Friday, April 16, 2004


How outsourcing creates jobs: "Job creation is the number-one issue in the Presidential election. And yet, the creation of jobs is a mysterious, little understood process -- especially among politicians.... Labor legislation has the goals of fairness and job stability, but the more "protective" the legislation, the less efficient labor markets become. Anyone familiar with academic tenure or government employment knows that well-protected jobs also mean low productivity and limited flexibility. The IMF study found that employment protection legislation was a primary factor in job creation. Where protection is strong, new job creation is almost nonexistent (.25%), but where job protection is relatively weak, job creation is five times greater (1.50%). Where it is easy to fire employees is precisely where you will find the higher rates of job creation because employers face a lower cost and risk when they hire a worker. Freedom in the labor market keeps employees productive because they know that employers can easily fire them... By outlawing or restricting the outsourcing of jobs to cheap foreign labor you would greatly discourage the establishment of new jobs in the U.S. and encourage current employers to move overseas... Putting limits on foreign outsourcing will make the U.S. a less desirable location for employers and would put American companies at a disadvantage"

Tyler Cowen (of 'Marginal Revolution') is an economist specialising in the economics of culture & globalization. Here is his take on how French cultural protectionism has driven French films from the world's cinema screens: "American movies account for 80 percent of European box office receipts, although European movies have won only 5 percent of the American market .. No government can legislate artistic success. Film culture, like all culture, is dynamic. It isn't protection that it needs; it is stimulation. Without it, the form atrophies. If Europeans treat their films as weak, those films will become permanently weak."

The bigger European states can't handle serious economic reform: "Whether it is ... 'Lula' da Silva in Brazil, Leszek Miller in Poland or Gerhard Schroeder in Germany, the core dilemma is the same. Governments from the left get elected by campaigning against the policies of the financial elite - yet then find themselves constrained to adopt the very policies they campaigned against... In part, this ... reflects the economic stagnation that has crippled Europe since 2001. Unemployment is now 9.3 per cent in Germany, 9.4 per cent in France, 16.7 per cent in Slovakia and 19.1 per cent in Poland. That's a tough environment for any government to be clawing back welfare entitlements.... But to economists and the elite, those high taxes and regulation are holding Europe back - and threatening to pull it under in the future, as an ageing society will have even fewer workers supporting far more retirees. In smaller economies such as Australia and the Netherlands, voters accept that governments must tighten their belts"


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