"[F]oreign outsourcing of service jobs is good for the American economy" is the mantra of Bush administration officials Treasury Secretary John Snow and Council of Economic Advisers member Gregory Mankiw, according to a recent report by Foreign Policy in Focus (FPIF).
The Bush administration also has worked to aid the outsourcing of manufacturing work. According to the AFL-CIO, 2.7 million such jobs have been lost since Bush took office, despite the administration's attempt to count fast-food jobs as manufacturing.
Estimates show, according to FPIF, that as many as 3 million jobs will be outsourced overseas by 2015 and about 40 percent of the top 1000 richest corporations have already done some outsourcing. 14 million jobs "are vulnerable" to it.
Outsourcing stems from the drive to increase profit margins by lowering labor costs. Mainly, this is accomplished by moving unionized work to non-union shops in parts of the world (or other parts of the US) where labor receives fewer protections. Outsourcing overseas has been greased by international financial institutions and free trade agreements, privatization efforts and weaker social safety nets and protections for working people.
In the US, pro-outsourcing corporate groups such as the Coalition for Economic Growth and American Jobs, the US Chamber of Commerce, and the Information Technology Association of America have adopted and pushed the view of the dominant pro-outsourcing voices in the Bush administration. Their claim is that production in regions and countries where the price of labor is low will lower the costs of commodities here.
This argument seems logical, until one looks at the escalating costs here of goods manufactured overseas, e.g. clothing and apparel. Also, when the cost per item produced is compared to the price you pay at the shelf, it is clear that huge profits are still made on huge mark-ups.
While Senator John Kerry has called for tax penalties for outsourcing companies, the Bush administration has simply tried to sidestep discussing the problem. Bush has cited "over-regulation," trade barriers and high corporate taxes as the causes of outsourcing. The FPIF report notes, however, that rapid overseas expansion of US multinational firms accompanied by a much slower growth in the US "has coincided with increased trade and investment liberalization and a declining corporate tax burden."
In other words, trade liberalization, de-regulation and privatization promote an atmosphere of capital movement, while a lower tax burden has freed up more capital for movement. In fact, when compared to other industrialized countries, existing US regulations and taxes provide a much more open environment in which outsourcing work overseas and the elimination of jobs can take place.
The most successful way to reduce the drive to outsource work is by pushing for stronger legal protections for workers in all countries and supporting the basic right to organize a union in a workplace. Simultaneously, international financial agreements demanded by the IMF, the World Bank and other international financial institutions that keep developing countries in debt should be eliminated. Massive debt relief for developing countries needs to be on the agenda.
Loans and investment should be freed up for internal development of local economic infrastructure in developing countries not for currency and bond schemes designed to produce massive economic and productive shifts toward dependency on international capital, exporting raw materials and importing manufactured goods in unbalanced and unfair ways.
Labor rights and development reform are two key concepts that will reduce and perhaps even end the "race to the bottom" for the world’s workers.
--Joel Wendland is managing editor of Political Affairs. Reach him with your comments at
jwendland@politicalaffairs.net or post your thoughts publicly below.
