OK, I know protectionism is bad, but do we really need Geithner working against US workers?

This is from Thursday's Financial Times:

The US government has vowed not to harm India’s IT outsourcing sector as it battles to create jobs at home in the worst labour market since the Great Depression of the 1930s. Tim Geithner, US Treasury secretary, said during a two-day visit to India that protectionist measures to prevent jobs from migrating outside the country would do more harm to the US than good.

“We are not going to go down that path,” promised Mr Geithner. “We know that it would make us weaker, not stronger.”
He also said that the administration of Barack Obama, president, would not seek to curb the investments of US companies overseas as “our fortunes are tied with the world”. There have been proposals to trim the tax privileges of US companies that operate internationally.
“American companies are long in the world,” Mr Geithner told Indian business leaders at a discussion hosted by the Confederation of Indian Industry.
“They are good at what much of the world needs. A huge part of the basic economic challenge we face is to give stronger in- centive for private investment, help support innovation and try to make sure there is more investment and stronger exports globally.”
Mr Geithner said Mr Obama was “deeply committed” to trying to build a consensus among Americans for more open trade to support the recovery.
“We have got the worst labour market since the Great Depression,” the Treasury secretary said. “Most Americans are still going through an incredibly difficult economic series of challenges and yet we’ve been very successful in working to keep our markets open under all that pressure.”
IT outsourcing, which is heavily dependent on business from the US, is one of India’s flagship economic sectors. Companies such as Tata Consultancy Services, Infosys and Genpact helped propel the economy to growth rates of 9 per cent before the global financial crisis and was responsible for creating 45 per cent of new jobs over the past 10 years.
Last year the global IT outsourcing market was estimated to be worth as much as $250bn (€187bn, £164bn).
“Some of the sounds coming out of the US have caused concerns here,” said Tarun Das, the president of the Aspen Institute in India. Local businesses were wondering whether “the authors of globalisation are turning to protectionism”.
Senior policymakers say that the Indian economy is fast becoming more export-oriented and more vulnerable to protectionist action by other large economies.
“If we want to get to 9-10 per cent growth it’s in our interest that the US should get back to growing as soon as possible,” said Montek Singh Ahluwalia, deputy chairman of India’s powerful planning commission.
“It’s also [important] that [the] market remain open.”

Comments

lewisoffset's picture
lewisoffset 4 years 20 weeks ago
#1

"Protectionism is always bad" is just another right-wing falacy that needs to be dispelled. When companies can freely circumvent American labor and evironmental regulations and taxes, how is this advantageous. Only free trade with a level playing will "Raise all Ships". What we have going on now is dragging all down!

michael.hall30's picture
michael.hall30 4 years 20 weeks ago
#2

whats so wrong with protectionism?

LeMoyne's picture
LeMoyne 4 years 20 weeks ago
#3

Outsourcing ( contract CustSvc / IT / accting / HR)
+ Offshoring ( to India, Philippines, etc. )
is often BPO - Business Process Outsourcing - which has brought very many jobs to the Philippines (from 4,000 in 2001 to 400,000 in 2009 and expected to hit 1,000,000 ) and India for their lower cost, large, native and school trained bilingual Spanish-English population. India is even outsourcing jobs back to US.

Quote TPI: 2009 was a year of extremes in the outsourcing industry – the number of contracts signed nearly set an annual record, but the total value awarded was at the lowest level since 2001. The market roared in the fourth quarter after a very quiet start to the year. (summary/teaser PDF)
They think it is the usual fourth quarter bounce AND a return to boom times. IT analyst firm Gartner said: "Even if tax breaks are taken away, the US firms have to outsource because that makes business sense for them." -- So.... it's not about to stop.

I researched Convergys (6th in world BPO) after they closed a call center here - employment @peak 700-800, @close announcement 677, @close a few wks later ~250 people - they fired people for the slightest reason - avoidance of UI charges? - call centers have restrictive time+attendance policies - late 5 mins 12 times/year+ <-> can fire. Convergys has total employment ~70,000 for the last few years and they have opened 20,000 jobs in the Philippines and now up to 10,000 in India so no room for anything but US/Canada employment drop (several centers closed). Oh...they do customer service for 9 of the 10 largest credit card companies (I think the exception is CitiCard which is global and can internally offshore to reduce their cost.)

Call centers often leave when employment/tax/lease benefits run out - Canada lost >2000? Convergys jobs after the loonie got strong against the dollar including 500 this week - Convergys has repeatedly said, in the Philippines, that US corpsy clients consistently request offshoring (<1/3 cost). While in the US and Canada, they say centers close because they have 'lost the contract'

Please note that these jobs are not just coming from the US - they are also from Europe, Australia, Taiwan... but really ... It's gotten pretty thick and they're not coming back ...

First was the switch from a manufacturing to a service economy -> 1980s-2000s

Now they outsource and offshore the service economy 1990s->today

We need a 'domestic enemies' stock index (DESI) w/ banksters, fossil fools, and companies with >10% empl expense outsourced+offshored or actually doing outsource+offshore - it would probably way outperform the standard indexes in total or by segment.

emberAZ's picture
emberAZ 4 years 20 weeks ago
#4

As I've learned from Thom, we need TARIFFS to protect our workers!!! It is immaterial to me whether people in other countries of the world have jobs -- my interest is Americans having jobs. We can help people elsewhere building infranstructure, including broadband and other stuff. We need to create our own smart grid, establish broadband everywhere like Japan and Europe and catch up with the rest of the world creating a REAL green economy. I want solar voltaics on every roof in Tucson and windmills all over town. We have almost none. I want an electric car which I charge from the panels on my apt. roof. We have a long way to go and shipping jobs elsewhere doesn't get us there.

4Buckley 4 years 20 weeks ago
#5

I agree! We need "protectionism". Republicans and Corporatists have given protectionism a dirty name! Our own laborers need jobs! We should not be promising to help India with its jobs when our own people are in need! Geithner's comments are shameful and an indication of how much people in Washington and well-off people in general just do not understand the needs of ordinary working Americans! Protectionism helped build America! Bring it back!

We also need to bring back the Fairness Doctrine in news. Too many people listen to slanted, biased news in this country. It's as if there are 2 different sets of data (one false) which people are operating on! It's impossible to talk with right wing people nowadays, as they are operating on a whole different set of "facts". One cannot begin to communicate!

BRR's picture
BRR 4 years 20 weeks ago
#6

Outsourcing is part of the price we are paying to ensure that countries like China, India, Brazil, etc don't become radicalized. By helping to raise their middle class standard of living, the US and other more developed countries are reducing suffering and raising education levels.

The bad part: In the United States only the middle class has paid for this transfer of wealth. While over the past 25 years, the top 20%'s wealth has increased substantially but the middle class has stagnated, and become small as more fell below the poverty level.

rhollenhorst's picture
rhollenhorst 4 years 20 weeks ago
#7

Do more harm than good to whom?

We know enough about foreign countries' trade policies to realize that there is plenty of room for improvement before we even achieve parity for the United States, which is long before we can be classified as being protectionist.

The United States is large enough to provide economic growth to its citizens even if we closed the borders tomorrow. The problem is not that corporations wouldn't be profitable; it's just that to some (like Mr. Geithner), a corporation can never be profitable enough.

What good are corporations that don't pay their fair share of taxes, don't hire American workers, and use their profits to influence politicians to the benefit of foreign countries? What do they have that we need? Close them down and there will be a thousand small businesses lining up to take their place.

RepubliCult's picture
RepubliCult 4 years 20 weeks ago
#8

Whenever an official or pundit speaks in hyperbole and unsubstantiated generalities ("We know that it would make us weaker, not stronger.”) PLEASE INSIST on them giving specific reasons to support their position. So far I've never heard of a bad reason for keeping these jobs in America.

rlabston's picture
rlabston 4 years 20 weeks ago
#9

I have had my job outsourced directly at least once that I know of and have seen my contract rate reduced substantially because of offshore development centers (ODCs). I have no problem with importing from foreign countries as long as the imports are taxed at a rate equal to the difference in price of producing the same product in the US AND that money is spent offsetting the cost of unemployment and retraining the victims of the outsourcing.

okielib's picture
okielib 4 years 20 weeks ago
#10

Two points

1. I own a lawn care business among others, I just hired 2 well qualified IT guys to mow yards for me because they can't find work.
2. I just got off the phone with a client contact that was outsourced to India, after 20 minutes of trying to make my point to the nice young woman I gave up and called the office in the US to get things straighted out.

Outsourcing needs to be taxed to the point that it makes it the same cost as hiring US workers, then if the playing field is level and the overseas workers can do a better job then so be it.

epdowd94's picture
epdowd94 4 years 20 weeks ago
#11

Outsourcing jobs kills the American way of life. What chance for improving our station in life if we must compete with people who will sleep 6-8 to a room and work for a fraction of our salaries? Down the line, this harms social security and other programs based on income and contributions from paychecks. We should be collecting income tax and SSI on outsourced employees regardless of the country they work in.

What made America the "Greatest Nation On Earth" was it's large middle class. Sure, middle class citizens become politically active and make demands, however, they also consume and the country thrives.

The error of the capitalist system is that unless you spread the wealth around, when you make it to "King", you gaze out your castle at squaller. You cannot hold a man down in a ditch without being in the ditch as well.

Since history repeats, it is a well known fact that when too few people control all of the money, land, and resources, the starving poor rise up and kill them. In the Russian Revolution, millions died after the fact. In the French Revolution, the beheadings lasted for five years. I'm advocating nothing here, merely pointing out historical fact that repeats itself, given time and greed.

DAN 1's picture
DAN 1 4 years 20 weeks ago
#12

I see "Protectionism" as a shield against interference in American affairs, by other societies and New World Order Forces, in the rest of the world. Protectionism should be total, for a while, to enable The American People to have the time and focus to clean up its own sovereign territory and all the error within it.

Outsourcing and illegal-immigration is especially disruptive of Our Stability, so We need to put a stop to these right now.

Eventually and carefully, the trade part of American Economic Affairs could gradually open up again; in a way that is fair and equitable to "all" on the planet.

But right now Our Nation is a mess and We need isolation to get control of Our Destiny.

Wicked's picture
Wicked 4 years 20 weeks ago
#13

Geithner is an ass. He is an incompetent boob, whose sole qualification for the job of Sec of Treas was complete failure in his job at the Fed. I wouldn't trust him to balance a checkbook.

When oh when we we have real progressive financial, labor and trade policies -- policies that protect American workers and the American economy? When will we have an immigration policy that is both sane and protectionist -- and punishes the employers not workers?

I am 61, and I have been waiting for the revolution for 45 years. I will probably die waiting.

Samuel Bryan 4 years 20 weeks ago
#14

The people of India can purchase our products or our assets.

We can encourage the former by increasing the taxes on stock transactions or on corporations.

We can also decrease the value of the Federal Reserve Note by just talking of replacing it, at least in part, with new United States Notes.

Both actions should stimulate employment.

Fire Geithner, or the man who hired him.

huffnpuff's picture
huffnpuff 4 years 20 weeks ago
#15

Strange that it's OK for other countries to protect their workers, manipulate currency and charge tariff's but the ass holes on the right squeal like a baby with a wet diapers. How can they think foreclosures and layoffs are good things?

I keep hearing the right say we want everything given to us. No, I just want them to stop supporting communist dictatorships that take our jobs away.

jmanstro's picture
jmanstro 4 years 20 weeks ago
#16

I think we need a model of the effects of our trade imbalances with various trading partners, combined with a grid of the values we would like to help create or sustain in the global marketplace.

As is often the case, those who feel strongly on one side or the other of this issue neglect to concede the important points of the other.

As a two-armed amatuer economist, I'll try to start a discussion. On the one hand, we have a benefit to businesses in the form of cheaper IT labor that translates through the imperfect sieve of competition and profits, down to cheaper cost of goods and services to the consumer. If I am running a shoe company, and I can get half of my IT expertise at 50% the cost of onshore, I should be able to sell shoes for less than my competitors, all other things being equal (which of course they are not in the real world). If IT labor available in the US is at full employment, it's also beneficial to have a secondary source, so as not to get into the high costs of a tight labor market, as we did during the run up to the year 2000. But alas, IT labor is not at full employment, as evidenced by the lawn mowing IT guys mentioned earlier. So here is a value to plug into the grid: Americans want to be fully employed in a job sector before we open the gates for outsourcing or immigration of labor in that sector. Can we measure and meter the off shore or immigrant labor perfectly under these circumstances? No, but can we do better than a one size fits all policy? Yes.

In the interest of time, yours, not mine, I'll leave it to your imagination to see the value in creating a list of 6 to 12 American values that should be optomized by an intelligent labor policy. Bring in the right amount of labor, to supplement the periods when american labor is not available at a price that can be estimated at normal equilibrium. Observe basic American and human values. Moderation, measurement, rational and objective policy weighing the value to America of being a good trading partner with friendly nations against the moral and social cost of exporting jobs when they are needed here at home. Can we turn the tap on and off? You can to a degree, but if the marketplace does not create steady demand, then we may need to create work temporarily to maintain the external sources for when we need them. Think public works, infrastructure, things that we must invest in, that we should invest in, at the time when the marketplace is not demanding services we know we will need again later.

hobbyfarmer's picture
hobbyfarmer 4 years 20 weeks ago
#17

MR. Geitner obviously has never worked a real job nor had to suppport a family on less than 40,000 dollars a year. Until the elite in this country are removed from places of power we will continue to go down hill. It makes me sick the notion the majority of us will probably die destitute at the rate of economic deterioration for the middle class in this country.

cruiserdude's picture
cruiserdude 4 years 20 weeks ago
#18

China since being given MFN Status have been Dumping on us from the get go and still are.Corporations complained to the Gov't about not being able to compete with China's Dumping.Soooooooo instead of our Gov't telling China that their "Free Ride" on our Markets is not going to be Free anymore and that they would have to start paying "Tariffs" on their exports to America our Gov't joins the "WTO" and passes "Free Trade" Legislation.This was the beginning of "Corporations" shutting down in America and moving to Countries with cheap labor and exporting back to America with "No Tariffs".Our Legislators knew that when they passed "Free Trade" it would be the outsourcing of "Hard Working American Jobs" and large unemployment.Even if President Obama gets a "Stimulus Package" passed it would only be a temporary solution to our high unemployment.If we want our Country to return to full employment (4%) we need our Legislators to end "Free Trade" and tell China that MFN Status will now have a "Tariff" on all of their exports to America and that their "Free Ride" has ended. "The Corporatist" in the House and the Senate need to step up to the plate and do the right thing for "Hard Working American Jobs" -------------------------- "End Free Trade Now"

jstufflebeam's picture
jstufflebeam 4 years 20 weeks ago
#19

Until WE THE PEOPLE unite in a great grassroots movement, get the $$$ out of Washington and the far right and corporations out of the Supreme Court we are going to continue to "go down the tube". Who has the time, energy and ability to unite people and form the grassroots movement then continue to breath life into it until is is strong enough to become a great wave? In the meantime we will continue to try to put out a million little, and not so little fires.

mswift's picture
mswift 4 years 20 weeks ago
#20

As an English professor, I am apalled at the pretty correct English, but horrendous pronunciation of many of the global outsourcees (such a word?). Further, a few years ago, most were actually polite, but now many are arrogant and downright rude. The problems in miscommunication are often so bad, that I have paid the extra fee to have a "north American" talk to me rather than an often incomprehensible voice in another country....The extra fee was well worth the time saved in avoiding frustration and aggravation...

LJB's picture
LJB 4 years 20 weeks ago
#21

Outsourcing is a huge problem and it seems no one cares. Bush, Clinton, and Obama all endorsed it. I know many people that were impacted due to this govt poolicy. Just recently (Minneapolis) RBC Dain outsouced and the employees had to go to a class to learn how to deal with the Indians. in short it says: they will say yes even though they maybe can't make a dead line. Don't commit. The concept of time is different for them, so they may be late for a meeting, ETC. It goes on and on and I would be happy to post this information from RBC. Can you imagine going to a job interview with those skills? So, under Obama the salaries in the US dropped almost 4% and it is going to get worse. I have no concept as to how it is good for the American worker to send a major industry like this overseas. I have lost my job twice since 2001. USB, WFC, BAC.. they are all the same. The govt. does not make policy, big business does.

Liberalism is killing America. Greed makes the rules. American workers pay the price.

Gnarlodious's picture
Gnarlodious 4 years 18 weeks ago
#22

I would suggest to every one of these "Borderless Nation" advocates that they give up on their gated mansions and tear down that wall around their house.

See how that works.

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