Posted on 05/18/2004 3:43:32 AM PDT by DeuceTraveler
The great outsourcing controversy is now over. All you information technology workers who like to suggest that my job should be outsourced whenever I write on this topic can now put away your poison pens. In elections last week, the voters of India fixed the problem by turning their country away from liberalism and back toward statism. Should India's new leaders follow through on their campaign promises, there will be a lot fewer businesses there doing outsourcing or anything else.
For 100 years, India was the crown jewel of the British Empire. The nation's best and brightest were often sent to British universities like Oxford, returning to India as public servants. By 1947, when India was granted independence, it probably had the best-trained bureaucracy in the Third World.
Two problems arose from this. First, many of India's bureaucrats had picked up ideas about socialism while studying in Britain. In the 1930s and 1940s, it was just about impossible to hear anything good said about the free market at a British university. This eventually led Britain itself to adopt socialism after World War II and India's leaders were quick to follow its lead, nationalizing industry, adopting 5-year plans and all the rest of the socialist dogma of the day.
Second, India's superb bureaucracy seemed to make socialism work. The widespread failures of socialism in other newly independent colonies was often blamed on undertrained and unskilled bureaucrats that lacked the expertise to implement national economic planning. To the extent that this was true, India had a leg up. As a consequence, socialism seemed to work there for a while.
Of course, the problems inherent in socialist planning go far beyond what even the best, most well intentioned bureaucrats can overcome. As a consequence, Indian industry became increasingly uncompetitive, requiring higher levels of trade protection to keep it afloat. Although the economy grew, this was mainly due to the rising population. On a per capita basis, growth was much slower--too slow to make a dent in India's massive poverty. Only technological advances imported from elsewhere allowed agricultural production to increase enough to avoid starvation. The nation's entrepreneurs and professionals frequently emigrated to places where their skills earned a better reward.
In the 1980s, India's leaders began to open up the economy just a bit. But major reforms were not instituted until 1991, in the wake of the Soviet Union's collapse. Industrial controls were dismantled, trade protection was reduced and foreign investment welcomed for the first time. Previously, India had discouraged foreign capital, believing that foreign aid was preferable. But all foreign aid did was paper over the inherent failure of planning, which allowed the country to put off liberalization for decades.
Opening the Indian economy led to a very rapid increase in trade, from 15 percent of the gross domestic product to 30 percent by 2002. Although the reduction in tariffs from 128 percent to 30 percent also led to a sharp increase in imports, exports increased even more. This proves an important point always lost on protectionists. Import barriers lead to a reduction in exports as well as imports. Thus they often make the trade balance worse, rather than better.
Basic trade theory says that nations will tend to export whatever they have a lot of. In India's case, it obviously has a lot of labor. Moreover, its legacy as a former British colony means that many of its workers are well educated and speak English fluently. This naturally led to the establishment of many businesses providing labor-intensive high tech services, such as keying in vast amounts of data. Also, India benefited from having many successful nationals living in Europe and America, who knew how to exploit its advantages once given the opportunity.
Growth of the outsourcing industry led to growth of a true middle class in India. Although wages are still much lower there than here, the gap is closing fast. IT workers in India have seen their wages rise 15 percent per year, which is quickly eroding their cost advantage. As a result, outsourcing companies are working harder to compete on quality and are even establishing subsidiaries in foreign countries as Indian wages become less competitive.
The Hindu nationalist party, which had been in power since 1998, strongly supported India's high-tech industry. But last week, it was thrown out of office by the left-wing Congress Party, which ruled India during the heyday of socialism in the 1950s and 1960s. It capitalized on resentment by the poor against the growing middle class. The Congress Party promised to slow reform and redistribute income. Fearing the worst, the Indian stock market has fallen sharply since the election.
Thus India's voters may unwittingly have solved the outsourcing problem here in a way that America's protectionists never could.
Bruce Bartlett is a senior fellow at the National Center for Policy Analysis, a Townhall.com member group.
Ping.
Excellent article! Truth is, the United States is not far behind. It won't matter because the Muslim terrorists are on the verge of having a killing field day, right here in the USA, after John Kerry and the Democrat Party take control of the USA government. Not looking good! Well, it was nice while it lasted. We only have ourselves to blame! We stood by and let it happen!
In the 1930s and 1940s, it was just about impossible to hear anything good said about the free market at a British university
US 2004?
BUMP FOR ARTICLE
While local figures blamed the proposed economic reforms of the newly elected socialist government, major media figures in the US were stating that the loss was clearly the fault of American President George Bush.
US 1960
And although the market's did rebound somewhat today (last night) I'm certain that they will punish India for making a foolish choice. It's not just a question of stability and the associated risks, it's a question of properly assessing the cost of doing business.
Bump for history and world politics. The situation in India right now is one of the most fascinating socio-political-economic developments anywhere in the world. It's too bad most people aren't the least bit interested in the news outside of their country.
I'm still wondering about this win for the socialists. I heard they really don't have much of a domestic plan except to punish businesses, and they don't have much of a foreign policy plan either, but are historically pro-Russian, pro-Chines, anti-Pakistani (even more than the old party), and anti-American.
The longer we treat outsourcing as an electioneering "red herring" of the left the more it will a source of real and lasting political gains for the opposition.
Their penalty is to destroy life for everyone. We in America are paying the price for the rise of another round of communism and radical religons based on old ideas.God help us.
Now, for all of you who think outsourcing to India may be ending of its own collapse - think about this: your insurance company, your bank, and your government has sent your personal information to India where US courts have no jurisdiction. What will happen when your identity is stolen? Who will guard your information now?
Nonsense. Read up on something called "The law of Comprative advantage." And quit crying in your Latte.
Won't happen. Trust me. Not even close.
As I said, I have yet to meet someone with a "Masters in Economics" that knew what they are talking about. You have proved my point. Given your infantile attempt at repartee with your "crying into you latte" your "degree" also looks to be of recent mint and therefore impresses even less. The fact that you think the concept of "comparative advantage" is somehow an esoteric notion reserved for "Masters of Economics" and thus requiring your explanation further suggests immaturity on your part - of mind if not of flesh. Knowledge is yet to come for you, young man.
I make a great deal of money on international intellectual property - how would you know my circumstance? Here again you confuse knowledge with ego, and self-importance with actual importance. My concern is for my nation, my fellows and my progeny not myself.
Believe me I had little respect for you when you start touting that "Masters in Economics" BS but now after all this ignorant and pissant huffing and puffing I have none whatsoever.
You need to figure out that you cannot insult someone that has no respect for you, and believe you me people have no respect for the combination of mediocrity and egomania - at least people that matter. You are not going to get very far with your attitude. Spend some time in the real world with real people of real accomplishment and attainment. You might actually learn something. If not it will be you that is crying but it will be in to beer in some dive somewhere, and your furnished room shall be waiting upstairs.
Believe me, I wish with all my heart and soul, I could believe what you say! But, other great and powerful countries and civilizations have destroyed themselves from within, so why is the USA immune? I mean John Kerry should be treated as the fool he is by an overwhelming majority of American voters. The fact that he has as much support as he does does not bode well for the continued future existance of our country!
Well the writer lost me right here. If there is some obvious difference between liberalism and statism someone needs to explain it to me. I don't see it.
The writer may have been using liberalism in its older meaning. What is called liberalism now in this country is what used to be called by other names. I won't attempt to go into all of this but I suspect that is what is going on.
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