(OPE-L) Outsourcing

From: Gerald_A_Levy@MSN.COM
Date: Sat Nov 13 2004 - 18:29:40 EST

----- Original Message -----
From: "Jurriaan Bendien" <andromeda246@hetnet.nl>
Sent: Saturday, November 13, 2004 6:17 PM
Subject: Outsourcing

 What I should have mentioned perhaps in my comments on outsourcing is that
 Epstein and others at the Political Economy Research Institute at Amherst,
 Massachusetts actually investigated this topic more closely -  in terms of
 the substitution of imported manufacturing inputs for locally produced
 inputs. See http://www.umass.edu/peri/pdfs/WP89.pdf

 This however does not prove any genuine "transfer" of jobs from the US to
 other countries. After all, it may be that investors or management opt to
 buy manufacturing inputs overseas, at a more competitive price, from
 overseas plants that already exist, or perhaps that they buy up these
 overseas plants.

 If outsourcing is taken to mean that "foreign workers are taking our jobs
 away" this would imply that a plant is closed down in one country, and
 re-established in another country employing foreign workers (this is of
 course more easy to do in services, than in manufacturing - I already
 commented on the notion of "stealing jobs").

 But I suspect really that much more often it is the case that management or
 investors just decide to buy cheaper foreign inputs, or alternatively start
 new plants overseas in preference to establishing them at home. In that
 case, additional investment does not occur at home, or, local plants are
 closed, because of competition from cheaper foreign products.

 Even so, if you look at data on capital committed to foreign direct
 investment in recent years, you find that it is tapering off, and that
 portfolio investment in foreign countries is quantitatively far more

 The interesting thing about the globalization discourse is that everybody
 loves it, if it opens up more opportunities, but when they find they're
 outdone in the competition, it no longer seems such a great idea, and they
 stop talking about it so enthusiastically.


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