We're SUPPOSED to Lose those Jobs Overseas

Stephen Colbert had a piece on the other night about goats stealing American jobs (see below) that cracked me up, but also got me thinking about posting on this topic. So much has been made about Americans losing their jobs to illegal immigrants (though this isn't exactly true - they do the jobs few Americans are actually willing to do) and workers in China and India, especially in this tough economy. Many candidates use the "I'll keep American jobs at home" line while campaigning. (Other popular campaign tactics this year: bigotry, profanity, and porn - Carl Paladino does all 3! Way to go, Carl!). Of course, the dirty little secret is: we're supposed to lose these jobs. It is a function of larger economic issues. The truth is, you can't fix this problem simply by going at corporations - yes, I know, I can't believe I just wrote that. You have to address the education system, instead, something that most ignore.

So, here's how it works. We're a rich country. We happen to be capital rich (vs. labor rich), like most (if not all) developed industrial countries. If we do the economically efficient thing, we should focus on capital, not labor - capital is our comparative advantage. In the long-run, we want to export our abundant factor, capital, while importing the scarce factor, labor. Pretty simple...do what you're best at, and buy from others the thing you're not so good at (labor), which they happen to be best at. Each part of this maximizes economic efficiency, which lets us all get optimal goods for the lowest price (labor rich countries get capital for lower prices than they would if they decided to produce these factors themselves - hence the importance of international capital in poor countries).