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KARACHI, WE HAVE A PROBLEM
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I was surfing away on TV the other day, not looking for Sex and the City,
when I came across the completely unsexy Senator Charles Schumer telling an
audience about what’s happening in Wall Street. I quote: "The head of a New York
securities firm [told] me that they had 800 people doing high-level computer
software programming…the highest level stuff... Their average salary was
$150,000. And he said to me that within three years, all of those jobs will be in
India where we can pay the average worker about a quarter of what we are paying
here".
The senator then went on to more good news, about radiologists. Their work
of reading X-rays can also be done in India for 25% of American wages, so we won
’t need them here anymore. Only really difficult work involving a lot of
detail which can’t be accurately beamed overseas will have to remain here.
Taking X-Rays stays, reading them goes, in other words.
You get the picture. Americans who thought about the problem of
manufacturing jobs leaving the U.S., as they have been, have had the habit of consoling
themselves with the thought that these were unskilled jobs for the most part and
the really strategic high-end jobs would stay here, with America always
leading the way in expanding the opportunity for work through innovation and
creation of new products.
Well, maybe. But we won’t have it all our own way. The Indians now learning
all about American computers won’t take long in learning how to make
computers themselves. The same goes for the Chinese, who specialize in electronics
manufacturing, and the Russians, who are the lowest-cost suppliers of
engineering services. They won’t go on working for us forever, they’ll become our
competitors.
The other people at this wake were two economists and the president of the
U.S. Chamber of Commerce. They didn’t have any suggestions to stop the
hemorrhage of jobs from America to the Third World, in fact they added in some horror
stories of their own. Schumer was the only one able to offer any consolation.
A leading businessman had told him things would converge in about 30 years.
The Third World workers would be getting more pay and Americans would be
getting less, so the gap between the two would be reduced to the point where it
wouldn’t pay to transfer jobs from America overseas. The American computer
programmers now getting $150,000 yearly would be getting something like $80,000,
while the Indians would have gone up to $60,000, producing this result. The
good side to this, although not mentioned by the source, is that the work done
would now be priced at $10,000 less than when it was an American monopoly, so
there would be a gain to consumers.
Since all this upheaval happens through free trade, it should not come as a
surprise to anyone that commodity prices would decline as a result. That’s
what free trade is all about. A lot of us have wondered if America could
continue to be supreme in a world where we had to face real competition from
countries that had lagged the world for centuries and were only now starting to catch
up. We’ll never go back to 1945, when we were the only country in the world
still on its feet after World War II, with a monopoly of world production and
world wealth and world power in our hands. In the time since our share of
these trinkets has increased absolutely but not relatively, in effect we have
been coming back to the field.
Mr. Donohue, the Chamber of Commerce president, brought up overregulation,
overlitigation and overtaxation as causes of the decline in America’s position
as the world’s business leader. Today I saw confirmation of this in the daily
paper. The Heritage Foundation and the Wall Street Journal jointly announced
that The United States is only the tenth most business-friendly country in the
world. The burden on business created by subsidies, regulation, deficits and
taxation was the cause of this. Taxation is the item that comes closest to
home for each of us, because we’re not all CEO’s worrying about OSHA and such,
or import restrictions, or auditing standards, etc., but we all pay taxes.
One of the taxes we pay is for the cost of imprisonment. Most people don’t
think of this, but the fact is that this cost is actually the first call on our
tax money. Not the army and navy, not Social Security, but prisoners. Their
needs have to be met before anyone else’s. The obvious reason is that they
are wards of the state, and the state must feed them, clothe them, house them,
and medicate them or they will die. They are wholly dependent on the
taxpayers to keep them alive. This is not true of anyone else receiving tax money,
so the prisoners come first. In 2001, according to the Office of National Drug
Control Policy, the cost of incarcerating federal drug prisoners alone was $3
billion a year. Since there are about fifteen times as many prisoners held
by the states and localities of the country, we come up with a figure of almost
$50 billion a year -- just for drug offenders. Since the total prison
population exceeds two million, well, I won’t quote a figure because there’s no
real agreement on how to measure it, but it’s obviously sky-high and heading
for the moon, especially since it also includes the costs of over a million and
a half police and correction employees nationwide. The net burden on the
citizen is the $521 per inhabitant that all governments spend on criminal justice
yearly.
That means that the taxpayer, assuming he represents three non-payers in his
family, has an obligation of $2,084 to pay for law enforcement before he pays
for the army and navy, for his Social Security, for his mortgage, for his
household, for anything. Remember, if he doesn’t pay it, the prisoners die.
All this is unprecedented in world history. Nobody had ever paid such costs
before anywhere in the world. As a result, since they don’t have to make
enough to pay such a bill, the other peoples of the world are low-cost producers
able to undersell Americans in the world market
Taxes aren’t the only drag on America’s competitiveness of course. And the
taxes I’ve described aren’t the only ones which get added into the price of
the products we have to sell to the world in competition with the low-cost
producers. But they’re a big part of them and also the part which strikes most
of us as the least palatable and most in need of reform. We are maintaining
over two million men (few women) in idleness for long stretches of time without
reimbursement of any kind while our economy goes to hell, partially as a
result.
I dwell on this because law enforcement is what I know about and incline to
connect to any subject I hear talked about. When I heard people talk about
U.S. trade and the world economy I immediately made the connection. Someone else
would have made another. Mine is as you see it. What you make of it is up
to you because I think pointing out the problem is enough at this time, with
follow-up for implications, ramifications and reverberations reserved for a
later date.
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