March 21, 2004

Drezner on Outsourcing

Dan Drezner has an extensive article in Foreign Affairs magazine that is worth a read:

Critics charge that the information revolution (especially the Internet) has accelerated the decimation of U.S. manufacturing and facilitated the outsourcing of service-sector jobs once considered safe, from backroom call centers to high-level software programming. (This concern feeds into the suspicion that U.S. corporations are exploiting globalization to fatten profits at the expense of workers.) They are right that offshore outsourcing deserves attention and that some measures to assist affected workers are called for. But if their exaggerated alarmism succeeds in provoking protectionist responses from lawmakers, it will do far more harm than good, to the U.S. economy and to American workers.

In particular, he points out that many of the scary statistics about the number of jobs moving offshore are gross numbers, not net. Often companies will use the savings from offshoring certain capabilities to hire more domestic workers in other arenas: "Delta Airlines outsourced 1,000 call-center jobs to India in 2003, but the $25 million in savings allowed the firm to add 1,200 reservation and sales positions in the United States" and "The case of IBM reinforces this lesson: although critics highlight the offshore outsourcing of 3,000 it jobs, they fail to mention the company's plans to add 4,500 positions to its U.S. payroll. Large software companies such as Microsoft and Oracle have simultaneously increased outsourcing and domestic payrolls."

Posted by richard at March 21, 2004 02:52 PM

Does willful blindness to this gross/net distinction give the Lou Dobbs-types the same kind of manipulative ammo that your invocation of "median income" did for you below?

Because I remember the Bush Administration touting the "median incomes" of shareholders when it rolled out the dividend tax, even though the vast majority of the tax was paid by high-percentile earners who, as you would expect, owned the vast majority of privately-owned shares.

The Times busted the Bush apologists on their sleight of hand here (I looked quickly but couldn't find the link — ah well, this other guy named Brad has the real numbers of consequence).

"Median income?" That's too bogus for someone like you to fall for. A rational capital gains tax I'm all for, but don't start arguing that the incidence of its current irrationality is as great for Joe 50K as it is for Dick Cheney.

I probably should have written this in your cap-gain section, but whatever.

Posted by: Brad A. at March 21, 2004 05:59 PM


You're conflating two different issues. Mike implied that I was focusing on an issue that was just "whining" because it didn't effect "common" people. My point was that stock ownership (both direct and indirect) is fairly widespread and is not just limited to rich people. Median income of $57,000 means that there are just as many stockholders who make less than $57,000 as there are ones who make more than $57,000. So it's exactly the right metric to use to show that it's not just limited to the upper class.

Now, do rich people have more stocks than poor people? Of course. Their portfolios are worth many, many, many times more. But I never said they didn't. I was just saying that the issue I discussed affected more people than Mike let on.

I didn't "fall for" anything, since I actually know what median income means and when it's useful. You seem to have taken evidence of one misuse of median income and determined that, in general, the very idea of median income is "bogus". It's useful for saying how many people in certain income ranges are affected (which is what I did). It's less useful for saying something about the incidence of a tax cut (which is what Bush did).

As for my proposal, which neither of you actually addressed other than to try to make it a class issue, it actually would be better for most lower income people because their capital gains rate would be keyed off of their marginal income tax rate, which is obviously lower than that of a higher income person. Right now, unless they are in the very lowest tax bracket, they pay the same 20% (soon to be 15%) as the richest fat cat.

Also, seniors would be helped because their investments are more likely to have been held for a long period, thus triggering lower taxes than under the current regime, even if they are not in an IRA or 401(k).

Families of four making $100,000 a year and wanting to buy a house, would have one less thing to worry about when selling stock to make a down payment. These are real issues for real people.

Neither of you thought about the corporate governance angle – that encouraging even the evil rich to think more towards the long-term gains (rather than short-term stock prices) could help avoid some of the corporate malfeasance of the late 1990's.

I guess I don't understand why you both have sunk to just partisan name-calling, avoiding what was meant as a constructive proposal. Rather than evaluate it, or say anything constructive about it at all, you both have tried to paint it as "just like the damn Romneys and Bushies". What exactly do you think I'm trying to slip past you?

Posted by: richard at March 22, 2004 12:40 AM

So I was going to weigh in and tell Mike that an irrational system is worth correcting even when the burden of that irrationality is borne by the rich. What you propose is an interesting and to my English major's mind a sound solution, and it seems silly to do as Mike did and fault your selection of the problem to solve. You're exactly right, and I didn't want to come off as though I was siding with Mike.

And if your citation of median income meant to support only the statement that "this problem affects everybody," then it was well chosen. I was only writing to say that the problem doesn't remotely affect everybody in the same way. So if you were trying to present the issue as class-friendly or class-neutral, it won't take.

The better response to Mike is that, yes — the irrationality of the current capital gains system falls disproportionately on the rich, as they pay more of the tax. But that doesn't mean it's not worth correcting, or that he who tries doesn't care about other problems.

You should note that, for the most part, if I don't write, it means I agree with you. And when I offer a limited quibble, it should sign that we're likely not in disagreement in the world outside the boundary of that quibble.

But don't lump me in with Mike on this one. If I'm at fault here, I don't think it's for what I did write, but for my dereliction of duty in telling Mike he was flying off the handle in this case — and I was going to correct that at my first opportunity (e.g., at 7:15 a.m. — Q. When is Brad up at 7:15 a.m.? A. On his first day of work, so cut him some slack.).

Posted by: Brad A. at March 22, 2004 07:18 AM

Thanks. I probably get a bit touchy when I write things and the only comment I get back is a glib attack that doesn't address the issue but paints me with a broad brush.

I will try to lump you in with Mike less often. But an encouraging word when you agree would help – or even addressing the substance when you don't – not because I'm looking for validation, but because it makes your criticism more powerful in the end because they don't sound like an autopilot remark (as Mike's are starting to). And I am looking for good criticism. Otherwise why would I write up a proposal like that?

Posted by: richard at March 22, 2004 10:56 AM

I should add, not as a statement of affiliation but as a guiding principle for you, that a knee-jerk liberal is probably right more often that the thoughtful conservative. It might be a dead heat, but the liberal probably ekes out victory in the end. So I think Mike's not terribly misguided in proceeding on instinct here.

As for pitting the thoughtful liberal v. knee-jerk conservative, that's not even close.

Posted by: Brad A. at March 23, 2004 07:22 PM

And a slow black man is more likely to be a good basketball player than a fast white one. So, we should probably have skipped the Vanderbilt v. Western Michigan game . Western Michigan probably ekes it out in the end, right? (Aren't generalizations fun?)

So, I obviously reject that line of "reasoning". It's the substance, not the label, that matters.

I also obviously eschew the categories that your ontology assumes. Call me a pragmatic, liberty-oriented centrist. A classical liberal. Or a dynamist. A moderate libertarian if you must. Maybe even Whiggish.

But I reject the idea and think there's little evidence that I'm "conservative". Perhaps I agree with conservatives on some economic issues, but that's like calling the Pope an Islamist because he wants us out of Iraq too.

Posted by: richard at March 23, 2004 08:08 PM

You're just generalizing about generalizations. Not all generalizations are bad . . .

and what do I have to do to become a Dynamist? Get bit by a radioactive spider?

I suppose I would eschew my ontology's categories, too, if I could stand to use those three words in the same sentence. You resist categorization because no category can account for or predict all the stances you would take on issues pertaining to the political economy. And assigning a person to a predictive category (like, say rational actor) is insulting and degrading to the individual — and that's why I hate economists. All of them. Because (speaking generally) they embrace the predictive category — it thrills them that they think the same way (thereby making it fine and good to speak generally about them), and they would command us all to think right alongside them, for the all-important sake of Efficiency.

But I'm digressing in an inflammatory way. It's just the damned economists . . .

Anyway, you've declared that you couldn't be plotted anywhere on the continuum between liberal and conservative. Fine, I'll buy that. I've always thought that the generally accepted platforms of both liberals and conservatives are inconsistent, at least as to one anterior principle: one thinks the government is qualified to handle your finances, but not your life, and the other thinks the reverse. Therefore, if you have grave concerns about the competence of elected officials, what do you pick? You declare yourself a libertarian, but you're nonetheless forced at the polls to choose between conservatives and liberals. You hate John Ashcroft and you fear John Kerry's protectionist rhetoric. What do you do? If you care more about social issues, you probably vote liberal. If the fiscal/financial/economic issues matter more to you, then vote conservative. But you won't be terribly happy either way, because you're taking up space on a continuum that's hostile to you.

And it sucks. All hail the two-party system — for my part, I'd find it harder to live with myself if I voted to re-elect the man who brought us Ashcroft. That's our chief point of friction. Mike and I — like your wife — see this as a point of opportunity as well to swing your vote.

As best I can figure it, there are governing principles, general, human nature-level assumptions that guide people to take certain positions. These assumptions sort by subject matter and tend to generate binaries comparable to liberal-conservative, but qualitatively different. Thus if a particular topic is supremely important to you, you fall on a certain continuum, and what you actually feel about the topic dictates where on the continuum you fall.

If the preeminent ordering principle of your politics is governmental competence, then you fall on the libertarian/socialism continuum (tending to the libertarian if your confidence in the government is low, and tending toward socialism or totalitarianism if it's high).

We're stuck with the inconvenient conservative/liberal binary for the same reason, I think, that we're stuck with American Idol on Tuesday nights these days instead of 24 — a lot of people seem to buy into it. There must be some fundamental division of worldview that has given rise to these categories; the shorthand would not have emerged if it didn't have popular backing, or it didn't speak to people.

My problem is that, for the life of me, I can't induce from the platforms what the topic is on which, as a matter of philosophy, the left and right divide in a way that makes their respective platforms so rigid and predictable. I thought it might have something to do with fundamental notions about human nature, e.g., are people by nature generous, kind and good, or selfish, venal, and evil?

But that doesn't fly: welfare programs assume selfishness: that the more fortunate will not look after the less fortunate unless forced to do so. Tough on crime policies also assume the worst about people, and they're promulgated by conservatives.

Anthony Burgess's novel, The Wanting Seed, describes a political system that is driven by these two worldviews, which he calls "Augustinian" and "Pelagian." History is conceived as a cycle through "Gusphase," where the government's driving force is its conviction that people are evil and sinful, to "Pelphase," where the government thinks that humans have it in them to create a heaven-like society on Earth and acts on that basis. In between is the Interphase where everyone gets shot. It's an interesting read.

Anyway, can someone tell me what philosophical principles underlie the liberal-conservative divide, besides "society is going to hell" v. "get over it already?" One idea is that conservatives adopt simple, straightforward views about good and evil, right and wrong, etc., and liberals recognize complexity in the world and understand the importance of perspective. Hence the overweening need of the Republican Party to declare war on everything: war on drugs, war on terror, culture war, war on Iraq. In fact, you find them almost anxious in peacetime to come up with a war, because it plays to their abilities.

When asked, in elementary school, to write an essay defining "evil," I did not write "The Soviet Union is evil." I thought about it for a while and decided that evil is what comes of extreme conviction — and in particular, an extreme conviction about what is good and evil. This conclusion might have hinted at future liberal stances — I try to avoid declaring absolute relativism, because it's a form of absolutism (though at times I can be heard saying the word "God" should be extracted from the Pledge of Allegiance, and what's more, criminalized, I understand that it probably wouldn't fix the problem of people killing and hating one another — that phenomenon would resurface elsewhere, likely in the enforcement of secularity).

Anyway, I've been digressing all over the damned place (hence all the paragraphs beginning with "Anyway . . .), because this is the part of the day when I can think about things that aren't stupid and boring (as opposed to the f**king workday). I'm sure there are great academic terms for all this crap that work better than "topic" or "subject matter" or "continuum" or "binary." Here's an academic term for you:


Posted by: Brad A. at March 24, 2004 11:03 PM

A few random point in reply.

  1. Sure, there are better generalizations. Hopefully you realize I picked an inflammatory one just to make a (hyperbolic) point.
  2. Political parties (at least mainstream ones) never have a coherent ideology or view of human nature, because they themselves are made up of competing factions and opportunistic coalitions. Libertarians and the Christian right are an example. These coalitions can come to an end and greatly effect national politics, even if no one changes their mind, as seen by the defection of southern Democrats during the 60's
  3. Conservative and liberal may used to have meant something, but they've been so distorted as to be pretty empty by themselves – which is why you have to say things like "classical liberal".
  4. The labels only makes sense with regard to a single axis or issue. And despite people wanting to make it so, it's not logically inconsistent to treat the axes differently (economic, personal).
  5. At some points in time, the major fault lines change, and a critical mass swings around to argue along a different dimension. Whether this is because of some kind of analytical "synthesis" or just changing power dynamics is irrelevant.
  6. Virginia Postrel argues that the dynamist-stasist divide is starting to become more relevant than the liberal-conservative one. Those who welcome a changing future versus those who propose static visions of the future (no matter how incompatible those visions)

Ok, that's all I got. Tried to be terse, if rambly.

Posted by: richard at March 25, 2004 09:54 AM

Oh, one more thing. You pretty much limited things to domestic policy with your spectrum of concerns. Closest thing to foreign policy you said was "protectionism".

If I vote for this President, it will be because of foreign policy, not domestic, because that's where I think the President has the most impact and the least oversight from Congress.

Say what you will about Medicare, No Child Left Behind, USA PATRIOT Act – they all passed Congress and a bunch of democrats (including often Kerry) voted for them.

Deciding to lob a cruise missile, or strike a deal with Libya, or authorize a CIA strike with a Predator, or how much pressure to put on Iran, are pretty much executive decisions.

Posted by: richard at March 25, 2004 10:01 AM

Back, a bit, to acrimonious debate (at Finegold's request, as he's trying to cut back on his posts and has nominated me as his surrogate):

I think the simplicity/compexity paradigm covered foreign policy. Conservatives rush to categorize other nations as "good" or "evil" -- "Evil Empire" and "Axis of Evil" leap to mind. And there's the war-mongering.

The classic argument I hear from conservatives in support of the war in Iraq is "Arabs only understand force." That is, the Arab nations will despise the U.S. and cast America as the Great Satan regardless of what we do, so the only solution is to squash them down to manageable size before they grow too big and problematic to fit under our thumb. Like Toby said in The West Wing: "they will like us when we win."

On the other hand, if you believe that there might be some underlying reasons as to why we're so despised -- our utter failure to serve as an impartial mediator between Israel and Palestine, the irregularity of our interest in confronting genocidal dictators, our tendency to "dine-and-ditch" as we did with the Afghan rebels and the Shia minority in Iraq during the Gulf War -- then you might take the position that there is some real complexity in foreign affairs above and beyond simply declaring oneself "a force of freedom and a force for good" and other nations to be "evil."

You might decide that there are long-term implications for what we do.

Ya know, I don't like Iran and North Korea, either. I don't like the Saudi or Syrian governments -- in fact, I despise the fascism over there more than I do the fascism over here (because -- by the estimation of some people anyway -- we chose the leader that brought on our kinder, gentler brand of fascism). But I suspect that, despite the best efforts of these regimes, power will devolve to the people -- with or without our help (no doubt more quickly with our help). I think it's important that when these governments finally do act according to the will of their majorities, the majorities don't hate us.

Toward that end, I want a President who is not obsessed with the role he will play in the coming Armageddon. But that's just me.


Posted by: Brad A. at March 25, 2004 05:02 PM