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Matt Yglesias thinks "Offshoring Is Fine"

Matt Yglesias of Slate continues his slow, shallow descent into becoming Tom Friedman Jr. with "Offshoring Is Fine" [1].

On one hand, what Yglesias writes is little different from what any of the many Koch family-linked libertarian economists would write. But, he adds in a "liberal" touch: he wants a generous welfare state to smooth over the dislocations caused by his otherwise libertarian policies. Think of it as "libertarian with benefits":

If (Mitt Romney) were a less pathologically risk-averse politician, he would defend what Bain did after 1999 and point out that there’s nothing wrong with companies shifting production offshore.

A good intuition check here is to note that nobody seems to think there’s anything wrong with offshoring when the United States is the offshore production site. And yet that’s often exactly what we are. ...[examples]...

Rules requiring firms to restrict employment to their country of origin would be hideously inefficient if applied on a global basis, and they would be every bit as devastating to American employees of foreign firms as offshoring by American firms is to workers who lose their jobs here. (One might also ask where the borders of corporate patriotism ought to be. If it’s wrong for a Michigan-based car company to have a supply chain that extends to Mexico, why is Ohio OK? After all, it hardly makes a difference to a laid-off worker where exactly his job went - the bad news is that he lost his job.)

Over the long run, we’re all going to be more prosperous if we live in a world where firms are allowed to locate work where it’s most efficient to locate it. This is exactly why, despite some tough ads, the Obama administration has not proposed any policies to restrict firms’ freedom to shift work across state or national boundaries.

...[Asian workers became productive, made advances] This has been a triumph for human welfare but a disaster for Americans whose skills have been radically devalued in the process. And these kinds of shocks happen all the time in a dynamic market economy.

The good news is that a growing economic pie lets us use tools like progressive taxation and the welfare state to make sure that everyone shares in prosperity.

1. Americans support the U.S. as an offshore site not because offshoring is a good thing, but because they see it as payback for how they'd been screwed by offshoring to other countries.

2. No one with any power is suggesting a law that would require all U.S.-sold products to be made in the U.S.; that's just a strawman.

3. It should be obvious to even Matthew Iglesias that a U.S. worker can follow his job from Michigan to Ohio, but can't do the same to Mexico. Internal migrations happen all the time in the U.S.: people are transferred, someone who can't find work in Nebraska moves to Chicago, and on and on. Almost all of those same people aren't going to be able to follow their jobs to other countries.

4. The "locate work where it’s most efficient to locate it" bit above is MattY reciting his Comparative Advantage lesson; start here for cases in which it doesn't apply.

5. The bit above about the Obama administration jumps to the conclusion that they actually care about U.S. workers; that's an open question.

While Virginia Postrel would be proud of Matt Iglesias' support for "dynamism", he's got things backwards. He'd allow rampant globalization to continue, causing dislocation among poorer Americans and with most of the benefits trickling upwards to the very rich. He'd then spread that wealth around to make up for the problems he caused.

The better solution would be to encourage increased production in the U.S. There are (and will continue to be) millions of Americans who can't or won't be able to work in call centers or designing computer chips, and they need something to do. That doesn't mean we should make Matthew Yglesias' strawman come to life and pass strict U.S. content laws, but it does mean reviving such now-disfavored ideas as "Buy American". From "How the U.S. Lost Out on iPhone Work" (link):

However, what has vexed Mr. Obama as well as economists and policy makers is that Apple - and many of its high-technology peers - are not nearly as avid in creating American jobs as other famous companies were in their heydays.

And, that's due in part to campaigns by libertarians, including now among that number Matt Yglesias. Instead of shaming companies into doing what's necessary to employ people in the U.S., they encourage companies to seek the lowest costs possible no matter the long-term costs to millions of Americans.

Matt Yglesias and libertarians say they want to "grow the pie", but what they don't mention is that almost all the apples are stacked one on top of one another in one small corner of the pie. The better solution is to spread those apples out a bit through good jobs.

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[1] slate.com/articles/business/moneybox/2012/07/
romney_and_offshoring_why_won_t_he_defend_bain_capital_s_record_.html

Other tags: free trade · globalism

Tue, 07/17/2012 - 11:12 · Importance: 4