Followers of the debate over outsourcing may remember N. Gregory Mankiw, President Bush's former chairman of the Council of Economic Advisors. In February 2004 Mankiw caused a political ruckus when he described the outsourcing of jobs as "probably a plus for the economy in the long run." Although this is an entirely unexceptional statement coming from an economist, it was deemed an inexcusable gaffe in a tightly contested election year, and the Bush administration backed away from it as fast as you can say "high unemployment in Ohio."
A week ago, Mankiw and a co-author released a 49-page report titled "The Politics and Economics of Offshore Outsourcing." A working paper of the resolutely right-wing American Enterprise Institute think tank, the gist of the paper is about as unsurprising as one would expect. Outsourcing: not a problem. In fact, "the empirical evidence suggests that the hysteria over offshore outsourcing is far out of proportion to its actual impact," and it may even "be connected to increased U.S. employment and investment rather than to overall job loss."
It will be interesting to watch the push-back against this paper, which includes a fairly comprehensive review of the academic literature on outsourcing. Certainly, How the World Works will keep a close eye on any upcoming ripostes. But the real interest offered by the report is not in its doctrinaire free trade approach to the question, but in its rather breathtaking explicitly political context and snarky tone. (At one point, the authors observe that holding an event discussing whether changes in the global economy have invalidated some classic free trade principles at the Brookings Institution "was akin to the Mayo Clinic hosting a discussion on the benefits of laetrile." AEI pot, meet kettle.)
More than half the paper is devoted to recounting the political debate over outsourcing during 2003 and 2004, and the central point of this is to rehabilitate Mankiw's image from politically clueless doofus to sensible economist. This is worth reading just for an insight into the politics of economics as practiced in the current White House. But my favorite part came in a discussion of how economists should talk about trade policy to ordinary people.
"Economists must be sensitive to the mythical tradeoff between trade and job creation. One good rule-of-thumb, when asked about trade policy, is to begin the answer by expressing concern about workers displaced by trade and emphasizing the importance of full-employment as a policy goal. This approach can seem unnatural to an economist: because theory and evidence indicates that there are net benefits to free trade, it feels strange to start a discussion by emphasizing the downside. The advantage of this approach, however, is that it establishes common ground with the skeptics, before rejecting their conclusions."
This is useful to know. But even better is the recommended language for discussing free trade/offshoring issues for maximum political effect.
Words to lose -------- Words to use
Competition ---------- Growth
Retool ---------------- Re-make
Protectionism --------- Isolationism
World trade ---------- Working with the world
Long term growth ----- Sustained growth
Global trade ---------- Trade
Cheaper -------------- Specialized
Forced to ------------- Take charge
Cost efficiencies ------- Meeting customers' needs
Making our budget ---- Meeting our needs
Do more with less ----- Do more with more
The authors list the Business Roundtable as the source for the above lexicon, so we can't give Mankiw credit for coming up with this wonderful display of politico-economic doublespeak. But I'm grateful for the lesson. Now we know for sure: less really is more.