I'll be interview Noam Chomsky Friday on the topic of white-collar outsourcing. Here's my background research.
Chomsky at a MIT lecture on millitirization of space, but somehow touches on outsourcing. Listen to it here, skip over to 1:18:35
Question on globalisation and outsourcing of IT jobs, and H1V visas.
Our economy is innovative not because of private enterprise, but because of state intervention.
Outsourcing has nothing to do with economic efficiency. Outsouring takes place within a network of command ecomocies i.e. corporations. Corporations are a totalitarian organization. Outsourcing is internal to the corporation. Corp. picks someone to outsource to, and keeps them under control. Low worker wages, low environmental standards. Artificially cheap inputs.
Outsourcing happens to send inputs across the border into the United States, under control of corporations.
Chomsky claims that economic models might show that outsourcing is good but economic models don't represent the real world.
He says that "...outsourcing is internal to the corporation..." and that "...outsourcing has nothing to do with economic efficiency..."
"Should we approve of it" he asks? Then answers, that its not the only solution. We can work on increasing labor and economic standards in developing countries.
But what about Trade-Related Investment Measures? What do they do? TRIPS is straight protectionism for the benefit of the rich and powerful, through publicly subsidized corporations. TRIMs are a little more subtle. What they require is that a country cannot impose conditions on what an investor decides to do. Suppose General Motors, let’s say, decides to carry out outsourcing, to have parts made in some other country with non-union cheap labor, and then send them back to General Motors. Well, the successful developing countries in Asia, one of the ways they developed is by blocking that sort of thing, by insisting that if there was foreign investment, it had to be done in a way that was productive for the receiving country. So there had to be technology transfer, or you had to invest in places they wanted you to invest in, or some proportion of the investment had to be for export of finished goods that made money. Lots of devices like that. That’s part of the way in which the East Asian economic miracle took place. Incidentally, it’s the way all the other developing countries developed too, including the United States, with technology transfer from England. Those approaches are blocked by Trade-Related Investment Measures. Superficially they sound like they are increasing free trade, but what they are in fact increasing is the capacity of huge corporations to carry out central managemnent of cross-border transactions, because that’s what outsourcing and intrafirm transfers are --centrally managed. It’s not trade in any meaningful sense. And they again undermine growth and development.
Interview with Simon Mars, this question on Outsourcing.
Simon Mars: Do you think there’s any chance of having economic issues addressed properly in this election? So far you have had concern about “outsourcing” as a buzzword for the last month or so, but the actual reason why jobs are going abroad, or the stagnation in people’s wages, will this be addressed?
Noam Chomsky: The problem is the jobs aren’t being created here. It’s painful for the people whose jobs are going abroad but why is it a problem now rather than ten years ago? Because at that time the jobs going abroad were manufacturing jobs, jobs of the working people. Now the jobs that are going abroad belong to professionals. They have more clout. They have more influence and power, but the number of jobs going aboard are far lower and probably as many jobs are coming in.
The problem is the way the economy and society are designed. For the last twenty years, for example, since the neo liberal programmes were instituted real incomes for about ninety per cent of the population have either stagnated or declined. For the top, if I remember correctly, 0.1 per cent of the population incomes, I think, have gone up by about 600 per cent. Well you know that kind of social planning does not happen by natural economic laws. Meanwhile the workload has considerably increased. One of the reasons for what’s called the high level of productivity in the United States, when measured per worker, is that American workers worka lot longer. They have by now the highest workload on the industrialised world. They have poor benefits, their real wages stagnate or decline while medical costs are out of sight. The pension system is under attack and this is done quite consciously.
When Alan Greenspan, Saint Alan as they sometimes call him, when he reported to Congress on what he called the success of the economy he was presiding over during the Clinton years, in the so called boom, he explained it forthrightly. He said a very crucial part of what he called “growing worker insecurity.” There is an economic theory, the prevailing one, that says, that’s a good thing. If you have worker insecurity then workers are too frightened to ask for higher wages and benefits and that makes for a healthy economy because then profits are high and maybe companies will invest.
In fact the theory behind the economy is really quite simple, you’ve got to keep rich people happy so maybe they’ll invest and something will trickle down. And you have to keep everybody else, meaning the great mass, insecure because then they won’t ask for a thing. There’s also another thing that follows, you have to keep them frightened because if they’re not frightened then they’re not going to accept it, so there’s a constant pressing of the panic button to keep the population frightened, so they won’t care if their wages are stagnating or their working hours are going up. They’re insecure they don’t know if they will have a job tomorrow. Outsourcing is a very marginal partof it. This is the way the economy has been designed.
Take NAFTA,The North American Free Trade Agreement, no one seriously believed it was going to lead to a large number of jobs leaving, maybe a small but not significant number, but what was understood and what happened, is that it provided a weapon for employers to ensure that workers are insecure, to break up union organising, of course that’s illegal but the government winks at it. The number of illegal interventions by employers to break unionising has shot up since NAFTA because people are afraid. Employers cansay that if you are going to try and organise a Union then we’re going to go to Mexico. They have no intention of doing it and if the organising takes place then they usually don’t but it’s a weapon. There’s a whole series of weapons to keep the population insecure, to keep them frightened. Outsourcing is a very small part of this problem; the escalation of health care costs, that’s much more serious. Notice when you hear about this, when Bush or Greenspan give a speech about it, it’s always wrapped together with social security. (They say) Social Security and medical costs are exploding, that’s not true. Social Security is in quite good shape. This is part of an effort to dismantle the Social Security system. It is medical costs that are going up and that’s because they are privatised but you can’t say that, in fact what they are trying to do is privatise Social Security so it will go out of sight too.
Well these are general maters of economic planning and we know who they are in the interest of. Take a look at who’s designing them and who’s gaining from them. It’s the top small sector of wealth and the corporate system. What are corporations? That's a serious question. Corporations are state constructed tyrannies. The internal management of corporations is simply a tyrannical system, orders come from the top down, you transfer them below you and so on. About a century ago the courts gave corporations the rights of persons, which was a tremendous blow against classical liberalism. Classical liberalism maintains that rights inhere in people, like you and me, not in abstract tyrannies. But corporations were given the rights ofpersons, such as freedom of speech, freedom from search, so they’re unaccountable. And of course they’re immortal persons of enormous power. In fact the recent trade agreements give them rights way beyond persons. General Motors can go to Mexico and demand to be treated like a Mexican company, it’s one of the ways the Mexican economic system has been taken over by foreigners. Can a Mexican come to New York and demand it national treatment? Its inconceivable.
Furthermore if you look at the core of Anglo American corporate law it requires that these corporate persons become what we would call pathological if they were human. If they were flesh and blood we would send them to mental institutions for treatment. But these corporations are required by law to act solely to maximise profit and power, anything beyond that is criminal. There is, though, one exception, they are allowed to be benevolent if it is hypocritical, so a pharmaceutical corporations are allowed to give free drugs to the poor people if the television cameras are on them; if it improves their image, that’s permitted. In fact there was an important court decision in 1969 which instructs corporations to act benevolently because otherwise an aroused public many recognise what is happening and take away their privileges, so they’d better pretend to be benevolent. That’s the core of the system. Massive tyrannies are unaccountable to the public except by very weak regulatory systems, compelled by law to be pathological, inter linked with one another since they don’t want too much competition, it cuts back profit and tied to very powerful states which sustain and support them.
The US follows totally different rules to Iraq and Haiti and other countries. It’s not simply the subsidies to agribusiness and the protection, that’s a small part of it; the major part is that there is a dynamic state sector in the economy which is the core of economic innovation and development. Research and development takes place mainly in the state sector.
Take the entire new economy, computers, telecommunications, the internet, now biotechnology and so on, the costs are largely socialised through various mechanisms such as the institution we’re now talking in (MIT ) which is part of the system. Costs are socialised, risks are socialised and if anything comes out decades later it’s handed over to private power. Computers and the internet are perfect examples. When I arrived at MIT fifty years ago computers were being developed here under the cover of air defence, which nobody believed in, but a computer in those days was big collection of rooms with vacuum tubes blowing up and paper flowing all over the place. Finally after ten or fifteen years they got them down to a scale where you could sell them as mainframes. So the project heads pulled out of the programme and started the first mainframe computer systems. Meanwhile IBM was learning how to switch from data processing machines to computers by using the technology and learning experiences and involvement which were being developedby federally funded programmes in places like here, they were using the MIT and Harvard computers which were government computers under Pentagon cover.
The same is true even of the pharmaceutical industry. The pharmaceutical industry has they highest profits of any industry, they claim that they need them because of research and development costs. Well by their own figures only about forty per cent of their research and development is in-house and even that’s misleading because a lot of that is waste, it’s copy cat drugs and things like that. There was one good economist who asked the obvious question, suppose we take the public funding of research and development and make it a hundred per cent and then we force the pharmaceutical industries out of the market, what would the savings be to consumers? Well it turns out the savings would be astronomical, much greater than was expected. But you can’t do that, it’s another one of those things that is politically impossible because they have too much power.
This is the way in which rich societies became rich. The rules and measures that are being imposed on Iraq or Haiti, or much of the world by the World Trade Organisation, that’s the way those countries became the third world. And the correlation is just striking. If you take a look at the modern period, since the neo liberal rules were formalised, there has been development in places like East Asia, but that’s because these countries didn’t follow the rules, they basically disregarded them, they followed the same rules that the rich countries had used for themselves, controlling investment; targeting investment or technologytransfer, which is now called piracy. They entered the market on their own terms just as England, The United States, Germany and others had done before them. If you have economic sovereignty then you can enter international markets on your own terms, you have a chance to develop, If you’re forced to enter the market by outside pressure, then you don’t.