Economic Populist Commentary

Economic commentary by a pro-capitalist, economic populist. Demand-Side Economic theory. Consists of author's economic views. Questions & comments appreciated. Dissenting views are VERY welcome and encouraged. Main "agenda" is crafting and advocacy of a "populist" economic agenda. A secondary goal is prevention of an economic Armageddon. Encouraging open discussion of US economy.

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Location: Southern California, California, United States

The author is a physician by profession, and a "student economist" by necessity. The current status of our economy necessitates the latter. The intent of this blog is to explain and discuss economics in layman terms. It is designed to promote thought and discussion. It is written by a layman. Comments and critiques of these theories and letters are welcome and ENCOURAGED. Dissenting comments are also WELCOME! They form the basis for discussion.

Thursday, December 23, 2004

Outsourcing and Free Trade

Trade agreements have been detrimental to our economy. In addition to permitting the U.S. market to be flooded with cheap foreign goods, they have helped facilitate outsourcing of American jobs to foreign countries.Outsourcing may well be our ultimate demise. Many people (including myself until recently) weren't aware of the REAL "benefits" of NAFTA, the WTO, and international trade organizations. The "benefit" is that they allow US companies to shop globally for the cheapest labor. Which obviously reduces the overall wages of American workers. Companies don't move overseas or outsource for tax benefits. And they don't do it because of lack of skilled US labor. They do it for the cheap labor. So that allows them to make their products cheaper. And make much bigger profits. So they sell their foreign made goods for a little less. But their costs are a lot less. Does anyone really think the US benefits from this?The largest market for US goods is the good old USA. And if US workers have to compete globally for wages, their wages will fall. And the previously huge US consumer market for goods and services will decrease. Because those US wages are what finance the US consumer market and consumer spending. And this spending will continue to decrease. Because American workers, who provide the consumer spending that drives our economy, will have progressively less income to spend. The benefits that US outsourcers achieve by using cheap foreign labor will be short-lived. Those benfits will eventually be overwhelmed by a long-term drop in US demand. Because when they outsourced those jobs, they also outsourced consumer income. They may have saved money on production, but they still have to sell their products to someone. And that is currently our biggest economic problem. Flat consumer spending. Lack of increase in DEMAND. And it will continue to get worse, unless this administration changes its supply-side economic agenda.

OUTSOURCING - job tracker (added 12/26/04)

This site lists American companies that are sending jobs overseas. Provided by The following is a quote from Working America's job tracker site:

"Corporations increasingly are shipping U.S. jobs overseas, with America's middle-class hardest hit. Since January 2001, the nation has lost 2.7 million manufacturing jobs, and some studies say 14 million white-collar jobs could be sent overseas in the years ahead. Unfair trade deals and large tax breaks often encourage corporations to export jobs overseas. To find out which jobs in your community have been exported or lost due to trade..."
The site listed below can be used to find which companies in your area are shipping jobs overseas. The source of the information is also given at the site.
Email Homepage 12.26.04 - 6:58 pm #
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Anonymous Anonymous said...


Your commentary on outsourcing is interesting. I agree with you that we are losing consumer income through outsourcing. I think you're saying that the loss in income is NOT compensated for by the price reduction. I think this ties in with your "Aggregate Demand" theory. If consumer income goes down, so does Aggregate Demand. So consumer spending, which you have correctly stated drives our economy, will decrease.
Also, as you have implied in your other commentary, this will reduce the demand for products and the labor that produces them.

You might want to soften the tone of your comments on "treasonous" Democratic organizations that support outsourcing. Though I agree with your point in general, I think you may be putting people off with that statement. This may reduce the informative value of your blog.


3:29 PM  
Anonymous Anonymous said...

Just stumbled across your blog page. I find your thoughts and perceptions interesting. Yes, I think the US is in for an economic correction within the next five years, but that's what the free market is all about: fluctuations. The US will recover, but its workers will have to learn again the value of productivity and efficiency, which its youth has forgotten. And until those virtues are learned again, we will have hard times. Soon gone are the soft days of excess. . .

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Blogger unlawflcombatnt said...

Anonymous 1,

Thanks for visiting my blog. You're point about my statement "treasonous Democratic organizations that support outsourcing" is duly noted. However, I'm still not quite ready to soften the language, especially given the passage of CAFTA with the help of 16 Democratic House members.

11:07 AM  
Blogger unlawflcombatnt said...

Anonymous 2,

Regarding your statement, "The US will recover, but its workers will have to learn again the value of productivity and efficiency, which its youth has forgotten.", I have to disagree with your underlying sentiment.

American workers are not losing jobs because they are non-productive or inefficient. Americans are losing jobs because Corporate America would rather use workers who are less productive and less effient who accept much less in wages. If a foreign worker is only 1/20th as productive as an American worker, but can be paid 1/50th as much as an American worker, then the job goes to the foreign worker. The cost of production using the foreign worker is less, despite the American worker being 20 times as productive.

The only way for American workers to compete in this case is to be either 50 times as productive, or accept 1/50th of the pay they now receive. Neither option is reasonable, or even possible.

If Corporate American continues global labor arbitrage in this manner, Americans won't have the purchasing power to buy their goods. That purchasing power comes primarily from wage income. And if wage income continues to decline from loss of jobs, so will Americans' ability to buy production.

That's not only going to hurt American workers, but Corporate America as well.

Profits are made by sale, of goods, not production. Reducing consumer/worker income will reduce the means necessary for Americans to purchase goods. And it will reduce the ability of Corporate America to "sell" production as well. No sales = No profit. Something Corporate America might want to consider in it's insatiable greed.

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