Surviving American capitalism

If climate change and peak oil don't get us, offshoring will.

Published March 23, 2006 11:47PM (EST)

Offshoring is the Third Industrial Revolution, declares economist Alan S. Blinder in the current issue of Foreign Affairs. First came the steam engine, and the beginning of the transition from agriculture to manufacturing. Second came the shift from manufacturing to services. Finally: the information age, an era in which "the cheap and easy flow of information around the globe has vastly expanded the scope of tradable service ... Just like the previous two, the third Industrial Revolution will require vast and unsettling adjustments in the way Americans and residents of other developed countries work, live, and educate their children."

The always excellent Brad Delong alerted me today to an essay in the Washington Post by Harold Meyerson, the editor-at-large of the American Prospect, who uses the Blinder treatise as a launching point for his own recommendations on how to deal with the offshoring future. Meyerson's suggestions are as follows: a massive investment in energy efficiency and worker training; the unionization and skill-upgrading "of the nearly 50 million private-sector workers in health care, transportation, construction, retail, restaurants and the like whose jobs can't be shipped abroad"; and "if America is to survive American capitalism in the age of globalization, we need to alter the composition of our corporate boards so that employee and public representatives can limit the offshoring of our economy."

That's all well and good, though I suspect that matters will have to get a great deal worse in this country before current leaders are replaced by politicians who will confront the deep structure of American capitalism head-on. But the actual text of Blinder's essay (available online for $5.95) does not make any reference to limiting the offshoring of the American economy. In fact, even as it lays out a stark scenario in which millions upon millions of white-collar jobs will become vulnerable to foreign competition in decades to come, Blinder, who served as one of Clinton's economic advisors in the early '90s, argues that "we should not view the coming wave of offshoring as an impending catastrophe."

"Nor should we try to stop it. The normal gains from trade mean that the world as a whole cannot lose from increases in productivity, and the United States and other industrial countries have not only weathered but also benefitted from comparable changes in the past. But in order to do so again, the governments and societies of the developed world must face up to the massive, complex, and multifaceted challenges that offshoring will bring. National data systems, trade policies, educational systems, social welfare programs and politics all must adapt to new realities. Unfortunately, none of this is happening now."

Blinder then goes on to recommend a variety of safety net improvements and (somewhat unspecified) educational reforms to help manage the transition. But as he notes, "it is easier to describe the broad contours of a solution than to prescribe specific remedies."

"Most obvious," he writes, "is what to avoid: protectionist barriers against offshoring. Building walls against conventional trade in physical goods is hard enough. Humankind's natural propensity to truck and barter, plus the power of comparative advantage, tends to undermine such efforts -- which not only end in failure but also cause wide-ranging collateral damage. But it is vastly harder (read 'impossible') to stop electronic trade. There are just too many 'ports' to monitor. The Coast Guard cannot interdict 'shipments' of electronic services delivered via the Internet. Governments could probably do a great deal of harm by trying to block such trade, but in the end they would not succeed in repealing the laws of economics, nor in holding back the forces of history."

I can already hear some of Salon's readers rolling their eyes and saying, there he goes again, quoting another typical economist bleating about how protectionism won't work. And I will concede, I'm inclined to agree with the sentiment expressed today in a letter responding to an earlier post: There is clearly no political will in this country for the massive investment in social programs necessary to prepare the U.S. for the onrushing future. Trade wars and punitive tariffs appear inevitable, particularly as white-collar workers with a higher political profile start to feel the competition more keenly.

Blinder doesn't think massive unemployment will result from this third revolution, but it's hard to argue with his conclusion: "the necessary adjustments will put strains on the societies of the rich countries, which seem completely unprepared for the coming industrial transformation."

Huh? Where else have we heard similar sentiments lately? We are likewise unready for a worldwide energy crunch or massive climate change. The 21st century is shaping up to be a real doozy.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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