Over the years, I've listened to experts, especially government experts, talk about our Trade Deficit, about U.S. companies moving overseas, and about protecting American jobs and industries. Now the big complaint is "outsourcing"... jobs that can be done overseas without moving the company, such as telephone customer service and help lines, or contracting computer programming, research, and other technical work.

How big is the problem? In terms of money being spent abroad (trade deficit) or work being done abroad (job loss) it's a sizable problem:

India is at the red-hot center of the Outsourcing Revolution. Thirty percent of all new Information Technology (IT) work for U.S. companies is now done abroad, mostly in India. McKinsey Consulting estimated that three countries received $20 billion in outsourcing revenue from the U.S. in 2002: Ireland ($8.3 billion), India ($7.7 billion) and Canada ($3.7 billion). Analysts forecast that by 2008 Indian IT services and back-office support will grow to a $57 billion a year industry with four million workers.

Estimates vary from a projected loss of 600,000 jobs by 2005 (Forrester Research) to 2 million by 2008 (Deloitte).

In all of these various discussions, the "expert" usually lays blame on greedy corporations trying to pad their bottom line, and on the free market. Almost without exception, government intervention is called upon to put an end to the problem. We've listened to politicians discussing these "critical economic problems" so long, that many of us have come to look to government for solutions. Just as unions and manufacturers have demanded and received high tariffs on foreign goods so that American producers can compete, opponents of outsourcing are now demanding government action to halt the drain of jobs and money from the U.S.

Here's what John Kerry, Democratic presidential candidate, has to say about the current crisis, outsourcing:

The Massachusetts senator said he wouldn't ban outsourcing, but would provide tax credits to companies that maintain U.S. factories and "close every single loophole that gives companies incentives to move jobs abroad."

Notice the incredible political gall implied in what he "would" and "wouldn't" do... the unabashed implication that he can actually control... micromanage... the economic world. Of course, he couldn't control it in any real sense, except to screw it up more. As a powerful Senator, the problem has occured "on his watch", hasn't it? (shame on me for bringing up that rude fact). Kerry, specifically, has been a Senator for 20 years now, and claims, on his Congressional website, that he has worked to "strengthen the economy and encourage the growth of the high tech New Economy"

What Kerry could indeed do, if he were president, is, as he suggested, is pay companies to stay here. Could there be a more typical Democratic plan? Throw some tax money at the problem! Buy somebody off. Of course, what he is saying, without saying it, is that he would take yet more money from working Americans and pay it to corporations to get them to stay here and keep jobs here. If that suggestion came from a Republican, Democrats would call it "caving in to greedy corporations". Since Kerry is a Democrat, we can call it "saving jobs".

It isn't my intent to pick on Kerry in particular... he's no better or worse than most other politicians, nor are his solutions any more deceptive and ignorant. We've listened to such rhetoric for so long, that a great many Americans have come to believe that government actually can control our economy. The simple truth is that the only "control" they can exercise over our economy is to twist it, distort it, and drive us ever closer to national financial collapse. Politicians can quote statistics, enumerate historical details, remember quotations, and babble on impressively ad nauseum, but what they understand about real-life economics is less than most average Americans.

Let me take you through some really simple-minded considerations about the problem of outsourcing of jobs to other countries:

Companies outsource jobs to save money. They can get the work done cheaper abroad than they can here. Why is it cheaper abroad? The old liberal bugaboo about "slave labor" abroad doesn't apply to outsourcing... workers in Ireland, India, and Canada just don't conveniently fall into that old category. These aren't junk jobs... they're skilled office jobs that require education and training, office space, and expensive equipment. While American programmers get about $60/hour, India's programmers can work for $10/hour.

One might ask... why don't American programmers work for $10/hour to keep their jobs? I think an explanation of that is needed, and since I've spent most of my working life as a programmer, I'll briefly do that. First, outsourcing isn't simple, and as long as there are other jobs available at the higher price, employees will move to get them. As more companies outsource, the effect will eventually lower the demand, and thus the price of such jobs. Programming is mentally intense and tiring. It's clean office work, but it's considered "professional" so overtime is expected (free) when required. You don't get to erase your "work memory" when you go home at night; the problems stay with you until tomorrow. When work is done to expectations, and demand is high, programming is worth $60/hour. Cut it to even $30/hour and most programmers will look for easier work at that wage.

Each of us carefully chooses our work, and the standard of living that such work will support. Some of us shoot high, knowing that we'll have to work intensely to maintain it... others choose to aim for a more modest, easier level, while some have little choice but to resign themselves to getting what they can. After many years of shooting for a high level, I personally decided that "I work in order to live, rather than live in order to work".

Outsourcing is a perfectly natural response for employers, and one that we will all benefit from. Certainly, some people will lose their jobs, or end up working at a lower wage, but that too is natural. Many of the jobs I once held are simply no longer done. As a teenager, I unloaded train cars filled with bags of cement. Palletizing has allowed lots of similar work to be done much faster and easier. As a farm boy, I loaded and stacked bales of hay onto skids pulled by tractors. That work was eliminated by having the baler dump bales directly onto wagons. Later in life, I spent untold hours pasting up type and art onto boards that were then photographed and burned into printing plates. Computers have eliminated that sort of work, and many other kinds. It's called progress. It occurs in all industries, and at almost all levels of workers. The benefits we all gain from such changes are that products we purchase become less expensive and higher in quality.

If the current trend toward outsourcing continues, software systems will be produced at less expense. More new software products will be produced and available for our use. Companies using outsourcing will also earn more profit, as will all the investors who hold their stock.

The gripe against outsourcing is that some people will be adversely affected... some American workers... while foreigners will be the ones to benefit. That's not new either. In recent decades, Japan has "invaded" a number of industries that used to be dominated by American manufacturers... automobiles being a prime example. That's a shame, isn't it? The U.S. once dominated in terms of manufacturing, especially in high-tech industries. We had the best educated workforce, great creativity and innovation, and a free market system that allowed it all to come together to produce wonders. What happened? How did businesses in other nations make up so much ground? Why is outsourcing happening from the U.S. to other nations instead of moving the other way... to American workers?

Tomorrow - the answers to those questions, in "formerly Made in America - part 2"