Article 99. Understanding the Principle of Economic Self Interest
That Giant sucking action that Ross Perot warned us about is starting to gather full speed. Manufacturing jobs are being lost in increasing numbers to other countries; especially China and Mexico while service and intellectual jobs are being lost to India. These Jobs that formed the basis of middle class America will soon be gone. While it is somewhat easier to reverse the process for intellectual jobs it is nearly impossible for manufacturing jobs. Trade unions and government leaders have failed to understand a basic economic concept: the Principle of Economic Self Interest and its meaning in the current global economy.
Remember the loss of the steel industry to the Far East and the creation of the Rust Belt in Ohio. The Rust Belt was a destroyed economy largely resulting from union pressure to prevent loss of jobs from modernization of the steel industry. The Unions failed to understand that the loss of a few jobs would have prevented the loss of an entire industry.
All economies local, state, country, and even the European Union depend on economic self interest to maintain their vitality and tax base. While many subscribe to this concept they yet support the outsourcing that undermines the economy affected. This is driven by a blind search for the cheapest labor in order to reduce costs and ignores the effects to the economy. Even state governments have allowed outsourcing of basic services such as telephone answering services to India while calculating the cost savings they missed the effects on the economy to local businesses and the tax base.
The Principle of Economic Self Interest is used by cities to compete with other cities for new businesses and government installations. It is also used at the state level for the same reasons. But somehow the understanding of this concept at the federal level has been lost and worst of all tax incentives for outsourcing have been provided to manufacturers who send jobs out of the country. The idea is simple to build the economy by providing jobs which in turn multiplies the economy through worker spending at local businesses.
This basic concept is also at the heart of the reason that the European Union has faltered. The disparity between EU economies mainly in wages and benefits has prevented further unification of the European countries. French unions recently pushed through its government a 35 hour work week. The result of this and with its national labor laws (once a French worker is hired he can not be fired for any reason except when the company goes out of business) has caused thousands of French companies to go out of business in France and start up immediately in the new eastern block countries of the EU where there are virtually no union restrictions. This has caused enough concern with Germany and France that the admission of Turkey with its low wages to the EU has been postponed.
Another way of looking at outsourcing is in the name of Free Trade which in itself is entirely desirable as long it is negotiated fairly. Reciprocal trade agreements should lead to an equitable balance of payments between the two countries. The problem is in thinking that Free Trade means that there shouldn’t be any restrictions.
