Re: Does Outsourcing Piss you off?

nospam wrote:
Hi Jim,

Jim Blair wrote:


However, at macroeconomic level the situation is different.
If too many businesses are actually doing it, the consumer income

decrease.

Hi,

You are not being "macro" enough. Because of his better paying job, that
guy in India or China now has also become a consumer.


Mythology Jim. An US unionized worker making 45k/yr can afford to buy an 35k
SUV. If his job was offshored to China and the Chinese make 2k/yr the GM is
not going to sell that SUV anymore.

Unless companies offshoring jobs start to pay the same scale wages as the
jobs lost in US, we are not going to gain any serious business there.

??? "We"'ve gained significant serious business there. I don't know that any company in China *should* build SUVs - the market right
now is telling Ford, GM and Chrysler that maybe the old, low-hanging-fruit SUV model ( rather low actual cost,
large markup, dependence on cheaper oil ) maybe has
sustainability problems.

China is trying to do a post-WWII recover, Amrican-Industrial-Revolution, TVA and a "bootstrap
a currency" thing all at once. It definitely *won't* be done as
it was in the American Century. In Europe, there are passenger
trains because that happened to win out ( mainly
becuase of economic weakness between the world wars );
likewise , in China it'll be something besides suburban plats and SUVs.

They are, after all, just upholstered pickup trucks. Trucks *used*
to be a cheap work vehicle - people took the *car* to town, the
truck to the feed mill.

Yes, the worker there is going to afford a 4k Chinese Ping-Ping-Pong car
instead of his old bike, however no a US made SUV.


Or perhaps something like a 40hp Honda motorcyle, which is much
more consistent with the urban densities expected in China.

Therefore, it is plain mythology (or rather propaganda lie) that moving our
jobs offshore we gain there customers for our products.

It is not a lie. It just depends on which products. We are back to
comparative advantage again.

This is not going
to happen until US wages are at the same scale with Chinese wages. One way
or another. Since the whole reason to move jobs offshore is not to pay
salaries as in US, the only option left will be for US economy to collapse
in order to match here the wages there.


There are different wage scales everywhere - even between states
in the United States. It's suspicious to think that it'll have to come to a parity equilibrium.

Hopefully, Chinese infrastructure will be considerably more
efficient than USAian. It'll likely port back over here, then.

And some of this shows that even zones of sovereignty as a
concept is showing signs of wear. Containerization and
telecomm make them much less relevant.


Overall "consumer income" has increased because of the higher combined
productivity of both the American who gets more done with his time, and
the Indian who is contributing to the Global economy rather than
subsistance farming or whatever he was doing before being hired by
schlepprock.


The total created wealth, yes did increased. However, average consumer
income (for US I am talking about) decreased. The fact that a IT CEO doubled his salary by offshoring the job of 100
programmers to India is not going to help GM sell more cars.


Actually, *it could*. It depends. Describing all the relevant
variables would take considerable space.

And GM, Ford et al are not the be-all/end-all anyway. They arguably
peaked in the '50s.

There is just so much space for others to out-innovate
GM that it's not even funny. Short of "Tucker" style
conspiracism, it's clear that it's not that hard to do better.

We have to evaluate carefully the fundamental assumption that
"not everything will get doen that we want done", but short of
that, we're back to comparative advantage. Which, again, cna
be iterated...

The CEO was already able to afford the car he wanted. Doubling his income is
not going to increase GM business. He is going to buy his new SUV at every
2 years as he already did.
The 100 Indians getting those jobs won't be anyhow able to afford an GM SUV
having Indian wages.
However, GM is going to lose 100 customers, which used to buy a car at every
5 years.


GM might consider accepting the going-on-thirty-years reality that
the oil prices card might not always complete the inside straight
they draw to every year.

So, despite the fact that "Overall "consumer income" has increased", our
economy is getting hurt.

Keep in mind a theorem: ======================
Polarization betwen poor and rich is not good for business. It hurt local
economy instead of helping it.



It's not very theorem-ey. Sounds more like a bumper sticker.

Once this point is reached, the economy would be in big big trouble and
everybody is going to get hurt. Including the businesses which take the
advantage of outsourcing to increase their profits today.

If that were the case it would have happened decades (eons?) ago when
people first started "outsourcing" their work to others.



Maybe this explain why each empire in history did not last for more than a
couple hundred of years.

Sure. That's one reason it's tempting to think America isn't really
an empire in the same way.

Accumulation of power increase polarization,

Not always.

and
there is a limit into how much polarization can grow before everything
collapse.

Those who don't know history are condemned to repeat it.


But some invent it.

--
Les Cargill
.