As a faithful reader of Chronicles, I was sorely disappointed to see Tom Piatak’s “Outsourcing Our Future” (American Proscenium, May).  Mr. Piatak takes the ridiculous but all-too-oft-repeated stance that, when Americans “lose” jobs to overseas workers, America suffers.

He appears to have forgotten one of the fundamental lessons of economics: the lesson of comparative advantage, which tells us that, when jobs are done by those who do them most efficiently, everybody wins.  If “American jobs” go overseas, this leaves Americans free to do things that they are more suited to do.

The question is, Why are engineers overseas apparently more efficient than American engineers?  Perhaps the answer is that American workers are not allowed to compete with overseas engineers.  Wage is nothing more than a term for the price of labor.  A government-mandated minimum wage is a price floor on labor.  If there are two markets for a good (e.g., labor), one with a price floor and one without, it is likely that purchasers (i.e., employers) will go to the market that offers a better product for a lower price.  In this case, purchasers have decided that overseas engineers produce better labor for a more efficient price.

Mr. Piatak appears to believe that the way to improve America’s economy and to make us more efficient is to restrict free trade even further.  I think that it makes more sense to remove the price floor on labor—that is, to abolish the minimum wage.  Freer trade is always better.

        —Heidi C. Morris
Hillsdale, MI

Mr. Piatak Replies:

I am delighted that Miss Morris is a faithful reader of Chronicles and thank her for her able summary of the free-trade ideology taught in many economics classes.  The problem with this theory is one that besets many theories: It cannot be reconciled with reality.

As Pat Buchanan points out in The Great Betrayal, the United States would still be a provider of agricultural goods to an economically powerful Great Britain if we had followed free-trade ideology.  Great Britain certainly had a “comparative advantage” in manufactured goods in the late 18th and early 19th centuries.  Fortunately, George Washington and Alexander Hamilton recognized that America’s political independence required economic independence and erected tariffs that both shielded American manufacturers from British competition and brought in all the tax revenues needed to finance a very small federal government.  American statesmen followed the wisdom of Washington and Hamilton well into the 20th century, resulting in an economy that was not only the world’s strongest but its freest.  By contrast, the greatest apostles of free trade in American history were Woodrow Wilson, who gave us the income tax, and FDR, who set us firmly on the road toward the massive and intrusive federal government we have today.

Free-trade ideology requires a country to be prepared to lose entire industries forever if a competitor enjoys a temporary advantage in price, even if that advantage is an artificial one created by foreign subsidies and even if the cost of the loss of such industries is massive unemployment, which inevitably results in a demand for more social services from government.  No country can become or long remain great by consistently following such a course, which is why even advocates of free trade have regularly resorted to quotas, tariffs, and bilateral agreements restricting imports.

Being a consistent ideologue, Miss Morris suggests that America will be better off if her engineers lose their jobs to Indian ones or end up working for salaries approaching those paid in India.  Absent from Miss Morris’ reasoning is any recognition that not all jobs are equally important to the nation.  If America loses her engineering jobs, she also largely loses her ability to create new products or improve existing ones, not to mention her ability to maintain a defense industry capable of protecting our independence.  Before jumping to such an absurd conclusion, Miss Morris would do well to reexamine the ideology that led her to reach it.