The schizophrenic Senator Lieberman

Senator Joe Lieberman gave a speech this morning at the New America Foundation on offshore outsourcing and what the U.S. government should do about it. Here’s a link to his white paper summary of proposals — and here’s a link to Grant Gross’ coverage of the speech for IT World. Among other things, Lieberman calls ...

By , a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast.

Senator Joe Lieberman gave a speech this morning at the New America Foundation on offshore outsourcing and what the U.S. government should do about it. Here's a link to his white paper summary of proposals -- and here's a link to Grant Gross' coverage of the speech for IT World. Among other things, Lieberman calls for increased wage insurance, expanded Trade Adjustment Assistance (TAA), and a bipartisan commission to study the problem. I'm of two minds about the speech and proposal. I like the proposals. Boosting R&D investment, expanding TAA, expanding education spending, getting our macroeconomic house in order -- I'm in favor of all of these, and promoted some of them in my Foreign Affairs article. The problem is the speech, which is alarmist in the extreme. Here's one sample:

Senator Joe Lieberman gave a speech this morning at the New America Foundation on offshore outsourcing and what the U.S. government should do about it. Here’s a link to his white paper summary of proposals — and here’s a link to Grant Gross’ coverage of the speech for IT World. Among other things, Lieberman calls for increased wage insurance, expanded Trade Adjustment Assistance (TAA), and a bipartisan commission to study the problem. I’m of two minds about the speech and proposal. I like the proposals. Boosting R&D investment, expanding TAA, expanding education spending, getting our macroeconomic house in order — I’m in favor of all of these, and promoted some of them in my Foreign Affairs article. The problem is the speech, which is alarmist in the extreme. Here’s one sample:

We know that manufacturing jobs have been shifting overseas for some time. But now the services sector is being hit hard by offshore outsourcing – and that hurts. The services sector provides 83% of America’s jobs, employing 86 million people. It dominates our economy. Customer call centers and data entry facilities are being relocated to places where capable labor can be found at lower wage levels. High-speed digital technologies make a connection between Boston and Bangalore as fast as between Boston and Baltimore. But offshoring is no longer limited to entry-level services jobs. Higher skilled professional jobs like computer chip design, information technology services, programming, architecture, engineering, consulting, automotive design and pharmaceutical research are beginning to go overseas. That is the bulk of the iceberg below the surface of the sea. The outsourcing of R&D is probably the most alarming illustration of this new problem. American companies now invest $17 billion in R&D abroad every year. IT multinationals have now established 223 R&D centers in China alone.

OK, lets count the inaccuracies in these two grafs:

1) Manufacturing jobs are not moving offshore — they’re largely disappearing due to technological innovation and productivity gains. 2) The service sector is not being “hit hard” by offshoring — job losses due to overseas relocation represent a trivial amount of total job destruction. 3) Offshoring is, in fact, largely limited to entry-level services jobs, even in the IT sector. This CNet article on R&D strikes an equally alarmist tone, but the interviews and raw numbers show that not a lot of high-level tasks are going to move offshore. Two tidbits:

Like many technology executives, Rhonda Hocker saw offshore outsourcing as an ideal way to stretch her budget and speed the development of new systems. The chief information officer at San Jose-based software maker BEA Systems contracted with an Indian outsource company six months ago to handle maintenance and support of internal enterprise software from PeopleSoft, Siebel Systems and Clarify. She then outsourced help-desk work and made plans to do the same for the development of Web services components. But even Hocker, a fan of outsourcing by any measure, has her limits. “We’ll never outsource any of our IT architects,” she said of her “rocket scientists,” BEA’s top information technology developers. “I would never envision putting them over there or outsourcing that to anyone.”…. Microsoft, the world’s largest software maker, has an R&D budget that is also one of the world’s largest–some $6.8 billion for fiscal 2004. It operates research labs in China and the United Kingdom, but the bulk of its work takes place in the United States. “We will push some product development projects to India and China, but the lion’s share will stay where it is, because we think the best work force is here,” Microsoft’s chairman and chief software architect, Bill Gates, said in an interview with CNET News.com.

The article looks at some firms with R&D operations overseas. Typical is IBM, which has 70 researchers in Delhi, India, and 90 in Beijing — in contrast to 3,000 total research staffers, and 2,000 in the United States.

Lieberman is correct about the education gap and the decline in public R&D investments — but those problems have little to do with the alarmist tone of the speech. Why wrap such sensible proposals around such exaggerated rhetoric? Because it’s politically effective. The key Lieberman proposals — education, R&D, macroeconomic prudence — are smart things to do on their own. However, only the spectre of foreign competition seems capable of motivating Washington — a fact that flummoxed Paul Krugman a decade ago. While I’m very enthusiastic about the Senator’s concrete proposals, I’m very, very queasy about the scaremongering tactics that are associated with them.

Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast. Twitter: @dandrezner

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