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The Tabloid Syndrome

The world is a complex and intricate place. So how are we to understand even just a piece of it, say, the United States government and its economic policies? It is a big problem, for the standard sources that I was taught as a child to rely upon – newspapers and television news – are breaking down.

For example, in early February 2004, the then Chairman of the President’s Council of Economic Advisers, N. Gregory Mankiw, spent some time trying to explain the issues surrounding “outsourcing” to America’s elite political news reporters. Mankiw’s standard description of outsourcing is very much like mine – indeed, like that of all neoclassical and neoliberal economists – and goes something like this:

As with any change in technology that increases the volume of international trade in goods and services, the outsourcing of service-sector jobs creates winners and losers – but almost surely more and bigger winners than losers. Big winners are workers in poor countries who get better jobs working for firms that can now export services to rich countries. The major losers are those who previously held the now-outsourced service-sector jobs; they must now find new and different jobs and almost surely find that their skills are worth less.

But even in the US, losers’ losses are outweighed by winners’ gains. Workers in certain industries find their skills in higher demand as foreigners spend their increased dollar earnings, consumers benefit from lower prices, and shareholders and managers see their companies’ profits increase. However much we may worry about the distributional consequences of outsourcing, we should never overlook the fact that it increases the total size of the economic pie.