulfilled both A) the challenge (and then some) and... B) the time constraint So set your laser sites on someone else. My grade for your high school economics class? B Why give myself a "B?" Because Your name starts with the "S" it goes with. Ignore me, elite boy. Nanny, nanny, boo, boo. Stick your head in doo-doo. The initial charge I made to start all of this still stands... ...and it was with the mandatory smilie, all in good fun, picking at you for "not having the time." Get over yourself you pompous pickle licking sour puss. Your grade for defense of a question by questioning and avoidance? A Way to derail your own arguement. On second thought, maybe you're "Butthead."
Is your example why you believe the results are flawed? Or is there something specific you know about the study? Regarding your example, I hear what you're saying, but we will all have examples to demonstrate the other side. A recent company I am very familiar with was planning a plant expansion. In order to get the required ROI for the expansion, corporate limited the spending budget to X million. In order to fit within the budget, the contractor that was hired had to outsource less than 10% of the work overseas. The remaining 90% of the work stayed in the US, and the plant and the associated jobs will be in the US. Some people on this project are whining that some business went overseas, but are overlooking the millions that will be invested in the US as a result of the outsourcing decision. Dream Sequence, do you know how old that study is? A couple good friends of mine are McKinsey alums and I would like to read it. If you have an idea as to when it was produced, I can get it from one of them. Thanks in advance. RocketFan, there's not a lot of academic econ reading material out there that I know of. But if you're like the majority of econ majors, you're after school life isn't really going to be related to textbook econ. I enjoy reading Fortune (a lot of articles about specific company situations), BusinessWeek, Forbes and of course WSJ. Good luck. As for the rest of this thread - pathetic. Rather than add to a discussion, one side decides to just spew an antagonizing one-liner. The other side doesn't have time to discuss an issue, but manages to find the time to brag that he understands basic economics. That's probably why most rational people stop coming to this forum.
Can't recall. Just register at the McKinsey Quarterly website. you should have access to all the articles they published, including the one referenced here. You nor I will have access to the full study documentation, but the article should be enough.
Right. So since I've demonstrated that I understand basic economics (this morning, in which I had more time than last night), can you bring yourself down to my pathetic level and demonstrate for me the support for the underlined assumption: that the millions saved in outsourcing will be reinvested in the US? Mind you, I'm not saying it's not there or it doesn't exist, as I haven't read the McKinsey thing -- but it is an assumption that is the linchpin of the entire idea.
My example wasn't based on the McKinsey report - I have yet to read it - it was based on an example that I am personally familiar with. Let's pretend the project had a $100 mm budget. By doing $10 mm of the design work overseas, the Company was able to make it within the guidleines provided by corporate. Therefore, the project can go forward and the remaining $90 million will be spent in purchases from local vendors, design firms and construction contractors. I'm not sure how to demonstrate the support for this. I've seen the total budget, the expenditures and the awards. It's not an assumption, its based on a specific example. But as Cesar showed, there will be other examples. My point of providing the example was to do exactly what I said...there are examples that show outsourcing can be beneficial to the economy, too. I wasn't trying to defend the assumptions in the McKinsey study, because I don't know them and therefore can't defend them yet. I realize one post was from yesterday and the others were from today. But its not like you made an effort (until now) to revisit the issue when you had more time. If it was no longer of interest to you, that would have been fine, but instead you chose to engage in the proverbial poo flinging. Though I disagree with your position fairly often, I respect the fact that you usually reason through your conclusions. It would be nice if people in this forum would stop beating their chests and discuss issues intelligently.
