Princeton University’s Alan Blinder wrote in 2001, “Like 99% of economists since the days of Adam Smith, I am a free trader down to my toes.” According to a front page article by the Wall Street Journal’s David Wessel and Bob Davis yesterday, Blinder “remains an implacable opponent of tariffs and trade barriers,” but now worries loudly “that a new industrial revolution — communication technology that allows services to be delivered electronically from afar — will put as many as 40 million American jobs at risk of being shipped out of the country in the next decade or two.”
Owing to his aversion to tariffs and trade barriers, Blinder is not advocating protectionist measures. He is, however, seeking greater and more tax-advantaged efforts by U.S. firms to create the kinds of jobs that can’t be outsourced, along with more expansive government programs “for displaced workers than the few months of training it offers today.” Unfortunately, Blinder’s advocacy of more government involvement in the jobs sector and “tailored” employment supposedly not effected by developments in the world economy works at cross purposes with his desire to improve the lot of American workers.
As Blinder no doubt knows, the surplus of any good, be it boxed or sent electronically from overseas, creates new wants among people. To the extent that U.S. firms send work to India or China to be done more cheaply, the lower cost associated with the move frees up capital for new investment by businesses stateside. The lower cost of goods and services also accrues to consumers in such a way that they have capital beyond life’s daily necessities, and through savings, help to fund the formation of new companies that will create jobs in place of those lost.
As a free trader, Blinder also surely knows that the quickest way for a country to impoverish itself is to engage in labor that could be done more cheaply elsewhere. Indeed, labor is wasted when it is geared toward something that others can do.
Without profit, there is no investment, and if we seek to manipulate the tax code to create jobs that are hard to outsource as opposed to those that most profitably exploit our talents, we’ll be poorer for the outflow of capital from the United States. If anything, we should embrace the flow of jobs overseas for the market signal that wages here are rising, not to mention that businesses here are accessing the global labor force to maximize profits. The latter act will attract the very capital that will fund the creation of new work opportunities.
On the education front, Blinder’s desire to retool education in such a way that Americans will access jobs that are not “outsourceable” is both undesirable for workers and impossible on its face. It’s undesirable for the simple reason that jobs free of competitive stress breed indolence. And if jobs are created for their stationary attributes rather than for their economic value, wages will reflect this reality.
The undesirable harm to businesses will be twofold, given the loss of investment that will result from underutilization of labor, and lost profitability opportunities due to limited access to overseas labor. Businesses don’t exist for the workers, and instead exist for shareholders. What Blinder wants is certainly unrealistic given capital’s prejudice in favor of the most profitable investment opportunities.
Blinder’s desire is impossible for the simple reason that no one can know what skills businesses will and will not need in the future. Specifically, he calls for more in the way of civil engineers “who have to be on site,” but if the markets are not demanding that kind of work, how are we helping the American worker? In the 1970s, the Soviet Union was turning out ten times the number of engineers as the United States, but this fact in no way delayed its eventual demise. Successful businesses are that way for meeting previously unmet and unknown needs. To assume that governments somehow possess an insider’s knowledge allowing them to divine the proper training necessary for the work of the future is the height of folly.
Lastly, there will be higher costs associated with extra government training that will require capital to be redeployed from the private sector into the government domain. Since it is private capital that creates jobs, a solution that involves more government spending seems inimical to the needs of outsourced workers, not to mention those still employed who must pay for it.
In the end, it has to be remembered that as the only closed economy is the world economy, economic advances benefit us all. Rather than run from the growing pools of labor around the world, we should embrace their work efforts knowing full well that they’ll accrue to our standing of living, all the while maximizing the value of the work we seek here.
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