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Outsourced Outta Here


So outsourcing – the one-stop phrase for “sending” jobs overseas – is the political hot-button for this election. Who’d have thunk?
It’s a confluence of events, as it almost always is in politics, the not-so-comfortable meeting between a less than stellar economic recovery, growing doubts about the Bush Administration’s leadership coupled with pressure from Democratic union strongholds. Old-line Democrats, the kind who like unions, may think they have a winner here. But they may not. A strong stance against out-sourcing could cost them the support of some of the very people they need the most: That crowd I call Progressive Libertarians, relatively new to politics, younger than most long-time supporters and easily frustrated by failure to change as they see fit.

For Progressive Libertarians in Northern California (where on a clear day you really can see America’s future) outsourcing is old news. Some days, it seems like no one has a job. For better or for worse, almost all of us are self-employed. And San Francisco International Airport has long been a gateway to India and China because so many people have been going back and forth for years (it’s 9 hours to Beijing, about the same as NYC to Paris). The traffic between Silicon Valley and India has been steady and profitable. But in the rest of the country where jobs matter and where a college education is supposed to be a guarantee of something better, the smoke is just starting rise up off this issue.
The Bush administration is in trouble on this issue because it can’t seem to figure out that outsourcing is as much a foreign policy issue as it is an economic issue. Those guys probably still think the U.S.’s main economic trading partner is always going to be China. They’re wrong. I’ve been to both places. The Indians have it all over the Chinese. Just ask Tom Friedman. The freemarketeer and New York Times columnist was in Bangalore all week.
There are a host of arguments to be made as Alan Murray points out in his column today. But Bush isn’t making them. Why, Murray wonders? Oh and his is one of four outsourcing stories in today’s Wall Street Journal, as good an indication as any that this debate is here to stay.
The hot button went from pale pink to bright red a few weeks ago when Bush’s chief economist said moving jobs overseas is the best way to grow the international and therefore the U.S. economy. That was like red meat to the Democrats eyeing a November show-down on the economy – terms they think will help them win. It’s all part of the party’s reliance on unions for organization and cash. Unions have so much power within the party, and job loss, or more politely, a laissez faire attitude on job creation, is seen as a good issue to use to fight Bush in battleground states. Of course, there aren’t a lot of computer programmers in those states and many of the telemarketing jobs that are going overseas weren’t covered by unions but hey, why sweat the details? Outsourcing is political shorthand now.
The Wall Street Journal isn’t the only place people are worried about outsourcing’s consequences. The Chron weighed in over the weekend with a long set of stories saying that tech jobs could be leaving the Bay area. They rounded up some eggheads over at Berkeley to talk about what it all means and they slapped a scary headline on the front page. I’m not sure what’s going to happen and The Chron’s cavalier treatment of what – until recently was quite real — possibility of nuclear war between Pakistan and India as the only way the outsourcing trend could be disrupted — was really off the mark. And while I don’t buy the optimistic scenario espoused by guys like Friedman at the NYT — creative jobs will stay so America will reign supreme — I think the doomsayers are wrong.
More than likely Northern California, in particular, will see a continuation of double hiring, which started a few years ago with wealthy Indian entrepreneurs hiring from their IITs back home. Indians here invest here and they invest in India, sometimes in the same company, sometimes not. But the money flow between the two places is, for many, a blurred line. (That, by the way, contributes to another trend with deeper political implications: Recent immigrants ability to stay in close, sometimes daily touch with their native culture. With cheap plane fares, fast Internet connections and cell phones, they can return – physically or otherwise — whenever they want. This sort of back and forth was once limited to Mexican, South and Central Americans. No longer.)
Outsourcing splits free market Democrats away from the party they nominally claim to support. So it’s going to be a real test for Silicon Valley, possibly the test of its future politics. The valley loves outsourcing because it loves the bottom line. And there is nothing like cheap engineering talent to warm the heart of an ROI-obsessed venture capitalist. Those guys don’t make their money – and they’ve made lots of it and they want to make lots more – from their labor. They make money from their capital. It’s the Republican Party view of the world; that of employers and early stage investors. Traditionally Democrats have another view: that of employees and buy-and-hold stock pickers.
But most Silicon Valley’s movers and shakers prefer to think of themselves as Democrats — Democrats who don’t like unions, who worship efficiency and who frequently call themselves Libertarians rather than identify with any party. It’s a pile of contradictions. That’s one reason to think of them as Progressive Libertarians. Most are reform minded when it comes to government or politics but bottom-line oriented when it comes to money and investing as we’ll see with outsourcing as a political issue. Political reality aka election year politics is going to put hard pressure on this “one from column a, two from column b” thinking. Throw in the debate brewing in Congress on stock options – the valley wants to deduct ‘em, no one else does – and you’ve got some nice fissures developing between Democrats and their big money supporters in Northern California. This isn’t a state of affairs that can last very long.
We’ve started to see this with Ro Khanna’s run for Congress.Endorsed by the hard Left since he was against the Iraqi War, Khanna’s got backing from people who would just as soon find all their employees in India. Khanna struggled to find a way to recognize the inevitability of outsourcing and its popularity among his backers but probably not among his constituents. He didn’t do such a good job with that difficult task. And his struggle isn’t going to be one that will get played out at the national level. Presumptive Democratic nominee John Kerry is going to have to make a choice and it’s probably going to be a straight, not a split, ticket on this issue.

Share  Posted by Chris Nolan at 2:32 PM | Permalink

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