[I had to turn off trackbacks, one by one, for each of my old blog posts because I was getting hundreds of trackback spams a day. The unfortunateness of the fact that a few parasitic people can destroy such a useful feature for everyone else needs no further comment. In any case, in the effort to turn off trackbacks I apparently made a typo that made this old post get reposted. But I think it makes a good point so I decided to let it stay, with a couple of small edits. As a side item I found it interesting to see my long-ago comments on the Iraq war, made at a time when the Katrina-like incompetence of this Administration's approach to Iraq was not yet apparent to me. I've left those for nostalgia's sake.]
Sometimes there are local increasing returns effects where a lot of resources gather in one place. That's how cities are formed.
Those formations are pretty stable, but not eternal under all circumstances. It's not religion. It's just something that happens.
When people discuss outsourcing, there often seems to be an assumption that it's America's God-given right to have an economy superior to most of the world. So, those who are for outsourcing say we'll give people in those other countries the uninteresting opportunities like call centers and software development, and assure us that (due to what, our inborn superiority?) we'll come up with whole new opportunities that will keep us in the economic lead. Those who are against it say that by erecting trade barriers we'll stay in the economic lead.
Both of those positions are fundamentally stupid, IMHO. There is no reason to assume it is possible for the U.S. to keep its economic lead forever.
There were increasing returns affects at work here that were very similar to the aforementioned creation of cities. American companies needed to have American call centers, for instance, because inter-continental broadband communications didn't exist. So the call centers ended up here. But modern technology says that they don't have to be on American soil. So the increasing returns effect with regard to that is greatly diminished. Perhaps even eliminated since the disadvantages of linguistic and cultural differences are offset by the fact that it is so much cheaper to set them up elsewhere.
Protectionism won't help; that will just make us less efficient, as whole, than other countries that don't engage in protectionism.
It may be that the only realistic way to get a grip on this is accept the fact that America and other world-leading nations may not be so different from everyone else for too many more decades. The bad news is that we'll have to change the way we do things so that people here have what they need despite our smaller relative GNP. The good news is that there will be less hardship in the world as a whole, and that has the potential to translate into fewer wars and less terrorism. Very arguably, it will be a net win for us. (That latter, after all, is one of the deeper reasons for the Iraq war; if we do successfully convert them to a functional democracy, instead of a wealth-hording dictatorship, Iraqis will be economically better-off and people living there will have less reason to hate the U.S. Other Arabs will see the example too, and movement will hopefully occur in that direction in other countries. That's the hope.)
The sooner we start thinking about how to make the likely future more workable, instead of pretending that we can hold off the inevitable, the better off we'll all be.