Reader Paul Davis writes: “You’re right, it is all about the money. I used to be a die-hard conservative, but people like you and those making the ‘morally neutral’ decision have pushed me to the left, hard left … Since it is all about the money … raise taxes on offshoring firms by 50%.”
Many readers mistook my description of the strategic logic behind offshoring for a public policy prescription.
For the record: I don’t like the trend toward offshoring any more than most IT professionals. I see few alternatives, though, for companies that compete on price, given the potential cost reduction that offshoring provides. (The good news about the bad news: For the time being, at least, offshoring isn’t a complete solution to IT service delivery. Thus far it’s best-suited to legacy systems maintenance.)
Mr. Davis’ “hard turn to the left” is, I think, less a change in political orientation than a recognition that good public policy isn’t a matter of the government always doing whatever big companies want it to do. Especially in an age when large corporations are global concerns, governments … which aren’t … have an obligation to protect the best interests of their electorates from those corporations which, by definition, have no motivation to look after the interests of the citizens of any country.
Should the U.S. tax the income of offshore IT services providers? Just taxing them, or imposing a tax penalty on companies that engage them, is simple protectionism. I think we’ve found that protectionism doesn’t work — in the long run its net impact is to reduce the incentive for U.S. providers to be globally competitive.
Here’s what might work: Charge a trade tariff on offshore services pegged to the import tariffs their governments charge on our exports. Companies located in nations that create no barriers to selling U.S. goods and services within their borders would find no barriers to their selling labor in ours. Countries that make it artificially expensive for their citizens to buy our products would find their offshoring companies suddenly uncompetitive in the U.S. marketplace.
It’s good economics. It’s also a win for the citizens of both countries. Increasing exports of our goods and services creates employment here; increased employment of citizens in less-wealthy nations increases their wealth, thereby increasing the size of the market able to buy our goods and services.
This isn’t a particularly subtle, brilliant, or original idea. In fact, it’s pretty obvious. Which brings up the question of why nobody has proposed it yet.
Sadly, the answer to that question is almost as obvious as the idea itself. But what the heck — if you like it, write your senators and congressional representatives, even if doing so is like giving chicken soup to a corpse.
You might argue that doing so won’t revive the dead. They are, after all, demised. No matter how efficacious chicken soup might be for a wide variety of ills (which brings up the question of why we don’t find chicken soup in stores purveying less-tried-and-true herbal remedies … but that’s another subject for another time) … no matter how many diseases chicken soup cures, death isn’t one of them. Why waste your time feeding it to a corpse?
Why write the Senate and Congress?
It can’t hurt.