A Modest Proposal to End Outsourcing

A Modest Proposal to End Outsourcing

Hrab Op-ed in The American Enterprise
June 09, 2004

Lately, the American people have heard many suggestions about ways to fight outsourcing.  Some protectionists think these plans and schemes do not go far enough.  Well, those protectionists need look no further.  Recently, I came across a document that describes what a truly comprehensive anti-outsourcing strategy might look like.  <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />


The plan originates from <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Europe.  It was first floated in a discussion between a German political leader and a British diplomat.  (Actually, it was more of a monologue than a discussion.)  According to notes made by the diplomat, the German leader began his attack on outsourcing with a compliment to his guest.  The German began by noting that economic "competition" between German workers and English workers is "fair" because "both have certain standards."  But he worried about Germans and Brits having to compete with workers in Russia and Japan.  He felt that the people living in those countries were too ready to "accept a low standard of life."


The German was particularly concerned about Russia.  The diplomat's notes summarize the German's arguments as follows: "In ten years Russia's industry will have grown to enormous dimensions, and its competition will be devastating, and will undermine the economy...of states with higher standard[s] of life."  He talked about how the Russians' wages were so low that they could manufacture things such as cars and bicycles for a fraction of what they would cost in Germany.


The nub of the problem was this, according to the German: how can countries "which have a common outlook and interest" confront the problem of low-wage competition and the pressures this competition brings to bear high-wage countries?  The German leader believed the only way forward was for "those countries whose economic and political interests harmonize" (i.e., the high-wage ones) to build a global industrial cartel.


What would this cartel look like?  According to the notes, the German leader described it as follows: "The countries which have relatively common interests," such as "Germany, England, France, Italy, America and Scandinavia" need to "arrive at some agreement whereby they would prevent their nationals from assisting in the industrializing of countries such as China and India."  The reasons for this were clear enough: "It is suicidal to promote the establishment in the agricultural countries of Asia of manufacturing industries."  The rich countries were better off trading their "manufactured goods" for the poorer countries' "raw materials," than allowing them to become industrialized (even if it meant cheaper goods).


The German thought the Western world might collapse if his prescription was not followed.  Again, quoting from the diplomat's notes: "Unless some arrangement is made, England, Germany, and America will lose their export trade.  Looking far into the future...something [like the industrial cartel] must be [built in order] to save the civilization built up by these countries."


So who were the people involved in the discussion from which this plan flows?  The British diplomat taking the notes was Lord Lothian, born Philip Kerr.  The German leader was Adolf Hitler.  The date: January 29, 1935.  Lord Lothian's summary of the conversation come from J.R.M. Butler's biography of Lothian, published in 1960 by St. Martin's Press.


The point of recalling this exchange is not to make odious and unfair comparisons between today's opponents of outsourcing and their predecessors.  Rather, it is to suggest that the outsourcing debate is actually far older than any of us may have realized.  This should give us something that has been hard to find of lateperspective.  Low wage countries didn't denude the Western world of its industry during the tough times of the 1930s.  We survived that.


Somehow, I think we'll also survive the current economic dislocations being wrought by globalization, too.