(06/29/05) Clyde Prestowitz quoted in The Sacramento Bee
Sacramento Bee, The (CA)
Copyright 2005 The Sacramento Bee
June 29, 2005
Education: It's not the answer to everything
Except for those immediately affected, last week's disclosure that IBM
was laying off 13,000 workers in this country and Western Europe and
creating 14,000 jobs in India was just one more little economic blip.
By now the offshoring of yet another chunk of high-tech jobs to
low-wage markets overseas is hardly news.
But each instance of outsourcing raises more questions about the
sufficiency of the conventional wisdom: that the only way to keep the
U.S. economy healthy is higher levels of education and training.
In May, in a forecast on California's future, PPIC, the Public Policy
Institute of California, found (in PPIC President David Lyon's words)
that "providing sufficient human capital, rather than more physical
capital, could well be California's biggest challenge in the year 2025
and beyond. ...
"Those born in California who do not get a four-year college degree
might well find themselves left out in future growth cycles. The
relative supply of jobs for high school graduates will shrink while
jobs for higher-skill workers expand."
California, as PPIC and countless others have long pointed out, grew
great in part because of its first-class higher education system. The
universities not only provided high-quality research and education for
millions of Californians. They were also, as the late Clark Kerr,
president of the University of California in the hard-charging 1960s,
said, "bait to be dangled in front of industry, with drawing power
greater than low taxes or cheap labor."
None of that's changed. The argument for educational opportunity and
high quality universities is more relevant than ever, and given the
growing number of high school students from families where no one had
ever gone to college, their challenge may be immeasurably greater.
But in the face of the global economy, the nation's deficit-ridden
economy, its costly and dysfunctional health care system, its frayed
social services, its nonexistent energy policy and its coddle-the-rich
tax structure, better education for the young and retraining of
laid-off workers alone simply aren't enough, no matter how often
President Bush and others pretend otherwise.
Clyde Prestowitz, president of the Economic Strategy Institute and a
trade negotiator in the Reagan administration, pointed out last year
that despite assurances from economists that outsourcing was a
phenomenon of minor significance, it "is a very big deal that is only
going to get bigger, with far-reaching consequences."
A common rule of thumb, said Prestowitz, is that every billion dollars
of exports creates about 20,000 jobs in the U.S. economy. Using those
numbers, and given the nation's current trade deficit, running about
$600 billion a year, "outsourcing can be said to have moved about 12
million U.S. jobs offshore. Even if the number is half that, it is
quite substantial and far above that 300,000 figure currently being
cited in many commentaries."
When the loss was merely manufacturing jobs, economists and business
leaders could dismiss the loss by arguing that it left the U.S. economy
free to "to do the high-value-added, sophisticated services and
high-tech development," Prestowitz says. But now it's clear that Indian
and Chinese engineers and software developers are perfectly capable of
doing many of those jobs as well, and doing them at a fifth of the
wages that their U.S. counterparts earn, or used to earn. Even if jobs
are not moved "the threat of movement will operate to keep salaries
low." For California, as for other high-tech regions, as Prestowitz
says, that "is a very big deal."
He correctly warns against the kind of protectionism that's always a
political temptation. At the same time, he also points that not all
outsourcing is a response to market forces. Some is the result of heavy
subsidies and other market manipulation. Those need to be dealt with.
It's understandable that few people want to challenge the
education-is-all wisdom. For the left, it would undercut the case for
more school and university funding. For the right, it would reinforce
the argument that other reforms are needed if the United States is not
to turn permanently into a stratified two-class society.
Among those reforms:
* Bolster and depoliticize federal support for basic research and development.
* Replace the nation's wasteful health care nonsystem with a single
payer system, which would lift a large competitive burden from business
(and relieve stress on state and local budgets).
* Develop a national energy policy, including higher gas taxes, to spur
efficiency and sharply reduce dependence on imported oil and gas.
* Restore the estate tax and other levies on high incomes to reduce
public borrowing, improve the nation's infrastructure and support
improved funding for children's and other social services.
* Stop insisting that schools can solve all our economic problems.
Education is a necessary element of a successful high-tech economy;
it's emphatically necessary to help reduce social inequities, and
imperative for civic and humanistic understanding and democratic unity.
But it's not enough in a high-tech global market where many jobs can be
sent overseas at the click of a mouse.