It looks as if Pat Buchanan is being proven right on the issue of free trade. So are the papal social encyclicals: There is no reason to march in lockstep to the principles of what the popes have called “economic individualism.”
James Fitzpatrick's new novel, The Dead Sea Conspiracy: Teilhard de Chardin and the New American Church, is available from our online store. You can email Mr. Fitzpatrick at fitzpatrijames@sbcglobal.net.
(This article originally appeared in The Wanderer and is reprinted with permission. To subscribe call 651-224-5733.)
The evidence is rolling in: Free trade theory sounds great on paper. But sometimes the real world does not work the way we expect it to. We have to adjust. We can’t go on permitting inexpensive foreign goods to flood the American market. Not unless we want more and more American workers left without sufficient income to buy the imports. A bargain is not a bargain if you are out of work and can’t afford it.
What is the evidence that free trade is doing damage? Well, they say we are in an economic recovery. Yet since President Bush took office, 2.5 million manufacturing jobs and nearly 600,000 service jobs have been lost. Where have the jobs gone? Overseas. To Mexico. To China. To Thailand. That is why the economists call this a “jobless recovery.”
Please note that 600,000 loss of service jobs. Those were the jobs that the free-market conservatives told us would take the place of the lost manufacturing jobs. We were told that it didn’t matter if China was making our bathing suits and baseball hats. Let them do the cheap labor jobs. Americans would get work in high-tech fields instead, jobs with better pay. And Americans would get the benefit of the lower priced imports.
Well, that is not what is happening. Paul Craig Roberts reports that in recent months 170,000 computer system design jobs have been shifted abroad. It is called “outsourcing,” and “offshore production.” There are now entrepreneurs in India who specialize in supplying skilled labor for American corporations. One of my sisters has discovered how it works. She has been told that she has to fire large numbers of computer programmers in her department because an Indian firm has won the contract to perform their work.
The Indians will come here, set up the computers at her company’s headquarters, “interface” them with the computers in India, and — voila! — you don’t need the American workers anymore. Indian programmers, who work for a fraction of what the Americans work for, will do the work. My sister’s company will save $14 million. All that is expected of the American workers is that they stay on to work with the Indian team who will set up the system that replaces them. If they refuse, they will not get their severance pay. Neat, no? Yes, my sister is wondering what they will need her for when she no longer has any workers in her department to supervise. But that topic has not come up yet with her boss, who must be wondering what they will need him for too.
The Boston Globe reports that this phenomenon is not isolated. Estimates are that major banks, brokerage houses and insurance companies will ship 500,000 more jobs overseas in the next five years. And why not, if the bottom line is all that matters? A graduate of the Indian Institiutes of Technology with a master’s degree in business administration can be hired for $12,000. The average starting salary for a Harvard MBA is $102,338. At least for now the Harvard MBA is worth that much.
Then again, the Harvard MBA may retain its value. The country’s commitment to free trade is likely to wane once it is no longer just blue-collar workers and North Carolina textile workers who are threatened by the foreign competition. I am sure you have noticed: It is always someone who can’t imagine his job being threatened by the foreign competition, who talks most glibly about how it is only fitting that Americans who are unable to compete with foreign workers should lose their jobs. Well, it looks as if there won’t be many jobs immune from the foreign competition much longer.
What made anyone think that the Chinese and the Indians would stay content with making cheap shirts and gee-gaws? They are not stupid. They can learn to design and program computers. And use them. Phyllis Schlafly notes in a recent column that U.S. companies already use Indian companies, or Indian nationals in the U.S. on work visas, “to do research and development, prepare tax returns, evaluate health insurance claims, transcribe doctor’s medical notes, analyze financial data, dun for overdue bills, read CAT scans, create presentations for bans, and more.”
Still sound like the kind of jobs we can afford to let them do? The Boston Globe reports that Morgan Stanley plans to hire Indian companies to do stock analysis. Goldman Sachs is studying the possibility of using Indian firms to do their research for them. And that the other Wall Street banks are lining up to do the same. Those graduates of Indian business schools work for 10 percent of the market rate in New York or London. As corporate executive interviewed by the Globe noted, “If it can be done by sitting at a desk in front of a computer, then it can be done abroad.” That job description covers a lot of American workers.
A lot. I recently moved into a new home and have been shopping for furniture, curtains and kitchen utensils. I haven’t done that kind of shopping in decades. It has been a revelation to me. It is as if we just lost a war to China. Everything I came across, in Wal-Mart and more upscale furniture stores — from living room tables and lamps to corkscrews and curtains — was made in China. Where does this process end? Maybe nowhere. Maybe this is why the unemployment rate remains over 6 percent as we go forward in this economic recovery. One would be hard-pressed to come up with more than a handful of jobs that cannot be taken over by low-wage foreign competition. After seeing what is going on at my sister’s company, my brother-in-law quipped, “Nothing will be done to stop the loss of jobs until the Indians figure out how to outsource the work of American lawyers.” Lots of wisdom in wisecracks, says I.
Would it be an abandonment of principle for conservatives to support tariffs and other protectionist measures? Anyone who thinks this is the case owes it to himself to read Pat Buchanan’s The Great Betrayal. America rose to global industrial supremacy under the cover of 19th century protectionist measures. George Washington and Alexander Hamilton were “protectionists” by the modern definition. They were willing to use the power of the central government to protect American manufacturers and American jobs from foreign competition. So were Henry Clay and Abraham Lincoln; so was Theodore Roosevelt, who once said that “every class of our people is benefited by the protective tariff” which gave America “more prosperous years than any other nation has ever seen.”
In fact, it could be argued that nations become attracted to the notion of free trade only after they have achieved an economic advantage over their rivals through years of protectionist legislation. At that point they are confident that they will emerge triumphant in the free-trade arena. In other words, they use protectionist measures when it serves the interests of their native industries and workers. And they champion free trade when it serves the same purpose.
It could be that we are on the verge of discovering that the decades of free trade that served us well are over. There is no reason to sacrifice our industries and workers to the “principle” of free trade. It is not carved in stone somewhere at the foot of the Washington Monument. The Indian companies that are displacing our companies and workers understand that. They would not permit a foreign country to insert itself into their economic life to the detriment of their people. That was why they kicked out the British.
