Friday, August 3, 2012

California, doing it right for a change...

Watch Diane Sawyer's video and get yourself all worked up, as I'm sure 99% of her viewers did, over the shameful outsourcing to China. Then allow me to disabuse you with one simple point in my commentary below. You'll (hopefully) understand that the shame is the utterly uninformed Ms. Sawyer's, who certainly, bless her heart, has good intentions.


The California assemblyman talks of the "multiplier effect" of spending government money in the most inefficient manner. He's suggesting the (excess) taxpayer money for the projects, had they used U.S. firms, would have made its way into the economy by way of the U.S. workers' pay checks. Now who'd argue with that logic? Government hires U.S. workers, pays them U.S. dollars that remain in the U.S. economy. As opposed to paying (albeit fewer) U.S. dollars to Chinese workers. Makes perfect sense, right?

Nope, sorry. Think about "U.S. dollars to Chinese workers." Why would Chinese workers want U.S. dollars? Would you take a job in say Ethiopia if you were paid in birr? What will the Macy's cashier back in California say when you present your 600 birr to buy a 30 dollar necktie. Of course you'll leave tieless, with all that dough 'birr'ning a hole in your pocket. You'd only take the job in Ethiopia if there were something you were after in Ethiopia (perhaps they make great neckties). Otherwise, Ethiopia has no opportunity to outsource to your services. The U.S. dollar, on the other hand, in the hands of a Chinese worker, is a precious commodity indeed. For there is clearly U.S. stuff the Chinese want (our exports to China have been rising consistently btw). And of course when they spend those U.S. dollars they're supporting U.S. producers - and the folks they hire (what news network stands up for them?).

Now consider the "multiplier effect": Less taxpayer money spent on the project means more money creating permanent jobs in the real economy (as opposed to the temporary jobs created by the project). Plus; those dollars paid to Chinese workers = more jobs in U.S. export industries.

Or, consider it in terms of the consequences of protectionism: I.e., allocating public funds (taking from the taxpayer) for the purpose of creating employment for a select group, at the expense of private sector jobs accross all sectors (serving both domestic and foreign customers), is the definition of inefficient allocation of resources (or bad business practice).

Seriously, haven't we Californians been complaining for years about our elected officials egregious mismanagement of our resources? If anything, we should be encouraged by their efforts to build the new Bay Bridge as efficiently as possible.

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