Saturday, November 12, 2005

Welcome to Freer Markets

Tibor R. Machan

"According to a confidential memorandum, I.B.M. is cutting 13,000 jobs in the United States and in Europe and creating 14,000 jobs in India. From 2000 to 2015, an estimated three million American jobs will have been outsourced; one in 10 technology jobs will leave these shores by the end...." This was the beginning of an Op Ed piece title "A Passage to India" by Suketu Mehta back on July 12, 2005. The author shows us how far India has come into the contemporary world and that it is moving more and more toward a society with relatively free institutions, including a free market.

Some lament this fact but I, for one, am mystified why anyone would consider it bad news. It is great news, for Indians looking for decent jobs; it's good news, also, for IBM and other firms that can benefit from the skills and education of Indians, where in previous times they couldn't and those in India had to go hungry or take jobs with very low pay, and it is wonderful news to customers of IBM who now can spend their saved money elsewhere and thereby create more jobs.

About outsourcing, as we discussed it recently in my business ethics class: We all do it routinely, in disparate pockets of the market place, everywhere around the world. For example, for twenty years after I was discharged from the US Air Force I cut my own hair. I feared someone else touching it, lest they ruin my fabulous flat top. In time, however, I was weaned from this stupid notion and started getting haircuts at barbershops. But now and then I leave one barbershop and start up with another—outsourcing, once again. And about a year ago I stopped the services of one house cleaner and hired another. I also switched grocery stores a couple of months ago and have starting taking my laundry to a new cleaner. Then I switched from one gym to another. And on and on it goes with nearly all of us. I also gave up my small American SUV and purchased one of those small but tall little cars from somewhere on the Pacific Rim. Outsourcing again, with all the other happy outsourcers.

In short, we are all outsourcers big time, whether we admit this or not.

As Prof. Joe Cobb, an economist, explained to my class in his recent guest lecture, people who protest this are suffering from a major confusion. They think of markets as if friends and family members populated them. To those of course we do often owe special obligations. Or they imagine we have such special obligations toward strangers who might be~Americans or live nearby. But people who work for us are almost always strangers, not friends and family and we interact with them for a limited but mutually beneficial, namely commercial, purpose. That's mostly it; although one can come to befriend one's butcher or hairdresser or even auto-mechanic and in time even start to date one of them. These categories are not rigid or fixed. But in the main, commerce is carried out with personally unknown individuals and they and we ought all to be fully aware that in such relationships loyalty is very secondary. What counts for most is whether a good deal can be struck.

Of course Karl Marx and his pals thought this to be alienating but that's bunk. It isn't alienating because most of those with whom we do business never were our bosom bodies in the first place. They were strangers all along and at one time this meant they couldn't do any good for each other at all. But with the thriving of commerce around the world, the increase of freedom of trade and of capital and labor movement, the source of mutual benefit, as well as with occasional volatility, strangers have become important sources of well-being for most of us.

So let's give at least two, if not three cheers to outsourcing. It isn't all that new a phenomenon in any case and has been supported by intelligent economists for years, one of them being, of course, Adam Smith himself. His The Wealth of Nations could use a bit of study by the likes of those whom Suketu Mehta was trying to educate about the elementary economics of the situation. It might make them happier about this global development.

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