Tuesday, July 05, 2005
Reading this depressing /. thread about the jobless recovery, I was somewhat surprised that the average Slashdotter hasn't really made the connection between the offshoring of labour and the technologies which have created the cost advantage that drives it: the Net, and open-source.
Without these two technologies, offshoring would be a costly proposition indeed. Coordination and transaction costs would be prohibitive. Put another way, offshoring is an externality of the Net and open-source. For a perfect example, take the Gizmo Project.
Both of these technologies are a product of the techno-hippie scene, but strangely, I have yet to see a single argument anywhere (apart from bubblegen) that while the techno-hippies achieved their goal of increasing equality of opportunity, the medium term price is less opportunity for most Americans (including some of their biggest fans, like Slashdotters).
In fact, if anything, Americans seem more hell-bent than ever on open-sourcing...everything they can. MIT's OCW is a nice example, as are blogs and other micromedia.
Now, thinking about offshoring in these terms helps reduce the productivity argument to the shell game it really is. Productivity, in this argument, follows Red Queen dynamics. The more we share, and the cheaper we make it to share, the faster we have to run to stand still. Put another way, American productivity has to increase faster than the gains realized from cheap information and knowledge.
To make this concrete, let me give an example. Let's say you want to learn how to cook the books like a CFO. Ten years ago, you either went to b-school, or spent some time as an accountant. Now, if every poor kid in the 3rd world can access the latest techniques, their productivity rises. It may be only 50% of yours. But the question is, what can you do to raise your productivity, to maintain a relative differential? On average, the answer, I think, is...not much.
In a sense, America has shared a hugely productive asset with the world (for free). The question American tech policy makers should be making is how to capture some of the massive value this has created. One obvious, but probably ill-advised way, is to tax Net usage for offshoring.
There are many other ways, which I won't get into. The fundamental point I'm trying to make is that policy should ensure valuable resources are also shared with Americans in return. Not to pick a fight, but I don't see policymakers in those countries which are benefiting most from offshoring sharing much in return.
Now, note, by sharing resources, I'm talking outside the framework of corporate profits. Corporate profit-boosting due to offshoring is only value creating in other countries, where knowledge spillovers make offshored workers more productive by growing their human capital.