Ilana Mercer, December 19, 2003

For at least 4,730 IBM computer programmers, the Christmas and New Year holiday will not be too festive. According to the Wall Street Journal, IBM plans on “moving their work” to India, China and “elsewhere.”


It’s not alone. High-tech companies like Microsoft, Oracle, Sun and others have similar plans. Citing research by International Data Corp., the Journal estimates that by 2007, 23 percent of all information-technology services jobs will move to “emerging markets.”


If the trend continues, we may see a dramatic shift in the labor landscape: more retail jobs, fewer knowledge jobs.


Understanding this impetus begins with a recognition that we do not have a free market. Like the Aliens in the Sigourney Weaver sci-fi films, the tentacles of the interventionist state innervate and enervate everything.


Because we live and work ensnared in a seamless web of statism, market solutions are often circuitous responses to the government’s laws and wars. These statist assaults on our prosperity ought to be the proper focus of the fight.


Unarguably, high-tech customers drive each company’s need to stay competitive. The message IBM consumers convey through their buying patterns is: “Keep those prices where we want them or else we’ll purchase our software from Hewlett-Packard or EMC Corp.” Indisputably, offshoring or “exporting jobs” is a market efficiency. These companies must meet the challenge of competition by making their products more appealing to buyers. And in the current commerce-averse climate, this challenge necessitates moving operations to where highly skilled labor is infinitely cheaper: China, India, Russia.


Furthermore, it is far preferable that IBM “export jobs” to retain a competitive edge and stay in the game, than lose market share and be forced to fold up and fire all its employees. High-tech companies increasingly must offshore or eventually risk going belly up.


If what I’ve delineated is a healthy, consumer-dictated, competitive response, what then of my claim that offshoring in the high-tech industry is a response to a shackled and not a free market? Aren’t we, after all, as free as can be? At least, that’s an inanity this administration has hammered into a good many hollow heads.


Inflation is one good gauge of the degree of freedom we enjoy. Observe how American high-tech firms are accused of taking advantage of “cheap” foreign labor. This implies that the “cheap” wage price is the incorrect or “unfair” price, and that the American salary approximates the right remuneration (whatever that means).


However, an Indian technology worker lives very nicely on his “cheap” $6,000 annual wage, while an American with a similar skill-set needs 10 times as much to make do. In 1960, the average annual salary of an American was about what it is today for our Indian “techie,” and – to paraphrase the song – the living was just as easy.


Without belaboring how government spending and the Federal Reserve System brought about this state of affairs, suffice it to say that if not for the inflation caused by their money-printing, credit-creating profligacy, U.S. wages and domestic prices would probably be falling now, making offshoring far less attractive.


How else does the American state benefit China and India?


As I wrote previously, “To the cost of the assorted alphabet soup of regulatory agencies a corporation must pay off [in the U.S.], add exorbitant corporate taxes and expenses like workers compensation insurance … as well as the cost of a government rape known as Social Security.”


“Buried under regulation” is how business ethicist Tibor Machan describes the plight of companies: “One license after the other, one permit after the other … [and] zillions of forms” to fill in daily. What with the legal obligation to give an employee practically a lifetime of benefits, who can afford to start a business? he asks.


If the ratio of lawyers to engineers in an economy is a measure of statism, then the preponderance of lawyers we suffer gives our competitors yet another edge. When indicting culprits who gum up the economy and drive business offshore, please find against tort lawyers.


There is something to be said about the concept of a “tipping point.” It’s not one thing that causes a rivet to pop in an economy, but many (although the state is invariably involved) – and it’s not their added effects that bring about a fundamental change, but their synergistic workings over time.


Clearly, foreign investors in China and India are not subject to more than 180 federal labor laws; to an Equal Employment Opportunity Commission, an Occupational Safety and Health Administration, an IRS and an EPA; or to a work force where merit is marred by affirmative action.


Our competitors might not have been certified “free” on the various indexes of economic freedom, but they haven’t yet reached the tipping point.


Other tilting factors: We spend more than any other nation on the military, and the nation’s culture reflects this. While we hound and scorn self-made productive individuals like Rush Limbaugh and Martha Stewart, we promote and lionize the parasitic, wealth-destroying stooges of the state – politicians, bureaucrats and their assorted foot soldiers.


As we continue to hone a global advantage in the use of state force, other nations – free of such drains on their economies – can concentrate on prosperity-generating market activities and begin to chip away at America’s economic armor.



December 19, 2003

CATEGORIES: Affirmative action, China, Economy, Inflation, Labor, Outsourcing, Regulation, Technology, The State & Statism