William Early examines Blinder's viewpoint on outsourcing. Photo Credit: Courtesy of William Early

On March 28, 2007 the Wall Street Journal published "Pain from Free Trade Spurs Second Thoughts" by David Wessel and Bob Davis. In the article Alan S. Blinder, Princeton University economist, expresses concern about the future of outsourcing in the United States and offers alternatives for more aggressive steps to mitigate the adverse impacts of jobs lost to outsourcing. Blinder, a life-long proponent of free trade who advised President Clinton on NAFTA, sees some starkly negative impacts coming for the United States.

The consistent value of having products and services produced by those who can provide them best and most cost effectively has not changed. Consumers in the US and around the world gain this benefit from free trade. For employees and their jobs there have always been winners and losers when production is shifted from one place to another to achieve these advantages for the consumer. That has not changed. The impacts which result from free trade create new jobs at the same time that old jobs are being lost. That, also, has not changed and it has been generally accepted that in the US the net number of jobs resulting from this process has been positive.

Professor Alan S. Blinder believes that the outsourcing of service jobs could result in more than forty million US jobs being lost over the next ten to twenty years.

What is new in all this, according to Professor Blinder, is the fact that advances in electronic communications have made it possible for millions of service jobs, previously insusceptible to outsourcing, are to now be shipped abroad. Blinder believes that this could result in more than forty million US jobs being lost over the next ten to twenty years. This assertion was debated by Blinder and Columbia economist, Jagdish Bhagwati, at Harvard on May 2, 2007. In response to Blinder's assertion, Bhagwati says: "He's dead wrong".

In the Wall Street Journal article, Blinder makes it clear that his concerns about large scale outsourcing of service jobs does not mean that he favors the protectionism that some are beginning to talk about. In a recent interview by Charlie Rose on April 26, 2007, Blinder offers alternatives to deal with large scale job losses resulting from free trade of services (and presumably manufacturing as well). He advocates for the provision of job retraining for those who lose their jobs. Although many companies do an excellent job of training their employees for a shift in jobs, our government has not done much in this regard and what it does do is not performed very well, according to Blinder. In addition to training, there are a number of other elements that negatively affect a person who has lost their job. Two significant ones are the loss of pensions and health insurance. Portability of pension rights and universal health care are important steps that should be implemented to offset the impact of jobs lost to off-shoring.

While Blinder does not claim to have all the answers at this point he believes that these are important starting points and issues that need to be fully addressed. This, not protectionism, is what Professor Blinder is advocating.

We will post more on these subjects following the Bhagwati-Blinder debate and in the meantime we invite your thoughts.




Contributed by William Early. William Early, a Portland, Oregon leader and philanthropist, has served the global community through his involvement with The Bretton Woods Committee, Initiative for Global Development, and Mercy Corps. He is the founder of Global Envision.

To read another Global Envision article about Jahdish Bhagwati and economics, see The United States Must Rethink the Doha Demands.



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