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March 28, 2004

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Outsourcing helps no worker


Can you say 1929?

Charles M. Kelly
Special for The Republic
Mar. 28, 2004 12:00 AM

Doron Levin of Bloomberg News noted in the Feb. 22 Republic that "savvy voters know there is nothing the president can, or should, do to impede the shutdown of inefficient manufacturing capacity."

Those who are profiting from globalization defend it under the banner of economic efficiency. Actually, unless you count cutting wages of U.S. workers an "economic efficiency," it's a horribly inefficient process.

True economic efficiencies are gained when a manufacturing facility is located:

• In the center of the distribution chain.

• Near the raw materials.

• Where the best technology is.

• Where the most qualified workers are.

• Where the best management is.

Obviously, locating a manufacturing plant in Mexico, China or any of the Third World countries to make products for the United States violates all of the above criteria. Again, unless you consider human beings as raw material or machines, cutting the cost of their labor is not an economic efficiency. It's the one-sided and brutal use of power.

In most cases, the only reason products can be made outside our country and sold more cheaply here is the huge disparity in wages, which more than makes up for all the trouble corporations and investors go through in order to cut American workers out of the income stream.

And that's the bottom line.

Investors and corporations know they get a triple-barreled benefit from outsourcing work to other countries. First, the workers who lose their jobs are replaced by workers making one-tenth to one-third as much.

Second, workers who lose their jobs enter the labor market and have a depressing effect on workers who still have jobs that can't be exported from this country: construction workers, truck drivers, salesclerks, waiters and so on.

That's why the outsourcing of jobs has hurt not only manufacturing workers, but virtually all who are in the same income class. It's not just the 5 percent of workers who are hurt by globalization, it's 100 percent.

Third, workers who still have manufacturing jobs know that when a corporation threatens to shut down a plant if employees don't behave, like wanting a bigger share of the corporation's profits, the threat is real. Even unionized employees have learned that they have effectively lost all their bargaining power.

Those who believe that eventually all workers will benefit from this perversion of international trade - which is based on true economic efficiencies - should read a recent article in the Wall Street Journal (Nov. 13, 2003), under the headline and subheadline: "Behind China's Export Boom, Heated Battle Among Factories; As Wal-Mart, Others Demand Lowest Prices, Managers Scramble to Slash Costs."

It describes how some Chinese workers are making $32 a month, even though the minimum wage is supposedly $56 a month - and they work up to 18-hour days.

The competition is brutal. As the Journal noted: "Buyers are moving aggressively to play one factory against another. 'As things get more competitive, the pressure that comes along with that, yeah, we try to take advantage of it,' says Gary Meyers, a vice president in global procurement at Wal-Mart."

What's even more worrisome is the outsourcing of high-tech jobs, from computer programmers, to Ph.D. chemists, to engineers, to architects. Incomes of virtually everyone who actually works for a living are vulnerable to similar increases in the labor supply, as investors and corporations tap the world market of poorly paid professionals to pit them against American professionals.

How can this race to the bottom for wages and working conditions for increasing numbers of the world's citizens ever create an economy in which workers can become consumers of the world's products?

Can you say 1929?

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