Industrial Revolution III
The March/April issue of Foreign Affairs is focused on Iraq; I found Joel Rayburn's "The Last Exit from Iraq" - about the British pull-out in 1932 - interesting and instructive. But it was an essay by Alan S Blinder, an economics professor at Princeton, that gave me pause. "Offshoring: The Next Industrial Revolution" seems to be an excellent analysis of the Internet's impact upon the world of work, but one from which the author fails to draw coherent conclusions. Or so it seems to this untutored mind.
Prof Blinder sketches the industrial revolutions of the past. The first turned farmhands into factory workers, while the second, after World War II, turned factory workers into office workers. The third revolution, if that's what it is, will turn office workers into people whose clients and employers may never see them, owing to thousands of miles of physical distance. Prof Blinder notes, for example, that radiologists are already feeling a competitive challenge from India. Having thought long and hard about this revolution, he sketches a prediction of the kinds of jobs that Americans ought to be training for.
But first, some figures.
Contrary to current thinking, Americans, and residents of other English-speaking countries, should be less concerned about the challenge from China, which comes largely in manufacturing, and more concerted about the challenge from India, which comes in services. India is learning to exploit its already strong comparative advantage in English, and that process will continue. The economists Jagdish Bhagwati, Arvind Panagariya, and T N Srinivasan meant to reassure Americans when they wrote, "Adding 300 million to the pool of skilled worker in India will take some decades." They were probably right. But decades is precisely the time frame that people thinking about - and 300 million people is roughly twice the size of the US work force.
Prof Blinder astutely draws a distinction between personal and impersonal services. Your barber and your divorce lawyer provide personal services involving face-to-face contact. Your bank and your answering service provide impersonal services. You want a barber who's nearby, but you don't care where your answering service is. The providers of personal services, according to Prof Blinder, have relatively little to worry about. It's the impersonal service providers whose jobs will be offshored.
This makes sense. It's in his what-to-do phase that Prof Blinder breaks down. Of course he is adamantly opposed to any attempt to hinder or prevent offshoring. Such interventions won't work - and perhaps Prof Blinder is right about that as far as today's world goes. But how long would today's world continue into a future populated by investors and their personal service providers? Prof Blinder never asks this question, but all of his (admittedly tentative) explanations point to the question.
Am I being naive? Am I wrong to assume that we don't already live in this world?
Prof Blinder blithely posits ever-falling transportation costs. It seems clear to me that we are going to have some serious reckoning about fuel allocation - the more serious the longer the reckoning is put off. How much of our oil to we commit to power generation? How much to industrial production (plastics, &c)? And how much to transportation? I don't believe in a free-market answer to this question, just as I don't believe in a free-market solution to the problem of smoking. Some things must be decided by society, pre-empting individual choice.
I was no socialist in my early life, and the extreme forms of socialism attempted by Russia, China, and other countries was demonstrably a failure. But the perils of the free market are not so modest, either. When are we going to hear reasoned, non-partisan discussion of them?
