02-20-2004, 02:30 AM
From Wall St Journal:
<b>Despite the Outcry, Mankiw Was Right About Outsourcing
<i>Alan Murray</i>
</b>
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->White House economist Gregory Mankiw has exposed one of the great rifts in the current U.S. political debate. It isn't Republicans vs. Democrats; it's economists vs. everybody else.
Mr. Mankiw's misstep was saying that <b>outsourcing of jobs to foreign countries is a form of trade and is good for the U.S. economy</b>. Even Democrats of the economic persuasion such as former Clinton Labor Secretary Robert Reich and former Council of Economic Advisers Chairwoman Janet Yellen were quick to come to his defense.
But Republicans and Democrats of the noneconomist ilk are having none of it -- even after Mr. Mankiw apologized for seeming insensitive to workers who have lost their jobs. Rep. Richard Burr -- a Republican running for the Senate in North Carolina -- usually attaches himself to President Bush like shrink wrap. But on Friday, Mr. Burr called on the president to fire Mr. Mankiw.
Mr. Bush seems to be siding with everybody else (there are more of them). Last week he lamented the fact "there are people looking for work because jobs here have gone overseas." While he has publicly defended Central Intelligence Agency Director George Tenet -- who has overseen one of the greatest intelligence failures in American history -- he has yet to muster a word of support for Mr. Mankiw, who only said what most economists believe.
The great divide runs deep these days. Noneconomists look at each month's U.S. Labor Department report and see an economy that can't seem to produce an adequate number of jobs.
Something is badly amiss, they fear. Surely all those Indians in Bangalore, who process payrolls and fix computer glitches, have something to do with it.
Economists look at the same report, and see the opposite. With each passing month, the U.S. economy is producing ever more output using roughly the same number of workers. American productivity -- output per worker -- is booming. The new economy, it seems, is alive and well.
Productivity is an abstract concept that can't be directly observed or measured. But it is the secret of progress: the reason we don't spend our days gathering nuts and hunting squirrels. Fewer people producing more goods and services has been the key to the U.S. economy's surprising success throughout history. "Outsourcing" work, so Americans can concentrate on what's truly important, is just part of the process.
Sure, in the short term, higher productivity may mean fewer jobs. But in the medium and long term, it doesn't. My friend and fellow columnist E.J. Dionne of the Washington Post disputed this argument last week, saying that in the long run we are all dead. I don't know what E.J. has planned, but I hope to be around 20 years from now. If productivity growth continues at a healthy rate of 3% or more for those two decades, the U.S. economy will double in size, produce far higher living standards, and be in better shape to finance the costly retirement of the baby boomers. <b>Any effort to stop outsourcing or block trade will slow productivity growth and threaten that rosy future.</b>
That's easy for me to say, of course, because I still have a job. And I'm not running for office. Candidates for the presidency have to do a different sort of calculus. Roughly 2.5 million jobs have disappeared since the recession began. Moreover, job losses seem to be concentrated in "battleground" states, where the election of 2004 may be determined. Those who have lost their jobs, or those afraid of losing jobs, don't want to hear about what the world will be like in 2024.
That's why the Economic Report of the President, in a nod toward election-year politics, emphasizes creating jobs rather than boosting productivity. The report's official forecast calls for more than three million new jobs between now and Election Day -- and a precipitous falloff in productivity growth as a consequence. Let's hope that forecast is wrong. It would be far better to have slower job growth and keep productivity booming. We can wait an extra year to get to full employment, if the result is two decades of rising living standards.
President Bush might try embracing Mr. Mankiw's argument, rather than running from it. A new poll by the Business Roundtable suggests American voters have a better understanding of the true nature of the U.S. economy and American business than many of the politicians who pander to them.
On this one, the economists are right. Fire Tenet. Keep Mankiw.
<!--QuoteEnd--><!--QuoteEEnd-->
<b>Despite the Outcry, Mankiw Was Right About Outsourcing
<i>Alan Murray</i>
</b>
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->White House economist Gregory Mankiw has exposed one of the great rifts in the current U.S. political debate. It isn't Republicans vs. Democrats; it's economists vs. everybody else.
Mr. Mankiw's misstep was saying that <b>outsourcing of jobs to foreign countries is a form of trade and is good for the U.S. economy</b>. Even Democrats of the economic persuasion such as former Clinton Labor Secretary Robert Reich and former Council of Economic Advisers Chairwoman Janet Yellen were quick to come to his defense.
But Republicans and Democrats of the noneconomist ilk are having none of it -- even after Mr. Mankiw apologized for seeming insensitive to workers who have lost their jobs. Rep. Richard Burr -- a Republican running for the Senate in North Carolina -- usually attaches himself to President Bush like shrink wrap. But on Friday, Mr. Burr called on the president to fire Mr. Mankiw.
Mr. Bush seems to be siding with everybody else (there are more of them). Last week he lamented the fact "there are people looking for work because jobs here have gone overseas." While he has publicly defended Central Intelligence Agency Director George Tenet -- who has overseen one of the greatest intelligence failures in American history -- he has yet to muster a word of support for Mr. Mankiw, who only said what most economists believe.
The great divide runs deep these days. Noneconomists look at each month's U.S. Labor Department report and see an economy that can't seem to produce an adequate number of jobs.
Something is badly amiss, they fear. Surely all those Indians in Bangalore, who process payrolls and fix computer glitches, have something to do with it.
Economists look at the same report, and see the opposite. With each passing month, the U.S. economy is producing ever more output using roughly the same number of workers. American productivity -- output per worker -- is booming. The new economy, it seems, is alive and well.
Productivity is an abstract concept that can't be directly observed or measured. But it is the secret of progress: the reason we don't spend our days gathering nuts and hunting squirrels. Fewer people producing more goods and services has been the key to the U.S. economy's surprising success throughout history. "Outsourcing" work, so Americans can concentrate on what's truly important, is just part of the process.
Sure, in the short term, higher productivity may mean fewer jobs. But in the medium and long term, it doesn't. My friend and fellow columnist E.J. Dionne of the Washington Post disputed this argument last week, saying that in the long run we are all dead. I don't know what E.J. has planned, but I hope to be around 20 years from now. If productivity growth continues at a healthy rate of 3% or more for those two decades, the U.S. economy will double in size, produce far higher living standards, and be in better shape to finance the costly retirement of the baby boomers. <b>Any effort to stop outsourcing or block trade will slow productivity growth and threaten that rosy future.</b>
That's easy for me to say, of course, because I still have a job. And I'm not running for office. Candidates for the presidency have to do a different sort of calculus. Roughly 2.5 million jobs have disappeared since the recession began. Moreover, job losses seem to be concentrated in "battleground" states, where the election of 2004 may be determined. Those who have lost their jobs, or those afraid of losing jobs, don't want to hear about what the world will be like in 2024.
That's why the Economic Report of the President, in a nod toward election-year politics, emphasizes creating jobs rather than boosting productivity. The report's official forecast calls for more than three million new jobs between now and Election Day -- and a precipitous falloff in productivity growth as a consequence. Let's hope that forecast is wrong. It would be far better to have slower job growth and keep productivity booming. We can wait an extra year to get to full employment, if the result is two decades of rising living standards.
President Bush might try embracing Mr. Mankiw's argument, rather than running from it. A new poll by the Business Roundtable suggests American voters have a better understanding of the true nature of the U.S. economy and American business than many of the politicians who pander to them.
On this one, the economists are right. Fire Tenet. Keep Mankiw.
<!--QuoteEnd--><!--QuoteEEnd-->