Thomas Friedman is pushing his education line again. He tells readers that in today's global economy only the movers and shakers with real initiative can get ahead. Everyone else will lose out to the low-paid competition in India and China. It must be comforting to those who draw large paychecks to believe that it is due to their creativity and initiative. However, it ain't true. Living in DC, I know plenty of people who draw good six figure salaries. Almost none of them are movers and shakers with real initiative. The key to their success is that these people enjoy protection from the low-paid competition in India and China that less powerful groups in society do not enjoy. What does this protection look like? Suppose that Wal-Mart realizes that it can buy clothes more cheaply from a Chinese producer than a domestic producer. Wal-Mart signs a contract with the Chinese producer and voila -- the domestic producer has lost a ton of business and laid off most or all of their work force. U.S. textile workers lose their jobs because they cannot compete with Chinese textile workers making $1 an hour. Now suppose that I am sent by the New York Times, Mr. Friedman's employer, to India to find smart reporters and columnists who are willing to work for much lower wages than the current staff of the newspaper. Suppose that I round up a thousand really bright and energetic Indian journalists who would be willing to work for an average pay of $50k a year. This would be great by Indian standards, but far below the average pay at the NYT. Would the NYT just be able to hire them on to their staff? No way. The NYT would have to certify that it had first tried to hire workers at the prevailing wage. It would then have to say that it is paying these workers the prevailing wage. Employers lie on these points all the time, but it is usually to hire a relatively small number of foreign employees, not to replace their whole staff. Furthermore, even the fact that they would have to lie would provide some disincentive to hire the low-paid Indian journalists. Maybe no one enforces the law today, but there is no guarantee that it won't be enforced tomorrow. Maybe the NYT will have to face serious legal consequences at some future date if it told wholesale lies to hire foreign journalists at low pay. The story of the elites doing well in the global economy is not one about their education and savvy, it's about protectionism. They just aren't smart enough to recognize it.
--Dean Baker
