Re: Don't believe the offshore hype? (long)

Subject: Re: Don't believe the offshore hype? (long)
From: Dick Margulis <margulis -at- fiam -dot- net>
To: "TECHWR-L" <techwr-l -at- lists -dot- raycomm -dot- com>
Date: Wed, 10 Mar 2004 14:42:45 -0500

Richard G. Combs wrote:

This isn't rocket science, just basic economics. All the progress in human
history is a consequence of the drive to use resources (capital, labor, and
raw materials) more efficiently in order to produce goods and services more
cheaply. This process makes the world richer and everyone everywhere better
off in the long run.

Of course, in the short run, some people benefit immediately (people
working -- or applying for jobs -- at Compaq, which sold a few thousand
computers to the 24/7 call center), while others are temporarily hurt (the
laid-off US call center workers). Do we stop or slow economic progress,
making us all poorer, in order to avert or ease the temporary pain of a few?

... and other good stuff [lots snipped for space]

There is a lot of whose-ox-is-gored stuff going on in this discussion (not just in techwr-l, but in general). There is one broad topic I haven't seen covered, though.

What is the mix of economic activity that we need in order to have a sustainable economy? For example, if we export 100% of our manufacturing jobs to China (not an inconceivable eventuality), what does that leave us by way of primary industries--things that can bring money in or create money from resources? It leaves us raw material extraction (you can't mine American coal in China); agriculture (you can't export our soil, water, and climate per se, but only the produce from them); trade (import/export, design and marketing); I'm not sure what else.

Services can either be secondary (flipping burgers, clerking at Wal*Mart) or primary (banking and finance, consulting, IT), but the primary ones can all be done elsewhere just as manufacturing can be (as we are learning).

So here's the thing. All the people who now work in manufacturing and primary services--what are they going to do for a living in the new world economy? Are they going to go back to the mines, forests, and farms? Do we become an economic colony of China? Are they going to go to work for the new trading houses that are going to spring up to replace the ones that China closes in Hong Kong? (And why would China do that?)

The fact is that we don't really need a whole lot more people farming or mining or cutting down trees. So we will create an immense class of people with nothing to do, which isn't good for social order, let alone an economy.

I'm not trying to predict dire consequences or erect trade barriers. I'm just asking how an expanding world economy (China, India, and everyone else industrializing and raising their standard of living, all of which is a good thing) plays out in terms of providing fulfilling work appropriate to people's abilities all over the world. You can't have a model that says the people in the lower two-thirds of the bell curve (no matter what you're measuring) have to move to another country to find work. You can't have a model that says we don't have to do anything productive because the world will be so rich in goods that nobody has to work.

And what about population dynamics? Major industrial nations have negative population growth if you exclude immigration. That's a result of wealth and financial stability. So sure, all those poor people from the South can come and clean our offices and tend our children and flip our burgers. But if we suddenly have a lower standard of living because we've exported all the middle-class, middle-ability jobs, our birth rate will go up and then that equation doesn't work either.

So since none of this Malthusian crap is going to fly, my question remains: What is the mix of economic activity that we need in order to have a sustainable economy after we get through the present dislocations?

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