donnz's Journal: Outsourcing, Robert X Cringely and the Great Depression

I've been thinking about this how to write entry for quite some time now. Whenever the topic of outsourcing is raised on /. I cringe at the froth, venom and xenophobia that seems accompanies the topic. Then a phrase from Eben Moglen's (of FSF fame) recent lecture to the Havard Law School caught my eye. I used it in an brief email exchange I had with Robert X Cringely (yes - he sent me a nice reply, to which I replied and he may reply back. I'll keep you posted). All of this had the effect of allowing me to organise some thoughts, so that I can put them in one place, here, which I can then point to or cut and paste from every time the topic raises it's head.

See, I always assumed /. gets "it". There is this OSS thing, built by world wide communities, underpinned by a philosophy of individual liberty and freedom that has a very natural home in the USA. Then there is the internet thing, again, building bridges and opportunities across the world and underpinned by some forward thinking (no, not you Al) and financing largely from the USA. This creates huge change and huge opportunity, particularly for a rich, high tech. economy like that of the USA. All is good, the savvy /. crowd are onto it, they understand, so I thought.

Then comes an economic downturn, under the current administration 2 million jobs are lost, a few of these in the tech sector where massive hype over the potential of the internet had created over-investment and over-employment and fraudulent accounting. And now, oh the ignominy, some of these jobs have gone to coloured folks in India. India! how could those people possibly do our highly skilled, highly paid, First World jobs.

Don't get me wrong, being out of work is not easy, been there done that and may end up there again, who knows? But be assured that clamouring for state and federal government to introduce protectionist legislation is the last thing that will help. You don't believe me, read about how protectionism helped turn a stock market crash into The Great Depression from someone who was there over the time (Google for the Smoot-Hawley Tariff Act of 1930, if you like). Look at world economic growth over the last 50 years. World GDP has grown five times over this period. International trade accounts for 25% of world GDP. Despite this impressive figure the economic disparity between rich and poor nations has widened considerably, meaning that countries like the USA have benefitted to a higher degree than most. What is holding back the world right now is not a lack of protectionism but too much of it, specifically in the form of agricultural subsidies paid by Europe, Japan and the USA to keep grossly overproducing, inefficient farmers in business and at the same time condemn Third World producers to grinding poverty.

This is the true crime of our new century.

India, is actually doing something sensible in this skewed climate, trading on its intellectual capital in which it has invested very heavily. White collar workers in certain 1st world countries are finding that maybe their jobs aren't quite so skilled and rare as they once arrogantly thought and are suddenly demanding government protectionist measures - and this in the land that clamours for "small government"!

So, back to Prof. Moglen. The phrases that caught my eye were:

"The result [of Free Software] - celebrated everywhere that capitalism is actually believed in -- is that existing firms are going to have to change their way of operation or leave the market. This is usually regarded as a positive outcome, associated with enormous welfare increases of which capitalism celebrates at every opportunity everywhere all the time in the hope that the few defects that capitalism may possess will be less prominently visible once that enormous benefit is carefully observed.

"Mr. McBride does not want to go out of business. This is understandable.Mr. Gates does not want to go out of business either. But they are bothon the wrong side of a problem in the political economy of the 21stcentury." (full text here on Groklaw).

Ironically this speech has been widely lauded in the /. and OSS community at large. Maybe people don't understand what he was saying. He is talking about a revolution. He was saying "if you don't change your business and attitude you *will* go bust". We clapped vigourously because he mentioned this in the context of our betes noires, McBride and Gates. Why, if we can so easily apply this thinking to SCO and Microsoft are we so unable to apply it to ourselves?

The Moglen comment applies equally to how the internet and globalisation are creating economic opportunity and change. This is not new. It wasn't new when the skilled cottage based wool spinners of rural England were put out of business by the infernal mills.

As I said to Bob...(:-o) "I'm sure the English spinners argued just as you do about quality of product versus price, I know the British coal miners in the early 1980s argued as you do (their coal was better, cleaner anthracite), as did the steel workers and car makers. Maybe they were right and maybe you are right but I don't remember seeing many of my fellow programmers at the time taking to the streets on their behalf, or demanding legislatures protect their jobs. They were all too busy earning exorbitant wages and driving BMWs. If, as you say, it [outsourcing] makes marginal sense then the decisions will be reversed - otherwise those companies will go bust."

I believe that with its very large, rich and generally healthy economy America and its citizens are in the box seat to continue taking advantage of the global economy. The world *is* getting richer, GDPs continue to grow, year in year out and America will benefit from this exponentially and continue to develop new technology and infrastructure on a scale that will not be matched anywhere else in the world. You don't need protectionist measures for that, in fact they are counter productive. America has been experiencing a period of economic downturn, the causes of which are probably self inflicted but if treated properly this is not a terminal state and already things are picking up.

Hell if my /. pal RevMike can find work, anyone can!

**Stop Press**

Bob replied to my reply...I'd better stop replying as I sense a slight terseness in the most recent response (maybe I'm too sensitive). Although I'm equally amazed that he does as - many thanks Bob.