Bhagwati is not wrong

Jagdish Bhagwati is incredibly credentialled. He is the Professor of Economics at Columbia. If I remember right, he was in contention for the Nobel prize a couple of years ago. So when he wrote 'The Outsourcing Bogeyman' , a lament that so few understand that everyone wins from outsourcing, I was more than a little bit shocked. I expected better from Prof. Bhagwati. That Republicans are pro-business and democrats pick on defenceless businesses by calling them names and demonizing them in the media is a narrative congealed in popular discourse (Cry me a river, won't you). Forget that the Clinton administration initiated a lot of the current outsourcing policies and the Obama administration has been steadfastly loyal to big money except for the occasional posturing.

Politics aside, I understand that there is no room for protectionism in the free market system. I understand that liberalizing trade with developing countries opens new markets to sell American wares. In turn the developing countries gain jobs because of their competitiveness (read cheap labour). The good professor is right. Everybody wins.

Except.

The trade surplus that America gains in this transaction goes to the wealthy banks and businesses while the jobs that are lost are from the middle class and the poor.

Yes, free market is free market. But what can be done about the jobless. What good does Prof. Bhagwati's assertion that everybody wins do to a family of four whose breadwinner has been laid off as his job has been shipped to India or China. What fault was it of his that he was born in the United States and not in India? He can't meet Michael Dell over cocktails at Davos and ask him for his job back, can he?

And Prof. Bhagwati, you want fallacy, I give you fallacy. The businesses that are outsourcing are not doing so only because it is uneconomic to maintain in the west (as you so delicately put it), they are doing it because they can boost their profits and give more to their shareholders. It is not the role of the business to care for anything other than their bottomline. I dig that. This is where the government can step in and play a role. Not as a force of protectionism but as the defender of its citizens' ability to pursue life, liberty and happiness. The government for instance, can say that while it cannot stop the businesses from outsourcing its operations, it can impose a tax on the profits that corporations make by reducing its operating cost. But since imposing a tax on corporations is equivalent to class warfare, killing your children and siding with devil, it is politically untenable, economically populist or not. A reasonable alternative is presented wherein no new taxes are imposed but merely the suspension of tax incentives given to businesses. Not all tax incentives, for I am no commie. Just the tax credit received for outsourcing; a Clinton-era initiative that encouraged businesses to outsource before it became the 'in-thing'. That is not the same as railing against evil corporations, is it? That doesn't make the world any less flat, does it? (Yo! Friedman, ever heard of Copernicus). Maybe that money can be used to, I don't know, re-train the unemployed, invest in infrastructure or create jobs that aren't outsource-able.

On a side note, Carly Fiorina got shellacked in the elections not because she was an evil person who outsourced jobs. She was not elected because her background as a businesswoman does not add any credibility to her as a person capable of protecting the interests of her constituents. That was the position that she was contesting for; a lobbyist for the common man in her state. HP has enough lobbyists, thank you very much. Who will speak for the voiceless if the members of Congress and Senate are also lobbyists for the interests of big business?

As hard as it maybe for you to believe Professor, I don't want to lynch businessmen. I want an equal contest between the aspirations of the poor and the needs of the business, even if the arena in which this bout takes place is the 'free market'. Is that too much to ask?