Wow. I watched Moneyline tonight and Lou Dobbs just ripped, RIPPED, into Marc Andreeson. (transcript in extended comments) Apparently, the former founder of Netscape is now running a consulting firm that helps domestic companies outsource their technology jobs. Lou has recently become an unlikely evangelist against outsourcing, and he got into a very heated debate with Andreeson... Dobbs clearly thinks he's a snake oil salesman, and I agree. He called the whole thing
. Ha!
I don't really get the logic behind why outsourcing is necessarily a good thing, and I agree with Lou, it's premised on a whole lot of assumptions. But, as Lou put it, it ends up enriching the upper class in the United States and the middle class in places like India at the expense of the middle class in the U.S.
DOBBS: There are very few issues right now that are more difficult for corporate America to deal with than the issue of outsourcing. You support it. You support it vigorously. Why?
ANDREESSEN: Yes.
I think it's purely good for the American company and it's good for American workers. It's part of the natural process of creating new jobs. I think job destruction and job creation go hand in hand. In the last 10 years, this economy has destroyed 325 million jobs and created 342 million new jobs. And, in general, those news jobs are better jobs than the ones that were destroyed.
And I think, in the next 10 years, we're going to destroy another 400 million, create another 430, 450 million new jobs, and those jobs will be better. I think it's blue skies.
DOBBS: Mark, I quite appreciate job destruction, job creation and the net effect. And that argument is advanced considerably. But that argument doesn't really work if the net result is not a higher value job and that has not occurred in this country now for three years, and perhaps more, actually.
That being the case, why should we accept it as a matter of faith that we can destroy lives -- and it is looking as though -- some estimates range as high as three million jobs have been outsourced now to cheap overseas labor markets.
ANDREESSEN: Right.
DOBBS: Why should we take it as an article of faith that that kind of pain results in better jobs, when we're not seeing it demonstrated in any of the data anywhere?
[In iterests of space, I've edited out a big LONG argument between Dobbs & Andreeson about manufacturing and trade deficits... it's good stuff, but mostly peripheral to the main problem]
DOBBS: Marc, we can sit here and not really edify anyone including ourselves by trading statistics. The fact is it is 2004, the fact is in the most event report on trade we show for the first time negative numbers in the area in which you live, that is technology which is supposed to be bringing us all of these wonderful jobs that so far are not materializing.
ANDEREESSEN: Look, technology took a big hit in the last four years due to recession. When I was involved in creating the first Internet browser in 1993, I can tell how many Internet jobs there were, there were 200. I can tell you how many there are now, there's two million now. We created new jobs in the next 10 years. I'll tell you what, we're going to create a huge number of new jobs in the next 10 years.
DOBBS: I expect you to do so. What I don't expect you to understand is that there is no one listening to us that should take -- has any reason to take as you an article of faith that by moving jobs overseas simply to acquire cheap labor that in any way adds to innovation to this country.
ANDEREESSEN: Absolutely it does. It compounds innovation, allows American companies to invest both overseas and the U.S. It allows American companies to hire more people in the U.S. It allows American companies to sell their products and services into a larger global market. I tell you another thing, it encourages peace and stability worldwide. The best thing that can happen to us from a national security standpoint we determine to develop the middle classes in India and China. And in fact the really best thing we could do is to start offshoring to the Middle East.
If you want to systematicly go after global security and peace, figure out how to bring everybody into this world of increasing returns from economic, increasing returns from trade...
DOBBS: Marc, you surely not suggesting that we create a middle class anywhere in the world at the expense of our own?
ANDEREESSEN: Of course not. It's not at the expense of our own.
DOBBS: That's precisely the effect of what is happening.
ANDEREESSEN: No it's not.
DOBBS: No, sir, it is.
ANDEREESSEN: Trade has been win-win for 200 years.
DOBBS: Win-win. Marc, you are too smart for this. You are absolutely too smart for this. When you hear win-win, what do you think of, a software salesman, right?
ANDEREESSEN: Not at all.
DOBBS: Come on. If it's -- thank you. I also have a sense of humor like you do, Marc. You know what, I don't think we should have too much a sense of humor about what we're doing to hardworking men and women in this country. Please, would you take as an article of faith if you were sitting there driving code that you are going to get to a result or would you want to empiricly be able to demonstrate it?
ANDEREESSEN: Absolutely.
DOBBS: Here are the empirical demonstrations of what we're dealing with right now.
We have a half trillion dollar trade deficit. I'm sorry, go ahead.
ANDEREESSEN: Empirical demonstration is over 200 years of standard of living has risen massively. We created 140 million net jobs. They say we created 342 million jobs in the last 10 years alone.
DOBBS: You do understand we have to talk in net terms.
ANDEREESSEN: Per capita income. We're up 17 million net new jobs in the 10 years, including the impact of the recession.
DOBBS: The last 10 years.
ANDEREESSEN: The last 20 years we're up 38 million net jobs. And those jobs per capita income, in that period of time, since World War II to today, per capita income is up. Everybody is better off.
DOBBS: By the way, if you are trying to convince me, our viewers, that it's good to live in America, that really isn't the issue. The fact is how do we preserve and improve on the quality of life for our middle class, for all Americans.
ANDEREESSEN: Economic growth is the key.
Would we agree economic growth is the key?
DOBBS: We -- I would agree absolutely that economic growth is the key.
ANDEREESSEN: We agree job creation is the key?
DOBBS: Absolutely.
ANDEREESSEN: Right, and this is what happens. We create jobs, grow, innovate, exploit new markets, we develop new markets.
DOBBS: But you haven't accounted for the experience of the past four years nor the failure of this economy through two and a half years since the recession ended to generate jobs and that is the critical issue, Marc.
ANDEREESSEN: Let's separate out. No. 1 in IT we had a big recession, right. We had a big bubble. We had a dotcom bubble.
DOBBS: Marc, I got to be honest with you. We have taken far more time than we should have. Come back, we're going to argue some more, do me a favor -- watch that, you know, faith based economics, will you? It's dangerous stuff, macro economics as well as it is in technology. You can reciprocate with counsel to me as well, Marc. You get the last word.
ANDEREESSEN: I reciprocate to you with exactly the same counsel, for 200 years the standard of living in this country has risen. and it's going to continue rising for the next hundred, I don't think there's any question about that.
DOBBS: I admire your faith and we appreciate your time.
ANDEREESSEN: Thank you.
Faith-based economics... ha!
Basically, the people coming on Moneyline has been trying to convince Lou that trade is a good thing for both parties (otherwise, why would they trade, unless both sides thought there was a net benefit to trading) -- this is the "win-win" allusion. Eventually, they argue, these benefits will add up to more innovation and thus more jobs & overall prosperity in the United States.
Now, I'm a law student and not an economist but here's why I think they're wrong: That presumption is based on a theory of trickle down economics that breaks when you allow the trickling down to go overseas. Sure, outsourcing is trade benefitting both parties... BUT we need to look closely at the parties: the upper class/corporations in the United States, and the middle/lower class abroad. THESE are the parties for which the situation is win-win.
However, one might argue... enriching the upper class HELPS the middle class in the U.S., because then the money will trickle down... right?
Wrong.
Because that money ISN'T trickling down... the upper class is using the money they gain from outsourcing to pay for more outsourcing. It is, after all, cheaper. Trickle down doesn't work if you're shunting the trickle into another pool. That's why outsourcing is, in the end, a bad thing for the United States worker. Sure, in an economic sense it might be more economically efficient to outsource, by removing inefficiencies in the U.S. labor market, but it does that at the expense of the American working class because those benefits are only economically advantageous to the overal global market. In the end outsourcing is dangerous to the American worker because it forces the United States into a race to the bottom on worker's rights and worker's wages, just so we can compete with less regulated offshore workers.
