by Jeff Fleischer(Mother Jones, February 7, 2005)
When American manufacturing jobs headed overseas in the 1990s, supporters of tariff-free trade argued that newly unemployed workers could simply find jobs in the growing high-tech sector. Yet multinational corporations soon outsourced white-collar and service-industry jobs as well, with overseas labor fielding support questions from computer users, programming software, and even examining X-rays and MRI scans for American consumers.
Outsourcing has found a fierce opponent in journalist Lou Dobbs. Since 2003, his CNN news show Lou Dobbs Tonight has featured a recurring segment in which Dobbs and his team report on corporations sending jobs overseas. He has compiled an online list of outsourcers, and recently wrote a book on the practice entitled Exporting America. Dobbs recently spoke with MotherJones.com about outsourcing and its effects, current and potential, on the American economy.
MotherJones.com: When did the current outsourcing trend really begin in earnest?
Lou Dobbs: It began really with the collapse of the telecom and communications bubble in 2000. The corporations took advantage of a digital universe to start moving jobs overseas to cheaper labor markets, and then expanded from there — to what’s now an estimated 400,000-500,000 jobs a year being exported to cheap overseas labor markets.
Moving from the manufacturing offshoring to outsourcing was really a creation of the Internet; the bandwith made it all possible. And while the web-based companies and technology companies and telecommunications companies were obviously first with outsourcing, it’s now expanded to nearly every industry in the country and the world.
MJ.com: In your book, you also describe how state and local governments are now outsourcing. How did that start?
LD: It’s come about because state governments are being approached by the outsourcing facilitators, consultants and outsourcing companies themselves. We’ve reported extensively on a number of state governments whose outsourcing contracts are based in their unemployment divisions and departments of labor — where, for example, people in Indiana at one point could call up their state unemployment office and be talking to someone in India about unemployment benefits — denying citizens of Indiana a job to help citizens of Indiana. It becomes increasingly mind-boggling what’s going on.
MJ.com: Obviously, the most immediate cost of this outsourcing is the loss of people’s jobs and livelihoods. What are some of the other long-term consequences?
LD: Among the many consequences is the pain that is being felt by working men and women in this country, particularly our middle class. But the other impact is the transfer of technology and our knowledge base. We’re exporting our privacy as well, because medical and financial records are being exported so that cheap overseas labor can work with those documents and records.
Each time we transfer knowledge bases overseas, whether it be manufacturing or technology or research, that is a service that will obviously be performed by a competing economy — whether emerging or not, a competing economy. And it is work that will not be done by the U.S. economy and our workers. The result is — and this is at the margins at this point, but could grow to an increasingly larger share of the trade-deficit problem — the result is further pressure on the U.S. economy.
And a further impact in terms of labor is not just the loss of jobs. Study after study, survey after survey, shows that every job that replaces one that is outsourced pays approximately 20 percent less than the job that was exported overseas. So we have a continuing downward pressure on wages in this country. That has an impact on education because obviously that money’s not available to the tax base that pays for education. It diminishes, in point of fact, the income-tax base for the federal government and state governments. So the impact is broad and it is deep.
MJ.com: When asked about outsourcing during the presidential debates, George Bush talked about workers needing more education and more skills. But where will the jobs come from for them to use those skills?
LD: That’s a question I’ve been asking for two years. This faith-based economics that seems to be the hallmark of this administration is leading us into a no man’s land of inexplicable possibilities. This administration — and frankly, it’s both parties, Democrats and Republicans as well as the administration — seems indifferent to the impact of a trade deficit that now amounts to $4 trillion in external debt. We have to borrow nearly $3 billion a day to support it. The dollar has plummeted. And yet everyone keeps saying, “Free trade is good for you.” I cannot find anyone for whom free trade is good.
As we go deeper in debt, we continue to lose jobs and diminish our manufacturing base. Many people want to talk about our dependency on foreign oil, and it’s a legitimate and real concern. But so is our dependency on the rest of the world for our clothing, our food, our computers and our consumer electronics. Our dependency isn’t just on foreign oil; we can’t even clothe ourselves. Free-trade economists will tell you we’re a technology economy, but we don’t even produce the technological components that are the foundation of a technology economy.
MJ.com: What steps have overseas markets such as India and the Philippines taken to attract these jobs?
LD: It’s just a straightforward sales proposition: “Give us your business, whether it is Wall Street research, call centers or radiology, and we will provide the same service for one-tenth of what you’re paying.” It’s impossible for an American worker to compete with that. It’s not because the American worker is any less educated, because he or she is not. It’s not because our workers are any less productive, because they’re more productive. It’s simply the labor-cost issues. In all the talk from the U.S multinationals, and the orthodoxy of business, government, academia and media, they’re all using code words like “competitiveness,” “productivity” and “efficiency.” Those are simply code for “the cheapest possible labor.”
MJ.com: It seems there isn’t as much debate about the merits of outsourcing as one might expect in politics and in the media. Why do you think that is?
LD: Over the course of the past 20 years, there has been an absolute move to market-based economics. And there’s a libertarian impulse to American politics right now, whether Democrat or Republican. That outlook, of course, means as little government as possible. What I’d like to see is a government that would actually be responsible for its citizens, who are workers as well as taxpayers, but that runs absolutely counter to the prevailing political notion, which is basically libertarian in foundation.
MJ.com: How do you respond to the free-traders’ argument that outsourcing is a short-term problem required for long-term economic growth?
LD: Well, there’s nothing short-term about 28 consecutive years of trade deficits. There’s nothing short-term about a mounting external debt as a result of our reliance on imports — an external debt that has reached $4 trillion. I see no basis whatsoever for the sophistry that’s coming from some of the conservative think tanks and much of academia that says this is a short-term issue. This is real and present pain for literally millions of Americans, and a clear and present danger to an economy that has generated most of the wealth of the entire world over the past 50 years. We could be near the end of that role.
MJ.com: Proponents of outsourcing also point to what they call “insourcing,” with overseas companies opening factories here. Does that provide any hope?
LD: It’s an interesting semantic game that has been played in the free-trade debate. The Bush administration has created this expression of “insourcing” to counter arguments and concerns about outsourcing of American jobs to cheaper labor markets. When they talk about insourcing, they’re really referring to foreign direct investment in this country. We can’t even keep up with the Chinese government on foreign direct investment in this country; China has for the first time surpassed the United States in that regard.
The Japanese car plants are here because Ronald Reagan — who many of the so-called free traders hold up as a paragon of free trade — demanded that those plants be created here if they were going to participate in our economy and enjoy the benefits of the world’s largest consumer economy. That wasn’t free trade; it was rational, balanced, reciprocal trade — which is the course we should be pursuing right now, and which all of our trade partners are pursuing. We’re the only nation in the world that just mindlessly opens our markets irrespective of the constraints on our own goods and services.
MJ.com: You talk about the need for a balanced middle ground between protectionism and wide-open trade. What would be an ideal balance?
LD: Overall, we’re going to have trade deficits with a given country and a given economy. But we should not be borrowing money to support our consumption habits over the course of 28 years. The argument has been styled by the free-traders as opposition between economic isolationists and free trade. The fact is free trade isn’t working, and nobody’s talking about economic isolationism. We’re talking about mutuality and balance in which we eliminate deficits and maintain vigorous, healthy trade with the world. But that requires that we have a manufacturing base and reduce our dependency on foreign oil, clothing and a host of other goods and services that we can no longer afford to import.
MJ.com: Do you see a tipping point where the U.S. will have outsourced so many jobs that the economy becomes unsustainable?
LD: The Federal Reserve did a study four years ago that demonstrated that any time a trade deficit rose above 5 percent of a national economy’s GDP, an inflection point had been created. We are now approaching 6 percent of GDP. Obviously, I hope this does not result in crisis. That is, a debt crisis because of the amount of money we have to borrow from overseas to support our imports, nor a diminishment of our tax base through outsourcing to the point that jobs become so poor-paying that we can’t maintain our tax base. But all of that is entirely possible unless people awaken to the dangers that are being posed. I know this is dull stuff for many people, to talk about external debt and currency devaluations. But the fact is, they’re all in prospect if we do not reverse these mindless policies.
MJ.com: What type of protections can the U.S. include in future trade agreements to place the American worker at less of a disadvantage?
LD: To make the American worker more competitive, what we should really be talking about is preserving the American way of life. Environmental protection. Protection for our working men and women. That has built up over 100 years in this country, and we are simply at risk of losing all of those protections. As we should have with NAFTA, we should sign only agreements with protections on the environment and on labor. Either we have that with every trading partner, or we will be at a disadvantage.
The ultimate extension of the free-trade policies that are being pursued is that not only will there be a race to the bottom for wages for working men and women, but we’re also going to have to eradicate the “inconvenient” and uncompetitive environmental protections that allow us to drink clean water and breathe clean air. And, by the way, those nasty child-labor laws could be an encumbrance to competitiveness; maybe we should get rid of those as well. How far are we going to roll back the progress of the past century?
MJ.com: If the federal government were suddenly to choose to fight outsourcing, what should it do?
LD: The first issue is to stop the destruction of an American job. The principal issue I have with outsourcing is that American companies — based in the United States, providing goods and services to the U.S. consumer economy — are killing jobs in this country and sending them overseas to provide the same goods and services back to the U.S. economy. I have no problem if they want to invest and create a market in India or the Philippines or wherever. That’s great, but don’t kill an American job and put it in the hands of someone making one-tenth as much just to send that same good or service back to the United States. That’s what’s unique and different, and that’s what has to be stopped. As far as ways to do it, we could do it with regulation. One would hope that before that, corporate America would find a conscience. But failing that, regulation is entirely necessary, I’m all for it, and my apologies to the libertarians.
MJ.com: What about those jobs already shipped overseas? Could some of those come back?
LD: Some of those jobs are already coming back, because companies are finding that despite whatever huge labor savings [the gain], there are also hidden costs, including the quality of the programming that’s being done. For example, the quality of the code work that’s being done by programmers in a number of the cheap labor markets, including India. Indian workers are remarkable people, highly entrepreneurial and well-educated, but they still cannot compete with American programmers where it’s a matter of quality instead of cost. There’s also a bit of a backlash now on the export of these jobs on the part of consumers. And my guess is that backlash is going to rise, and there will be economic costs as a result.
MJ.com: It seems like you’ve been more active about outsourcing than probably any other issue during your years as a journalist. Why has this issue gotten you so involved?
LD: Because at a time when this economy needed to be growing jobs, we were exporting jobs. At a time of economic downturn, we were raising the U.S. trade deficit even further. And the sophistry of the free-trade orthodoxy — talking about how uneducated Americans are, how unproductive and incapable of competing — just frankly rankles the hell out of me. We were smart enough in the ‘90s to generate 22 million new jobs. Did we, in the course of four years, become so stupid, so lazy and so unproductive, or did something else change? I maintain something else changed, and that was policies that permitted destructive business practices like outsourcing, and a continuation of free-trade policies that are leading to greater trade deficits and greater indebtedness on the part of the United States. We simply cannot sustain the path we’re on.