by Jagdish Bhagwati, Alan S. Blinder
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Product Description
It is no surprise that many fearful American workers see the call center operator in Bangalore or the factory worker in Guangzhou as a threat to their jobs. The emergence of China and India (along with other, smaller developing countries) as economic powers has doubled the supply of labor to the integrated world economy. Economic theory suggests that such a dramatic increase in the supply of labor without an accompanying increase in the supply of capital is likely to exert downward pressure on wages for workers already in the integrated world economy, and wages for most workers in the United States have indeed stagnated or declined. In this book, leading economists Jagdish Bhagwati and Alan S. Blinder offer their perspectives on how the outsourcing of labor and the shifting of jobs to lower-wage countries affect the U.S. economy and what, if any, policy responses are required.
Bhagwati, in his colorful and pithy style, focuses on globalization and free trade, while Blinder, erudite and witty, addresses the significance of labor market adjustment caused by trade. Bhagwati's and Blinder's contributions are followed by comments from economists Richard Freedman, Douglas A. Irwin, Lori G. Kletzer, and Robert Z. Lawrence. Bhagwati and Blinder then respond separately to the issues raised. Benjamin Friedman, who edited this volume (and organized the symposium that inspired it), provides an introduction.
Alvin Hansen Symposium on Public Policy at Harvard University
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Average Customer Review:
0 of 1 people found the following review helpful:
 Outstanding and Timely!, 2009-10-17
Alan Blinder is a professor of Economics and Public Affairs at Princeton, and also served on President Clinton's Council of Economic Advisers and as Vice-Chairman of the Federal Reserve. Jagdish Bhagwati is a professor of Economics at Columbia. "Offshoring of American Jobs" includes their papers presented at a 2007 Alvin Hansen Symposium on Public Policy at Harvard University. The most interesting material in the book, by far, comes from Professor Blinder.
The relevant supply of labor to the integrated world economy has doubled in recent years - advances in information and communications technology, the entry of giants like China and India into the mainstream world economy, and rising levels of Asian education have made an ever wider range of jobs subject to international competition. This will bring major change in America's industrial structure, in what Americans do to earn their living, in wages, job security, and turnover.
The key distinction in whether a job is likely to be offshored or not will be in whether a particular service is delivered in person (haircuts, brain surgery) or not (computer programing) - not whether it is education intensive. Thus, a college degree may no longer be a panacea. Blinder recommends more vocational training; emphasizing students trying to outperform memory chips on rote learning is not going to succeed. Blinder also believes it is quite likely that offshoring will depress the real wages of many U.S. workers who do not lose their jobs. The transition will last for 2 - 3 decades and bring gross potential job losses in the range of 30- 40 million. Unemployment will rise.
What will these displaced service workers do? Blinder has no specific answers, though points out that our economy has already gone through a similar 'revolution' when the share of Americans earning their living on farms fell from 84% to 2%.
Blinder's regression analysis shows that offshorable jobs have already suffered an estimated 13% wage penalty as of 2004, a result surprising to him and other economics professionals. Unfortunately, he also contends that while the U.S. may be harmed overall (lower wage levels, depreciated dollar, higher unemployment), that this offshoring cannot be stopped and is in favor of Free Trade.
This offshoring will strike the U.S. harder than other nations - eg. Germany and France, because the foreign supply of English speakers is so much larger.
Blinder sees our future as lying in new industries, presumably higher technology. However, China's reputation for intellectual acquisition (by theft or any other means - eg. Windows 7 pirated editions were selling in China prior to the U.S. release date), rising education levels, enormous surplus labor supply, and the fact that Asians in general score about 10 points above Caucasians on IQ tests does not bode well for that suggestion.
The 'gains-in-trade' theorem from Adam Smith posits that overall the U.S. will benefit from this new revolution; however, Blinder offers no further documentation or support, and himself believes the U.S. standard of living will decline. If market prices do not reflect social costs, then Adam Smith's 'Invisible Hand' will point in the wrong direction - government and businesses may make incorrect decisions. On the other hand, some Free Trade defenders continue to argue that free trade does not depress wages - but these analyses occurred when we were buying a lot less from overseas than now (and contravene basic economic principles).
Bottom Line: Alan Blinder's thoughts on offshoring are well-thought out, scary, and merit intense high-level government consideration and action.
1 of 2 people found the following review helpful:
 Offshoring the Opinions of Economists, 2009-10-05
Jagdish Bhagwati turns out to be the king of "ad hominem:" I am very clever, have studied under the finest teachers of economics, have taught most of you (in the audience). During the past 20 years, I have anticipated all the points you raise, and have refuted them convincingly.
Don't fixate on India and China. Remember the rise of S. Korea, Taiwan, Singapore, and Hong Kong. Blinder may turn out to be right...for all the wrong reasons. I'm 73, and won't care. Offshoring is an inevitable and creative part of creative destruction.
Alan Blinder's "ad rem:" Offshoring will be a Big Deal for English-speaking economies,in number and types of jobs affected. Indians, Philippinos, and Chinese do not speak French or German, so France and Germany will see a lesser impact.
Aim yourself towards constant innovation and at jobs that cannot be off-shored. I'd advise my children to prepare for careers that a computer cannot do better, and that a well-educated Indian cannot do well.
My own comment: No knock-out punches om either side. I vote for economic advice from another Indian economic gasbag (not at Columbia University) who will give advice at much less cost.
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