An Elder Challenges Outsourcing's Orthodoxy

With all the talk about outsourcing, along with the realities of globalization, it's nice to find a well reasoned article on the topic. The New York Times featured this story yesterday about Paul A. Samuelson's dissent with the popular view that the benefits outweigh the potential harm. I am certainly no economist, and I admit that parts of the story were a bit more than my marketing and sales mind can digest. Nevertheless, the article cuts through the headlines and the mind-numbing clutter that we are fed via political rhetoric and daily sound bites.

The article drives two points home for me. First, unchecked outsourcing could become too much of a good thing. As Mr. Samuelson points out, "a low-wage nation that is rapidly improving its technology, like India or China, has the potential to change the terms of trade with America in fields like call-center services or computer programming in ways that reduce per-capita income in the United States." Could this really happen, though? Mr. Bhagwati points out some important limitations. As has been discussed before , the actual number of jobs being outsourced is much more limited than the media buzz would have us believe.

The second interesting point is that economists on both sides of the issue seem to be united in their concern about protecting displaced workers and/or industries in the short term. "Mr. Samuelson and Mr. Bhagwati agree that the way to buffer the adjustment for the workers who lose in the global competition is with wage insurance programs." I wish they'd defined what "wage insurance programs" are, but knowing these guys, it certainly isn't welfare. What I read between the lines is a concern about the speed of change versus the time it takes the US economy to re-invent itself and cast workers profitably and productively in a new direction.

Another observation: Mr. Samuelson sure has a lot of Karl Marx books on his shelf (see the lower left corner of the image). That's a little disturbing, though I'm sure every good economist has studied Marxism extensively. 

Best quote: "Being able to purchase groceries 20 percent cheaper at Wal-Mart does not necessarily make up for the wage losses" (Samuelson).