BOOK REVIEW
A misguide to outsourcing, US economy
Exporting America: Why Corporate Greed is Shipping Jobs Overseas by Lou Dobbs

Reviewed by Daniel Griswold

Not content to rail night after night on CNN against disappearing jobs, greedy corporations and foreign outsourcing, Lou Dobbs has turned his nightly fulminations into a book of sorts. The best thing about Exporting America: Why Corporate Greed is Shipping Jobs Overseas is that it is mercifully short at 196 pages. Indeed, it is thin in every sense of the word, except its flabby reasoning.

The book is really a collection of anecdotes and opinions more suitable for the world of cable TV than a serious discussion about trade and the US economy. As with his TV show Lou Dobbs Tonight , Dobbs misses the big story while spinning off questionable assertions and a few factually challenged whoppers along the way.

We can all acknowledge up front that some Americans have lost jobs because of trade in general and outsourcing in particular. How many, we don't know for sure, but by all credible sources the numbers are small. The US Bureau of Labor Statistics (BLS) reported earlier this year that only about 2% of recent layoffs involving 50 or more workers could be blamed on import competition or foreign outsourcing. Of the remaining 98% of displaced workers who lost their jobs because of factors other than trade - new technology, domestic competition, changing consumer tastes - Lou Dobbs says virtually nothing.

The much-cited Forrester Research studies project 3.4 million jobs will be lost to outsourcing by 2015. But that amounts to about 257,000 jobs per year - a drop in the bucket in an economy that employs 138 million workers and has 300,000 people applying for unemployment insurance benefits every week, even in good times. According to the BLS, 15 million jobs are permanently eliminated - and even more are created - in a typical year. In a dynamic market economy such as ours, companies are eliminating and creating millions of jobs every year. Yet to Dobbs, the small share of that job churn attributable to trade and outsourcing is a national scandal.

Even his anecdotes miss the mark. Dobbs bemoans the fact that Travelocity, the online travel company, recently announced it would move 250 mostly call-center jobs from Clintwood, Virginia, to India. The company is already losing more than $50 million a year. If Dobbs had his way and outsourcing were not an option, Travelocity and many other information-technology companies would have no alternative but to go out of business or move their whole operations abroad - eliminating jobs for workers across the pay scale, not just the $8-an-hour jobs that are being outsourced.

Dobbs also systematically ignores or discounts the benefits of trade and outsourcing to the US economy and workers. Free trade is a working family's best friend, delivering lower prices, more choices and better quality to shoppers by protecting them from potential domestic monopolies. Yet to Dobbs, those benefits are dismissed as "helping consumers save a few cents on trinkets and T-shirts". Note to Lou: A lot more Americans consume those products you so lightly dismiss, than produce them.

Exporting America contains a number of factual and analytical bloopers. Among my favorites:

On page 38, Dobbs claims that Americans are "buying most of our goods from other countries". Last year, Americans produced $3,663 billion worth of durable and non-durable goods in the United States while they imported goods worth $1,260 billion and exported $713 billion. So clearly most of "our goods" are made in the good old USA.

Then on page 138, Dobbs asserts that since 1976, "We've increased our consumption - and reduced our production - at such a staggering rate that we find ourselves under a crushing level of debt." Whether the level of US debt is crushing or not is a matter of opinion, but by what conceivable measure have Americans "reduced our production"? Since 1976, US real gross domestic product (GDP) has more than doubled, from $4.5 trillion to $10.7 trillion (in 2000 dollar value). Real GDP per capita in that same period has grown from $20,830 to $35,732. Real output of goods has more than doubled since the 1970s. That looks more like a staggering increase in production.

In an 11-page chapter grandly titled "Globalization", Dobbs dedicates a third of its pages to a table that supposedly shows that more than half of the world's largest economies are, scandalously, corporations! Something must be obviously wrong with a world in which the total annual sales of the world's largest corporation, General Motors, is greater than the entire economy of mighty Denmark.

Actually, Dobbs commits a basic, albeit common, error in the table, which measures the size of national economies by GDP and the size of companies by total sales. This is really comparing apples and oranges. GDP is a measure of value added, of new wealth created each year. A company's total sales include not only the value added by that company, but the value added by all of its suppliers.

The more valid comparison would be between GDP of countries and the value added (roughly speaking, the annual profits) of the world's largest corporations. In his excellent new book Why Globalization Works, columnist Martin Wolf of the Financial Times slices and dices this common fallacy among anti-globalizers. When companies are measured by their value added, and not total sales, the number of "corporate economies" in the top 100 falls to about half of what Dobbs' faulty table claims. Only two, ExxonMobil and GM, rank in the top 50, and then just barely.

Like many critics of free trade, dating back to the mercantilists of Adam Smith's day, Dobbs sees the trade balance as the great measure of a nation's success or failure. "Germany, Japan, Russia, Canada, Brazil, and China have enormous trade surpluses and are the clear winners," he asserts, while the US, Australia and other deficit countries "are clear losers". But if trade surpluses are so great, why has Japan suffered more than a decade of stagnation and why are Germans saddled with chronic, double-digit unemployment? How many workers in "loser" America would willingly swap places with their counterparts in such "winners" as Brazil, Russia and China? No thanks.

Dobbs predicts that if we do not stand up to those big, greedy corporations and reduce our dependency on imports, "the American worker faces less opportunity and lower pay in the years ahead". I wonder if Dobbs could name a single country that has taken his advice and prospered. In fact, those countries where workers enjoy the most opportunities and best living standards today are invariably those that are most engaged in the global economy.

Sadly, Lou Dobbs has become the Dan Rather of financial journalism. He thinks he knows the truth before actually investigating a story and he latches on to whatever documentation he can find, no matter how questionable, that seems to support his thesis. That fact has been on display night after night in one small slice of cable-TV land. Now we can pay $20 to read the transcript.

Exporting America: Why Corporate Greed is Shipping Jobs Overseas by Lou Dobbs. Warner Business Books, August 30, 2004. ISBN 0446577448. Price US$13.97, 196 pages.

Daniel Griswold is director of the Center for Trade Policy Studies at the Cato Institute in Washington. Published with permission for the Cato Institute.