Ilana Mercer, June 4, 2003

India and China are where the “new economy” is really humming. Columnist Paul Craig Roberts, a long-time chronicler of the trend, describes “dazzling new technology parks on the outskirts of India’s major cities,” where top U.S. companies in the fields of finance and banking, electronics, even architecture “hire Indians to do knowledge jobs that Americans did three years ago.” Who knows, your next mammogram or CT scan may be interpreted by an Indian radiologist. Be it research and development in molecular biology or in software and hardware engineering, Indians are doing it for us.


Ditto for China, says Roberts. There, Microsoft employs Chinese programmers, a third of whom got their Ph.Ds in the U.S., courtesy of you, the taxpayer.


The evidence of the outsourcing of high-income – and, in particular, high-tech – careers is not anecdotal. As I argued in part 1 of this series, something is happening to American high-productivity occupations. And big government is at the root of the rot. Perversely, outsourcing is a healthy response to a business climate made moribund by an omnipresent government.


It’s worth mentioning, if only in passing, that government is also outsourcing. A welfare recipient in the Garden State who wishes to check up on the status of his welfare check will find himself dealing with a call center in … Bombay, India. But this is really a minor detail. Such a practice is perfectly compatible with the damage government’s minimum-wage laws do to business and workers on a daily basis.


So when government, through these laws, legislates unemployment in its own country, while hiring cheap, foreign labor below the minimum wage, it’s being true to its destructive “principles.”


Business can supply jobs. American workers want to apply for them. But thanks to minimum-wage laws, both parties are prohibited from entering into these mutually consensual and mutually beneficial agreements. You do know who then is responsible for welcoming illegals and turning a blind eye when these foreign non-nationals vie for jobs that have been legislated out of the reach of poor nationals.


Still, it’s virtually impossible to impress on people that big government, not big business, is what plagues them. Or that people who make a living through non-coercive voluntary exchanges on the free market are the moral superiors of people who survive by parasitically living off others and collecting their wages at the point of a gun, as politicians do. Sadly, when the leeches who consume almost half of the nation’s income are finally blamed for the economic hardship the country is in, it is for not being sufficiently meddlesome.


In the past, when liberals hollered about the indignities of downsizing, free market thinkers were vindicated. Media liberals looked only at the politically connected special interests, who often had vocal union representatives, themselves a cause of job demise, who screamed blue murder when jobs left their neck of the woods. These protectionists ignored the fact that, after unions inflated the wages for low-skill jobs, the outsourcing of these jobs reduced the costs of production and prices, and increased profitability, generating employment in other industries.


In the past, complaints about downsizing in specific industries coincided fantastically with increased overall employment figures and a rise in the American standard of living, as well as in real income.


The opposite is the case now.


In addition to the loss of high-productivity jobs, standards of living continue to plummet; there is a steep rise in unemployment, in the national debt and in deficits, as is there a decline in spending, savings and in the value of the dollar.


In “Basic Economics,” Thomas Sowell provides an analysis that takes as a given that, while low-skill jobs will move offshore, American innovators will retain their comparative advantage in the development of say, computer technology and software design.


He stops short of postulating, “What if we don’t retain this edge?”


Sure enough, across the U.S., American engineering teams are not exactly putting their heads together and trying to come up with a vision for new products, while teams of Chinese beavers assemble the guts of the widgets. Skilled workers are not being freed up to do what they are allegedly best at doing. They are, rather, being phased out, as innovation moves off shore.


One orthodoxy is to insist that we’re doing more with less – we’re manufacturing more than ever, and we’re becoming increasingly efficient, which is why, apparently, we don’t need as much skilled labor.


There’s something slightly off kilter with this picture too. First, we do need innovators; we’re just getting them elsewhere. Second, compared with foreign nationals, masters and doctoral degrees awarded to U.S. citizens in engineering have been declining precipitously. Would this not increase the demand for the few that are qualified?


Not if they live among swarms of locust-like tort lawyers and bureaucrats.


If civil society is the sphere in which people accomplish things by engaging in productive, peaceful, and voluntary exchanges, the State is the sphere where domination is achieved legally by force and destruction. Of late, the State has been encroaching on ever-larger portions of civil society. Under Bush, the shift of resources from the productive, private sector to the unproductive bureaucracy and military-industrial complex hasn’t been equaled in decades.


Americans have been nudged into cultivating a comparative – even an absolute – advantage in violence and force, while losing their edge in productive innovation.


Our main export now is democracy. Exporting democracy involves wasteful, wealth-destroying political and military might. So far, it has entailed placing Iraq on the American payroll and much more. The economic abyss we’re descending into is, I believe, because the American economy has reached a breaking point.


The State is seriously threatening to absorb civil society.


As Ayn Rand did, I believe that the well-being of a free and prosperous society rests on those at the “top of the intellectual pyramid,” whose energy and “creative over-abundance” redounds to the rest. Their dwindling presence in the economy is a significant symptom.



June 4, 2003

CATEGORIES: China, Economy, Government, Labor, Outsourcing, The State & Statism, War

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