Clicking on banner ads enables JWR to constantly improve
Jewish World Review March 16, 2004 / 23 Adar, 5764

Mort Zuckerman

Mort Zuckerman
JWR's Pundits
World Editorial
Cartoon Showcase

Mallard Fillmore

Michael Barone
Mona Charen
Linda Chavez
Ann Coulter
Greg Crosby
Larry Elder
Don Feder
Suzanne Fields
Paul Greenberg
Bob Greene
Betsy Hart
Nat Hentoff
David Horowitz
Marianne Jennings
Michael Kelly
Mort Kondracke
Ch. Krauthammer
Lawrence Kudlow
Dr. Laura
John Leo
David Limbaugh
Michelle Malkin
Chris Matthews
Michael Medved
Kathleen Parker
Wes Pruden
Sam Schulman
Amity Shlaes
Tony Snow
Thomas Sowell
Cal Thomas
Jonathan S. Tobin
Ben Wattenberg
George Will
Bruce Williams
Walter Williams
Mort Zuckerman

Consumer Reports

Dems demagoguing protectionism adds up to economic nonsense | If you have shopped for a toy lately, you will have noticed how inexpensive many have become. On average, in the past six years, toy prices have fallen by about 25 percent. That is typical of what's been happening over a vast range of goods and services that we import. Lower prices and high quality, of course, are what American consumers expect. They're not thinking about paying a higher price in order to keep jobs in America, and this gives retailers little leeway in product sourcing, whether the products are made in China or South Carolina.

Now outsourcing is talked about as a national disaster, but we forget that it brings lower prices, which beget lower inflation, which begets an increase in the real purchasing power of people with relatively stagnant wages. It also begets lower interest rates, which beget higher investment and economic growth and lower mortgage rates. And according to a McKinsey Global Institute study, for every dollar a U.S. company spends on outsourcing, our economy gains $1.14.

Two-way street. The media, and vulnerable workers, naturally focus on jobs lost to overseas, but even the job shift hasn't been one way. Four and a half million Americans work for European companies here; a million-plus work in companies involved in global trade. And foreign companies are continuing to invest in America, despite our higher wages. Look at the auto sector, with plants like Mercedes-Benz, Honda, BMW, and Toyota. And check out foreign investment in our financial services, pharmaceutical, chemical, and energy companies. They're all growing. And this is on top of the $600 billion invested annually here to support our trade deficit. It brings to mind Oscar Levant's saying, "People always talk to me about my drinking; they never ask me about my thirst."

There is understandable anxiety that we no longer have a lock on the high-tech, white-collar jobs that were supposed to be the next employer for those who lost manufacturing work. Everybody is aware of a new, global, highly skilled labor force that earns as little as a tenth as much as we pay here. And everybody's nervous — even those earning $75,000 and up. No wonder high-tech workers live increasingly under the shadow of this competition.

The fuss over outsourcing must not be allowed to obscure the real reason for our disappointing job and wage numbers. It's productivity. Increase in output per worker has, until recently, exceeded growth in the gross domestic product. This means fewer jobs, including 800,000 management and executive positions in the past four years — jobs that would not be outsourced to Bangladesh. Why? Companies will simply not hire new staff until they have confidence that sales will increase faster than gains in productivity.

We have seen this movie before. Productivity has brought about huge job losses in manufacturing, not just in America but worldwide, where 22 million manufacturing jobs vanished between 1995 and 2002. In the 1990s, we began outsourcing memory chips, laptops, and other high-tech equipment manufacturing to China and Taiwan. The fear then was that this might lead to the loss of our technological edge. But U.S. semiconductor makers shifted into high-value microprocessors and sparked a productivity boom. All sorts of businesses found new ways to apply this technology, resulting in multibillion-dollar new Internet markets and thousands of new jobs. The same thing is likely to happen again.

Donate to JWR

This optimism is consistent with our history. Jobs moved from the Northeast to the South, then moved abroad, always accompanied by predictions of doom. We feared the migration of our industries to Japan in the 1950s and 1960s, OPEC's buying the world in the 1970s, and the giant sucking sound of jobs going to Mexico in the 1990s. But every time, we have been able to adapt, creating new industries and jobs that never existed while we abandoned others.

This doesn't mean that we should stand still, of course. Unlike the 1980s, when outsourcing badly hurt the manufacturing world, companies this time are benefiting from shifting lower-cost production overseas, and it is the workers who are being hurt. So companies have a responsibility to enhance their training programs, using a portion of their savings from outsourcing. Government also has a role to play, protecting intellectual-property rights, encouraging new research and development, and improving the education and training of our people. The only solution is to upgrade our skills.

Protectionism is an easy call, but it's a delusional one. The Democrats are demagoguing the issue in the hope it will produce votes. They may be right, but it is economic nonsense. Most Americans, I believe, will be wise enough to see that.

Every weekday publishes what many in Washington and in the media consider "must reading." Sign up for the daily JWR update. It's free. Just click here.

JWR contributor Mort Zuckerman is editor-in-chief and publisher of U.S. News and World Report. Send your comments to him by clicking here.


03/02/04: A truly cruel college squeeze
02/10/04: Fixing what's broken
01/13/04: Policing the corporate suites
11/25/03: Slowly but surely in Iraq
11/12/03: Holding their feet to the fire
10/29/03: Graffiti On History's Walls
09/04/03: All work and no play
08/29/03: Facing the other threat among us
07/23/03: Making odds on a recovery
07/15/03: A Kremlin conversation
06/10/03: Welcome to Sue City, U.S.A.
05/05/03: America's next critical test
04/22/03: The challenge of success
04/15/03: Shape up or step aside
04/08/03: The latest in reality TV is
04/02/03: Chirac and Saddam's thugs are two of a kind
03/26/03: War by new rules
03/05/03: The high price of waiting
02/14/03: Needed: fast fiscal action
02/03/03: Clear and compelling proof
01/24/03: Midnight for Baghdad
01/14/03: They should have said...
12/24/02: Who finances the fanatics?
12/19/02: Put-up or shut-up time
12/09/02: Sheep, wolves, and reality
11/21/02: Curing the uncommon cold
11/12/02: Everybody has the right to be wrong but the Dems have been abusing the privilege
11/05/02: Force vs. fanaticism
10/30/02: Land of the sinking sun
10/22/02: No more cat and mouse
10/15/02: And pigs will fly
10/07/02: A shameful contagion
09/26/02: Calling a madman's number
09/23/02: Our rainbow underclass
09/13/02: Why America must act
09/04/02: After bubbles, a double dip?
08/20/02: No time for equivocation
08/06/02: No time for politics
07/30/02: Getting off the dime
07/17/02: What scandal cannot dim
06/18/02: Time to crack down: Where is the outrage?
06/05/02: The next new thing
04/30/02: Roller-coaster nation
04/25/02: A critical tipping point
04/15/02: Israel's endgame will impact the free world
03/21/02: In the face of pure evil
03/14/02: A man on a mission
03/07/02: Land of the Sinking Sun
02/12/02: Speaking truth about energy
01/15/02: Putting our house in order
01/12/02: Talking points for 2002
12/24/01: The shape of things to come
12/11/01: Finally, a clarity of vision
12/04/01: Apocalypse now
11/26/01: The Big Apple's core
11/06/01: What it will take to win
10/22/01: Getting the mayor's message
10/08/01: A remedy for repair
10/01/01: A question of priorities
09/26/01: Our mission, our moment
09/11/01: Running the asylum
08/29/01: Hail, brave consumer
06/14/01: Blackouts --- or blackmail?
06/01/01: A time to reap --- and sow
05/25/01: A question of confidence
05/18/01: A question of confidence
05/04/01: Making the grade
04/26/01: The caribou conundrum
04/19/01: Chinese boomerang
03/27/01: The man of the moment
03/20/01: The Fed must be bold
03/15/01: Japan on the brink
03/01/01: Rethinking the next war
02/09/01: The education paradox
01/08/01: How the bottom fell out
01/03/01: Quipping in the new year
12/20/00: A time for healing
11/13/00: The need for legitimacy
10/30/00: Arafat's bloody cynicism
10/18/00: Arafat torches peace
10/03/00: A great step backward
09/08/00: The Perfect Storm
08/29/00: Don't blow the surplus
08/15/00: Voting for grown-ups
08/01/00: Arafat's lack of nerve
07/17/00: Can there be a new peace between old enemies? Or will new enemies regress to an old state of war?
07/11/00: A time to celebrate
06/19/00: A bit of straight talk
06/08/00: Using hate against Israel
05/26/00: Is the Federal Reserve trigger-happy?
04/18/00: Tensions on the 'Net
04/13/00: A paranoid power
03/10/00: Fuel prices in the red zone
02/25/00: Web wake-up call
02/18/00: Back to the future
01/21/00: Whistling while we work
01/11/00: Loose lips, fast quips
12/23/99: The times of our lives
12/14/99: Hey, big spender
11/18/99: Fountain of Youth
11/04/99: An impossible partner
10/14/99: A nation divided
10/05/99: India at center stage
09/21/99: Along with good cops, we need a better probation system
09/08/99: Though plundered and confused, Russia can solve its problems
08/31/99: The military should spend more on forces and less on facilities
08/05/99: Squandering the surplus
07/06/99: More than ever, America's unique promise is a reality
06/24/99: The time has come to hit the brakes on affirmative action
06/15/99: America should take pride in honoring its responsibilities
06/02/99: The Middle Kingdom shows its antagonistic side
05/11/99: Technology's transforming power is giving a lift to everything
05/04/99: The big game gets bigger
04/30/99: On Kosovo, Russia talked loudly and carried a small stick
04/21/99: No time to go wobbly
04/13/99: The Evil of two lessers

© 2001, Mortimer Zuckerman