- The Washington Times - Monday, June 21, 2004

Earlier this month, following the March-May period during which nearly 1 million jobs were created, the Labor Department issued its first-ever report examining what proportion of layoffs was attributed to firms outsourcing work to overseas facilities. Confirming what nearly all sober-minded economists had known for decades, the report found that fewer than 2 percent of the 240,000 private-sector nonfarm workers laid off for at least 31 days during the first quarter “were associated with the movement of work outside of the country.”

John Kerry rode the outsourcing “crisis” as hard as he could until Super Tuesday, March 2, when he effectively captured the Democratic nomination. In the heat of the primary season, Mr. Kerry’s campaign suggested that President Bush’s nominee for manufacturing czar qualified as a notorious “Benedict Arnold CEO” because he opened a production facility in China to serve the local market. By that standard, of course, the $500 million Heinz ketchup fortune inherited by his wife, Teresa Heinz Kerry, would have been generated by a “Benedict Arnold” company, which for decades has been producing overseas to serve local markets.

In fact, as the Economist pointedly noted recently, outsourcing is a centuries-old phenomenon. As such, however, it has always accounted for a very small fraction of the total number of jobs created and destroyed by America’s phenomenal jobs-producing economy, which for decades has been — and remains — the envy of the industrial world. Indeed, America’s extremely flexible labor market, which routinely churns 2 million jobs each month, has generated a net increase of about 20 million jobs during each of the past three decades. During that period, total employment increased by more than 60 million jobs, or by 85 percent.

Throughout this wealth-generating process of “creative destruction,” as economist Joseph Schumpeter described it more than 60 years ago, the constant churning assures that the increases in employment are directed to growth industries where the new jobs can be most productive. Higher productivity raises a nation’s standard of living, a result that is confirmed by the fact that U.S. inflation-adjusted per capita gross domestic product increased by nearly 90 percent over the past three decades, rising from $18,400 per person in 1970 to $34,800 per person in 2000. The fact that 600,000 jobs were lost from 1970 to 2000 in the manufacturing industry, which has been especially affected by the outsourcing phenomenon, did not prevent U.S.-based firms from nearly tripling their manufacturing output.

There never was an outsourcing crisis, a conclusion evident from the fact that trade-related layoffs, when they peaked in 2001, accounted for only 0.6 percent of total U.S. unemployment. Nevertheless, Mr. Kerry successfully exploited a non-existing crisis. In the three months since Mr. Kerry wrapped up the nomination, nearly 1 million jobs have been created, but he continues his cross-country misery tour remorselessly proclaiming the worst economy since the Great Depression.

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