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Richmond Times-Dispatch, Va., Bob Rayner Column
February 22, 2004 4:52pm
Knight-Ridder / Tribune Business News

Feb. 22–EVEN JOHN KERRY KNOWS ‘OFFSHORING’ CAN BE BENEFICIAL: One of the perils of writing a newspaper column: Sometimes you leave even your closest friends appalled and confused.

“So you think price gouging is a good idea?” an old pal asked after I’d written about the advantages of flexible pricing during a crisis.

“No, I was trying to explain the benefits of allowing prices to be set by supply and demand in a free market,” I said.

“But you think price gouging is good?” he responded.

At that point, we decided it might be better — and more interesting — to talk about the Red Sox for a while.

Well, this is another one of those columns. Just so you’ll know in advance, I’m about to argue that it really is good for America — and American workers — when some jobs are shipped overseas.

I’m going to go even one step further and assert that a certain New England aristocrat making lots of noise right now about the evils of “offshoring” actually knows better.

And should he grasp the reins of power in January, which seems increasingly likely, he will make only symbolic protectionist gestures, ones that won’t stop the flow of certain types of jobs overseas but will mollify his political base.

Not that it will matter by then. Job growth should be so strong by early next year that this whole controversy about shipping American jobs to places like India and China will have faded, just as the hysteria in the 1980s about Japan taking over the world disappeared as that nation slipped into almost perpetual recession.

How, you ask, can any sane and compassionate American argue that it’s good for our country to lose jobs to other countries, even if those overseas jobs help lift millions of people in the Third World out of poverty and plant them firmly on the road to becoming middle-class consumers of, among other things, lots of American goods and services?

Well, it’s simple, sort of.

As a dynamic, growing nation — marked by a prosperity that reaches the vast majority of our people — we have always lost jobs. And they’ve always been replaced by better jobs.

A century ago, it took half the workers in America simply to keep us fed. Now, just a couple percent of the population provides us with the most plentiful and affordable food supply in history, along with a big surplus that we can sell overseas.

More recently, as many as a third of Americans worked in factories. That number has been cut by nearly two-thirds today, yet we’re producing more, and better, products than ever before.

Now, you could argue that we’d be better off if half of us were still following a plow through the fields and another third spent all day bolting rivets to an endless stream of sheet metal. But you’d be wrong, of course.

Vast improvements in productivity have killed millions of jobs. But those jobs have invariably been replaced by better, more-challenging, higher-paying jobs.

The farmer’s son is a factory foreman and his son is a mainframe computer engineer and his daughter is a doctor and her daughter writes software that allows physicians to diagnose patients who live hundreds of miles away.

And that software also allows a medical technician in India to read X-rays of a factory foreman in Indiana, saving a bit on those soaring health-care costs.

We have evolved from a nation of farmers to a nation of factory workers to a nation of designers, inventors, artists, communicators, marketers, financiers, teachers, scientists, researchers, medical professionals and builders of things that no one has ever built before.

Which brings us, if you’ll bear with me for a few paragraphs, to absolute and comparative advantage, a couple of widely respected and accepted economic theories about international trade. I’m certain that at least one Ivy League-educated senator from Massachusetts understands the principles quite well, even if the reporters covering his campaign don’t.

Absolute advantage basically says that national economies, and the people who make them work, benefit in the long run if goods and services are produced in the places that create them most efficiently. Here’s Adam Smith, in “The Wealth of Nations”: “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.”

George Washington University economist Steven Suranovic: “If our country can produce some set of goods at lower cost than a foreign country, and if the foreign country can produce some other set of goods at a lower cost than we can produce them, then clearly it would be best for us to trade our relatively cheaper goods for their relatively cheaper goods. In this way both countries may gain from trade.”

Comparative advantage is a bit more complicated, but it strongly implies that low wages alone will not attract all economic production and that when two countries engage in free trade, in both labor and goods, workers and consumers in both countries will benefit.

Suranovic again: Free “trade may not result in a domestic industry’s decline just because the foreign firms pay their workers lower wages. The movement to free trade generates an improvement in welfare in both countries both individually and nationally. Specialization and trade will increase the set of consumption possibilities and will make possible an increase in consumption.”

Apologies to those of you who aren’t accustomed to reading the prose of economists, even the ones who write with Suranovic’s clarity.

To simplify a bit, comparative advantage basically says countries, whether highly developed or still developing, prosper when they are able to focus their productive energies on the things they do best, even if some other countries do them even better.

In the long run, if they trade freely, countries are likely to see increases in productivity and employment, along with a greater abundance of (and more affordable) goods and services.

Fortunately for us, the things we do well tend to be creative and innovative pursuits, which add high value to the economy and ultimately create lots of challenging, high-paying jobs.

Don’t expect to hear much about this on the campaign trail.

If John Kerry is president a year from now, I’m certain he will not want to sabotage the U.S. economy, which would surely undermine his re-election prospects in 2008.

So, being a smart and pragmatic guy like President Clinton before him, he’ll do everything in his power to preserve the booming economy he inherits from this President Bush. That means he’ll do nothing of substance to kill free trade. Which means lots of jobs will still move overseas, as even more new jobs are created here.

But for the moment, the stupid season has arrived in full force, as it does every four years. The contours of this season’s idiocy are already clear: The Democrats will say lots of questionable, even downright dumb, things about our supposedly crumbling economy, and the media will respond with a hallelujah chorus.

Republicans will wring their hands because they’re worried the American people won’t be able to grasp a sensible but nuanced approach to economic prosperity and job growth.

Here’s my hunch: Americans are pretty smart. We would have never gotten this far if we weren’t. Sure, we get caught up in the emotions of the moment. But if someone is willing to treat us as adults, you can usually count on us to look past our noses and make sound decisions about the country’s future.

Contact Bob Rayner at (804) 649-6073 or [email]brayner@timesdispatch.com[/email]

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Copyright ? 2004 Richmond Times-Dispatch, Va. Distributed by Knight Ridder/Tribune Business News.