Ilana Mercer, December 26, 2003

The McKinsey Global Institute’s preferred idiom for what they do is, “To work with executives to improve a company’s performance.” But many understand that this is code for outsourcing work to China, India and elsewhere.


When a high-tech corporation hires McKinsey Global’s consultants – or ghouls with a similar mission – the writing is on the wall, at least for the company’s creative core: its engineers and programmers. McKinsey typically recommends “exporting” jobs to locations offering cheap labor. And when McKinsey gets going, it’s not call centers on the chopping block, but CAD centers. Execrable chief executives complement the McKinsey strategy by importing cheap labor through hustling H-1B and L-1 visas.


McKinsey has claimed that the savings it achieves for corporate clients by these methods are plowed straight back into the economy, resulting in a “reinvestment in new ventures and ideas.” That’s the way it’s supposed to work, and there is, of course, a large kernel of truth in this. At least stockholders – and they include a great many average Americans – benefit, because downsizing by “exporting” jobs and importing cheap workers reduces costs, thus increasing profits. Ergo, stock prices rise.


And it is this stock blip that has become the be-all and end-all of American corporate culture. There’s no mystique involved: The individuals leading corporate America do not stand outside the culture like Ayn Rand’s heroes, but are an extension of it. The trends that have infected American society contaminate the captains of industry just the same. For the corporate clients who court it, McKinsey fosters a short-term stock surge – but it does so by plowing under their rising talent, destroying the intellectual seed capital that ensures sustainable long-term business.


Indeed, the belief that this business model will see American high-tech workers elevated into ever “higher-value work” is a pie-in-the-sky fantasy. The reality, according to Professor Norman Matloff’s data, points instead to massive underemployment: Computer programmers are “working in nonprofessional jobs such as bus driver and real-estate appraiser.”


A reality that the IEEE-USA, the world’s largest technical professional society, is also hip to. The organization reports “the highest level of member unemployment ever recorded, more than double the levels reached in the recession periods of the mid-1970s and early 1990s.” Since U.S. IEEE members were far less likely to be out of work than their non-IEEE counterparts, these estimates are probably optimistic. The data portend a sharp decline in the overall demand for electrical, electronics, and computer engineers.


As I said in a previous column in this series, the improved productivity – the kind McKinsey is instrumental in achieving for its clients – is a form of market efficiency. But what form, and at what long-term costs? After all, a price – and this includes the price of labor – doesn’t have absolute value; it is a function of the subjective evaluations of the parties involved in the exchange.


Yes, all trade is ex ante beneficial to the traders because it is voluntary and hence desirable. But often lost in the reflexive praise for “market efficiencies” is (1) the role of state grants-of-privilege to the special interests involved in some “trades,” and consequently (2) the long-term costs to the legally disempowered.


For the high-tech firm and its newly acquired Indian techies, the benefits of job exportation or of the easily available, state-sponsored visa system, are obvious. For Professor Matloff’s American computer-science students, though, the harm is just as apparent. A vocal critic of H-1B and L-1 visa programs, Matloff has seen how his students, many of whom are Asian-American, are progressively prevented from practicing their professions in the U.S. because corporations are systematically replacing them with immigrants.


The labyrinth of work visas is one example of the fascistic government-business cartel in operation. This domestic partnership has become the model for a sordid series of global liaisons. Through the programs of the International Trade Administration, the Export-Import Bank, the Overseas Private Investment Corporation, the International Monetary Fund, and other oink-operations, taxpaying American workers are forced to subsidize and underwrite the investment risks of the very corporations that then give them the boot.


Clearly, government and the market today are inextricably enmeshed, and for this reason, trade is not free. Trade is regulated to the hilt, so that many corporations are now incorrigibly corrupt rent seekers. In this mixed-economy milieu, trends like exporting jobs, and importing cheap labor with visas that do not require employers to give hiring preference to Americans, do not epitomize the classical liberal idea of laissez faire.


Those who say they champion laissez faire must understand this, and stop confusing current reality with their proclaimed ideal. Rather than endorse the mixed-economy mess in our labor markets, they must uphold a principled alternative.


Government involvement with the commercial life of the community must be eliminated. This pertains to regulation of, as well as to all grants of special privilege to, business. Sanctions on corporations should be confined to removing all taxpayer subsidies – those issuing from programs like the Export-Import Bank are an example.


Certainly, to recommend restrictions on the movement of capital to foreign destinations is verboten for libertarians. Similarly, a free society cannot make it illegal for employers to transact over the Internet. The emigration end of the outsourcing problem is thus taboo for liberty lovers. The right of exit – the ability to take one’s money and run – must be inviolable.


But conversely, the immigration aspect of the job quagmire ought to become fair game for libertarians. America’s immigration policy manifests the transfer society at its worst. And as long as we have a profligate welfare state, there’s nothing wrong in stopping would-be parasites at the border.


Likewise, there’s nothing wrong in refusing work visas that will only result in the dispossession of perfectly qualified American workers – workers who are forced to subsidize the high-tech industry lobby and the hordes of immigrants they bring in. That policy is a gross injustice, one that cries out for moral opposition from those truly concerned with individual rights.


December 26, 2003

CATEGORIES: Classical liberalism, Economy, Immigration, Labor, Libertarianism, Outsourcing, Regulation