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No political solution?

 
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The difficulty of attempting a political solution to the outsourcing of jobs is that it is not one action but rather an abstract combination of two actions: (1) buying services overseas, and (2) firing domestic workers.
We call it "outsourcing" because we have good reason to believe that the two actions are planned as part of a single competitive strategy; but in fact they are two separate actions.
Can we pass a law to punish companies for firing people? Europe has had such laws for years, but the main result is that businesses become extremely reluctant to hire people in the first place.
Can we pass a law to prevent businesses from buying components overseas? The last time we tried it -- the 1930 Smoot-Hawley Tariff act -- it was reciprocated by our trade partners, thus severely deepening a world-wide economic Depression.
If it is not feasible to use politics to stop private businesses from downsizing, and equally infeasible to prevent them from buying overseas services, then how on earth can any President act to stop a corporation from doing both? We cannot prove that one act had anything to do with the other if the employer chooses not to admit it; or if the employer tries to disguise the intent by separating the two actions over time.
If we tried to regulate the practice, then what is to prevent a holding company from re-investing the earnings of an employee-laden subsidiery into a competing start-up that never had many employees to begin with (and uses foreign services from the beginning), which then renders the employee-laden business unprofitable (and fit only for a complete shut-down)?
Any political action that makes America a less attractive place to run a business is only going to accelarate the melt-down. I am sick about the degradation of my once-sterling economic prospects; but I do not fool myself into thinking that I'll be able to do anything about it come November. _That_ choice will have to be based on my feelings about issues that do have political solutions.
In the meantime, all I can do is to try to cultivate my family relationships; because when I'm old I imagine that we're going to have to depend upon extended families living together to get by -- just like in the old days and in poor countries today.
[ February 10, 2004: Message edited by: Frank Silbermann ]
 
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FS: Can we pass a law to punish companies for firing people? Europe has had such laws for years, but the main result is that businesses become extremely reluctant to hire people in the first place.
ME: The chilling effect simply has to be overridden by the opportuntity for making a profit. The total cost of retaining an employee even in a small business can appear prohibitive. We don't punish companies in the US for firing, but we do make businesses pay unemployment insurance, match an employee's Social Security and Medicare deductions, maintain compliance with no small set of regulations to protect employees, even pay more into unemployment for laying people off.
The pressure on businesses to compete effectively and make solid profits invariably reflects on the investment in human resources any business is willing to make. By the same token, no one business can be everywhere. What Citibank leaves behind is invariably something another enterprising soul can turn into an advantage.
FS: (H)ow on earth can any President act to stop a corporation from doing both? We cannot prove that one act had anything to do with the other if the employer chooses not to admit it; or if the employer tries to disguise the intent by separating the two actions over time.
ME: The solution doesn't have to be prescriptive. Economic incentives to invest in America should be motivation enough.
FS: If we tried to regulate the practice, then what is to prevent a holding company from re-investing the earnings of an employee-laden subsidiery into a competing start-up that never had many employees to begin with (and uses foreign services from the beginning), which then renders the employee-laden business unprofitable (and fit only for a complete shut-down)?
ME: Nothing. But markets usually respond to that kind of shell game much faster than anyone thinks; it's not a foolproof strategy. If it didn't, Beatrice would still be running the world.
FS: Any political action that makes America a less attractive place to run a business is only going to accelarate the melt-down. I am sick about the degradation of my once-sterling economic prospects; but I do not fool myself into thinking that I'll be able to do anything about it come November.
ME: I hear what you're saying; I just don't quite see it. My prospects have never looked better. Then again, I never wanted to work in a call center, correct appraisal paperwork, or do anything that could be done by anyone, anywhere. I've always looked for work where I'd be hard to replace, and opportunities where I could provide something people need. I saw lots of people shoot past me, financially speaking, during the tech bubble. In both directions. That's the life of a prospector, and always has been. I bet it was an engaging ride, though.
FS: In the meantime, all I can do is to try to cultivate my family relationships; because when I'm old I imagine that we're going to have to depend upon extended families living together to get by -- just like in the old days and in poor countries today.
ME: Or reinvent yourself. A fine American tradition.
[ February 10, 2004: Message edited by: Michael Ernest ]
 
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The problem with "reinvent yourself" is that it's easier said than done.
I guess it strikes me as patronizing.
I'm fortunate because I have positioned myself to take advantage of the outsourcing fad and will still have a job when it does eventually subside. However, I realize that not everyone can do what I do.
I see a lot of fallout from the unemployment in my area. Numerous shops and businesses are shutting down. There is no money here. With so many tech workers out of work and outsourcing being a big deal for many companies in my area, the local economy simply has no more money coming in. It's not just affecting people in IT.
I have nothing against Bush, I voted for him in the last election. However, he continually turns a blind eye to what big business does. He doesn't even seem to care. It's frustrating, because I've seen the marketplace react pre-emptively in the past to protect themselves if they believe they'll face regulation if they don't change their practices. As long as they think the current folks in government won't move against them, they'll continue shipping jobs overseas.
What additionally adds to my frustration is that I see a lot of potential in outsourcing. It's not really a new concept and it could indeed work. It may not create a lot of new jobs initially, but there is no reason to replace jobs with it either. It really is the whole "Everything looks like a nail" syndrome. Outsourcing has become the silver bullet to every problem, whether it's wise or not. Ironically, we're training our future competitors in the global marketplace. Those folks we're using today for outsourcing might be taking more than American jobs tomorrow. It seems we've learned nothing from Europe's mistakes of the past.
The real issue that bugs me is that there are other ways to save money than laying people off. The last major economic slump we hit was further exacerbated by the huge layoffs. Companies kept firing people, consumer spending went down, so more people were fired. No one seemed to notice that maybe taking away people's paychecks was not the best way to encourage consumer spending.
You look at the executives talking about how outsourcing saves millions, while they collect million dollar salaries. It's too much to pay an IT worker $75,000 but an exec who makes millions each year is affordable?
I think this is also where a lot of bitterness is setting in. Most of the folks justifying outsourcing are reaping huge PERSONAL profits from it for questionable short-term gains. We're putting someone who probably makes $60,000 out on the street so some guy in a suit can make an extra $2 million. I'm all for capitalism, but there has to be some balance.
What's going on is a redistribution of wealth. Only the money is going up instead of down. I'm watching the middle class shrink before my eyes and it frightens me. Now I am working my way up the food chain, but that doesn't mean I have no concern for those who can't follow.
 
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