Do you remember those Information Technology (IT) jobs that were going to take the place in the "new economy" of those outsourced manufacturing jobs? Don't bother to retrain. The IT jobs are leaving, too.
Knowledge work can be done anywhere there are educated people. These days that's just about everywhere: the Philippines, India, China, Russia, Eastern Europe, Costa Rica, and South Africa. Outsourcing of "new economy" jobs is exploding.
A recent article in Business Week ("The New Global Job Shift" Feb. 3) describes "dazzling new technology parks" on the outskirts of India's major cities where U.S. companies such as Bank of America, Texas Instruments, pharmaceutical companies, Intel, Lehman Brothers, Bear Stearns, Hewlett Packard, American Express, Dell Computer, Eastman Kodak, IBM, GE, Microsoft, Procter & Gamble, Fluor Corp, Electronic Data Services, Citibank, Boeing, mortgage lenders, Massachusetts General Hospital, and even architectural firms hire Indians to do knowledge jobs that Americans did three years ago.
In Bangalore Indian radiologists interpret CT scans for Massachusetts General Hospital, and Indian engineers design third-generation mobile-phone chips for Texas Instruments. Other Indians process claims for major U.S. insurance companies and home loans for U.S. mortgage companies. Indian molecular biologists conduct research for pharmaceutical companies. Indians analyze financial data for Wall Street, conduct R&D for U.S. high tech companies, and design software for Microsoft.
The competition for U.S. knowledge workers is tough. India has 520,000 IT engineers, and starting salaries are $5,000. Five years from now, Indian service exports will add $57 billion annually to the U.S. and European trade deficits, and four million IT jobs will have been moved to India.
The same thing is happening in China, a country with which the U.S. is expected to have a $125 billion trade deficit this year due largely to outsourcing. Microsoft alone is spending $1,150,000,000 for R&D and outsourcing in India and China over the next three years. In Microsoft's Beijing research facility, one-third of the Chinese programmers have PhDs from U.S. universities at U.S. taxpayers' expense.
Filipinos prepare Proctor & Gamble's tax returns and crunch numbers for audits conducted by U.S. accounting firms. Architectural work ranging from home design to multibillion dollar petrochemical plants is outsourced to Hungary, India, and the Philippines.
The U.S. gave away its agricultural knowledge, its education, its technology, its manufacturing jobs and is now giving away its IT jobs. The displaced manufacturing workers did not move to the promised greener pastures. What reason is there to believe that the displaced engineers, Wall Street analysts, accountants, scientists, and other knowledge workers will do any better when their careers are outsourced?
Business Week asked Harvard University globalist advocate Robert Lawrence what happens if America loses its knowledge jobs on top of its manufacturing jobs. His answer was not reassuring. He has no evidence—just faith—that globalization will make us better off.
What is going on when American policymakers and elites gamble with the livelihoods of tens of millions of Americans on faith? Business Week is correct when it says "economists haven't begun to fathom the implications" for America of globalization. But it is already obvious who the winners and losers are.
The winners are the foreigners with IT educations who live in countries where both the standard and cost of living are very low. The losers are IT employees in the U.S. where both the standard and cost of living is very high. Filipino engineers working for American firms at salaries of $3,000 annually, and Chinese and Indians working for $5,000 to $10,000 annually are unbeatable competition. For American university students struggling to prepare for high tech careers, the good times are over before they begin.
While jobs leave America and incomes fall, the eligibility of illegal aliens for U.S. Social Security and Medicaid benefits is a powerful magnet pulling in poor foreigners by the droves. The 1996 Welfare Reform Act did not end benefits for PRUCOL aliens, those who entered illegally and "permanently reside under color of law." People collect benefits who have never paid in. And it is American citizens, downsized and outsourced, who are saddled with the burden.
As most everyone knows, Social Security is in dire straits. But its funding problem has not deterred the Bush administration from drafting a treaty with Mexico that will give the Mexican government $345 billion in Social Security payments for Mexicans who have worked legally and illegally in the U.S.
Let's hope that the Bush administration is correct and that we are not starting a 30-year war in the Middle East by invading Iraq. Otherwise, the combination of war, job and income loss, unprecedented trade deficits, and the creation of Social Security entitlements for foreign nationals will break the U.S. long before another generation passes.
Before the U.S. can reconstruct the world, it must cease deconstructing itself. For that task, the country will need a champion.
Paul Craig Roberts is the author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice. Click here for Peter Brimelow's Forbes Magazine interview with Roberts about the recent epidemic of prosecutorial misconduct.
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