by Victor Davis Hanson
National Review Online
One of Sen. Barbara Boxer’s sharpest charges against challenger Carly Fiorina is that, as CEO of Hewlett-Packard, she allowed thousands of jobs to be outsourced overseas — depriving U.S. workers of income while piling up profits for executive grandees like herself.
Outsourcing of both manufacturing and service jobs has become a wedge issue. It stings especially when times are tough. By Election Day, outsourcing will be portrayed as equivalent to child-molesting in its depravity. But the charge of greed and lack of economic patriotism is disingenuous for a variety of reasons.
Remember that outsourcing can be insidious — it knows no political bounds. When presidential candidate Sen. John Kerry once equated outsourcing with treason by promising to go after “any Benedict Arnold CEO or company [that moves] jobs overseas,” he was forgetting that his wife’s billion-dollar-plus fortune and thus his own luxury power boat were derived from the profits of the American-based H. J. Heinz Company, which made such gargantuan profits in part because it moved dozens of its American operations all over the globe. Take the most liberal icons of the business world — from Bill Gates to George Soros — and you will find ownerships of, or investments in, American companies that outsource production overseas.
Second, is there something called “insourcing” to explain why a Toyota or a Honda relocates plants to the United States, depriving Japanese workers of high-paying jobs in order to maximize profits for its corporate hierarchy? When Mercedes opens an American car-making plant, are we supposed to applaud a foreign company’s hiring our workers and attempting to share some of its success with the homeland of its customers or lament the loss of German jobs? Mercedes is a hero to us but a traitor to Germany?
Do we complain that China and India seem to have outsourced most of their higher-education responsibilities — from engineering PhDs to MBAs for CEOs — to American universities? And in turn are we even angrier that a number of American universities are opening branch campuses in China and the Middle East — depriving Americans of both staff and instructional jobs — to better capitalize on this new global market in higher education? Are there Japanese Barbara Boxers demanding an end to Nissan plants in the American South or Indian populists running Boxer-like campaigns by crying to stop sending Indian talent to be educated at an outrageously expensive Yale?
So apparently the problem is not so much shipping some jobs overseas, but shipping more jobs out than are shipped in. Or does the anger arise because we draw in foreign capital for our own labor in some areas, but not enough in others to balance it out? Should we worry that we are assembling some American-designed printers overseas or be relieved that we are taking over more and more of the intricate manufacturing of the most sophisticated jumbo jets in the world?
In other words, no one knows exactly all the real costs and benefits of outsourcing, or how to turn the equation to our sole advantage, or why we seem to do well in one area, but not so well in another, or whether outsourcing helps many of the very developing countries that buy our American-designed products. When we fail to beat the competition in high-end, highly skilled manufacturing, then we turn to damn those who sometimes outsource the fabrication of products that require less skill.
Neither a Democratic nor a Republican president has been able to reverse the ongoing trade deficit. As Senator Boxer damns the outsourcing of Hewlett-Packard jobs, she offers little in the way of concrete answers as to how to stop it. Would she raise tariffs on imported goods (in expectation that other countries would not retaliate), or pressure a dollar-rich China to kindly end devaluation its yuan and politely quit its mercantilist policies, as both Bill Clinton and George W. Bush tried but failed to do? Or perhaps she could reverse her stance on the cutoff of California water deliveries, increase the acreage of the state’s productive farms, and thereby win back more jobs for California as America was again able to export agricultural products as it once did?
Democrats privately know that free trade and cheap manufacturing abroad result in cheap consumer goods at places like Walmart and Home Depot, which expands the purchasing power of the strapped American consumer. Republicans stress that in the open arena of trade, the more competition, the more pressure on American firms to stay lean and turn out better products at lower costs.
One reason why a Hewlett-Packard, or an Apple or a Microsoft, is so successful is that the skilled engineering, administration, and financing of such global high-profit operations draw on unique American talent and labor, while the often less-skilled fabrication of the resulting consumer goods is in part outsourced to places where labor regulations, wages, and attitudes tend to be very non-American. Would we prefer it the other way around — $100,000-a-year Chinese engineers traveling to San Jose or Gilroy to teach our unskilled workers how to assemble their hot-selling, freshly designed electronic gadgets at the rate of $1 an hour?
Because we do not wish to lower wages to China’s levels, or emulate the working conditions of Mexico — or see our companies go bankrupt with goods priced well over unforgiving global going rates — the only answer is upping the value of American labor and skill sets. That way we can continue to design the world’s top appurtenances, and to figure out the practical problems of their fabrication, while allowing the less-skilled labor of developing countries to put the actual product together — and we can do that to such an overwhelming degree that we keep everyone from design engineers to accountants to manual writers employed at very high wages. They in turn can afford to pay everyone from hard-working baby-sitters to carpenters to restaurant workers wages that are likewise well over the global norm.
But such an idea requires that Americans encourage business innovation, ensure the world’s most educated and flexible work force, and create a tax climate where productivity is encouraged rather than punished. All of that would require a radical change in the political class’s understanding of the effects of taxation and regulation. It would also require radical changes in American education — questioning the ethics of teachers’ unions, reconsidering ossified ideas like tenure, and junking an increasingly uncompetitive and therapeutic school curriculum.
Instead, at present — given a radical divergence in work ethics, wages, and business climates — there is a reason why most foreign automobile manufacturers that locate here do so in the South rather than near Detroit. European or Asian high-tech firms go to places like North Carolina’s Research Triangle and California’s Silicon Valley, where the local schools ensure a competent work force, and not to rural California, where school test scores are at or near the bottom of the country in math and English.
But again, all of that is too complicated for a Barbara Boxer. Instead, outsourcing is demagogued as greed versus liberality, patriotism versus treason. The subtext is the looking-glass notion that our middle-class and poor citizens must be able to buy iPods and DVDs at Walmart at rock-bottom prices, while we demand that the workers who manufacture them get paid over $20 an hour.
Like it or not, globalization has done away with such fantasies, especially the notion of a privileged U.S. populace that by birthright deserves its exalted position. From here on out, our lifestyles and our very futures hinge on our collective productivity, innovation, and imagination. If we still had the best educated and most highly skilled work force, the most productive work ethic, the most business-friendly environment, and the most responsive and fiscally sound government, then a flexible and constantly changing America would always be creating high-end jobs for its citizens, well ahead of the competition, with little worry over the fact that some lower-end tasks of assembling consumer products at times might migrate elsewhere.
Anger over outsourcing is thus a symptom of a larger malaise. Our politicians assume that Americans deserve both cheap consumer products and high-wage manufacturing jobs — and that we will get both because Americans are the best educated and most productive workers in the world, and our managers and designers operate in the most fertile business and intellectual environment on the planet.
The current financial and political climate suggests that is not quite any longer true. So anger follows when unemployment is over 12 percent in a bankrupt state like California. On cue, in comes a railing Barbara Boxer — whose policies had a lot to do with punishing taxes, layers of government red tape, and therapeutic education — charging that Hewlett-Packard built some things overseas when it could not make a profit doing so here.
If that is to be the analysis of and solution for outsourcing, then California and this country will see far worse days ahead.
©2010 Victor Davis Hanson