The great outsourcing controversy is now over. All you information technology workers who like to suggest that my job should be outsourced whenever I write on this topic can now put away your poison pens. In elections last week, the voters of India fixed the problem by turning their country away from liberalism and back toward statism. Should India's new leaders follow through on their campaign promises, there will be a lot fewer businesses there doing outsourcing or anything else.
For 100 years, India was the crown jewel of the British Empire. The nation's best and brightest were often sent to British universities like Oxford, returning to India as public servants. By 1947, when India was granted independence, it probably had the best-trained bureaucracy in the Third World.
Two problems arose from this. First, many of India's bureaucrats had picked up ideas about socialism while studying in Britain. In the 1930s and 1940s, it was just about impossible to hear anything good said about the free market at a British university. This eventually led Britain itself to adopt socialism after World War II and India's leaders were quick to follow its lead, nationalizing industry, adopting 5-year plans and all the rest of the socialist dogma of the day.
Second, India's superb bureaucracy seemed to make socialism work. The widespread failures of socialism in other newly independent colonies was often blamed on undertrained and unskilled bureaucrats that lacked the expertise to implement national economic planning. To the extent that this was true, India had a leg up. As a consequence, socialism seemed to work there for a while.
Of course, the problems inherent in socialist planning go far beyond what even the best, most well intentioned bureaucrats can overcome. As a consequence, Indian industry became increasingly uncompetitive, requiring higher levels of trade protection to keep it afloat. Although the economy grew, this was mainly due to the rising population. On a per capita basis, growth was much slower--too slow to make a dent in India's massive poverty. Only technological advances imported from elsewhere allowed agricultural production to increase enough to avoid starvation. The nation's entrepreneurs and professionals frequently emigrated to places where their skills earned a better reward.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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