The effect of outsourcing is to create a two tiered economy in both both countries. 'We' don't don't provide jobs, build factories, or import stuff unless you happen to be among those with actual capital. It's always amazing to me how working people in America automatically identify with American business even when they have practically no interests in common with them.
This begs the question – does outsourcing help a country move away from third world status and raise the standards for everyone in that country?
I think the answer is yes it does, but it’s terribly slow.
The big fat reason for why this is?
How Can We Speed Up The Process?
The simple solution to this problem is to not be greedy.
When someone so entrenched in the capitalist system starts thinking this way, it portents that capitalism may finally be starting to be seen as obsolete.
But many observers failed to ask a basic question: “Where did the government of such a low- income country get the money to finance all this impressive urban infrastructure?” The answer: rural China. In the 1990s, as skyscrapers sprang up in Beijing and Shanghai, the rate of rural income growth went down. Low income growth then led to low consumption growth. Household consumption fluctuated between 40 and 45 percent of GDP throughout the 1990s but then began a decline in 2000, from 46 percent to today’s 35 percent. (In most other countries, consumption usually averages between 60 and 70 percent of GDP.) This was the beginning of the economic imbalances that put production far ahead of consumption— facilitated, one should add, by de mand created by excessive American consumption fueled by credit bubbles. The trade tensions with the United States and all the charges and counter charges about currency manipulation are basically the result of this startlingly low consumption/production ratio.
How did rural Chinese fare in the 1990s? Not very well. Their income growth rate fell sharply, from seven to eight percent annually in the 1980s to around four percent in the 1990s. At the same time, surcharges by the state on basic education and health care services rose, increasing economic pressures on families and reducing their ability to buy goods and services.
One avenue of material improvement remained open to rural Chinese: migrating to the coastal cities to work in factories. Many took this route. There is no question that the pay in urban centers was much better than it was on farms back home. But the flood of workers depressed wages in the cities. In Guangdong Province, average pay for migrant workers increased at only about one- third the rate that GDP did. Slow wage growth meant that Chinese migrant workers, unlike middle-class urbanites elsewhere in the world, were not able to consume much of what they produced. But the excess production had to find a market. China became an export- driven economy as a result.
The problem, as I see it, is not that outsourcing is exploitative of non-Westerners; the problem is that it is short-sighted and self-destructive for the West. Morality may be at issue here on an individual level, but that's not the crisis. What's blowing up is that individualism itself, and everything that is built on that ideology - not just the American ideal of meritocratic capitalism but freedom and justice as well.
Yeah, I bet those Foxconn employees are real happy about their jobs. The ones who are still alive, anyway.
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