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(06/29/05) Clyde Prestowitz quoted in The Sacramento Bee

(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
Peter Schrag

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.

Peter Schrag can be reached at Box 15779, Sacramento, CA 95852-0779 or at This email address is being protected from spambots. You need JavaScript enabled to view it..

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