Viriginia Postrel’s latest article, The Trend of Vanishing Tech Jobs, addresses the “outsourcing” crisis in IT:
What’s happening now to software and services has already happened to hardware, with great economic results.In the late 1980′s, Asian manufacturers began turning out basic memory chips, undercutting American chip makers’ prices and inciting a fierce policy debate. Many industry leaders argued that the United States would lose its technological edge unless the government intervened to protect chip makers.
In a famous 1988 Harvard Business Review article, Charles Ferguson, then a postdoctoral associate at the Center for Technology Policy and Industrial Development at M.I.T., summed up the conventional wisdom: ‘Most experts believe that without deep changes in both industry behavior and government policy, U.S. microelectronics will be reduced to permanent, decisive inferiority within 10 years.’
He denounced the “fragmented, chronically entrepreneurial industry” of Silicon Valley, which was losing market share to government-aided Asian businesses. “Only economists moved by the invisible hand,” he wrote, “have failed to apprehend the problem.”
Those optimistic economists were right. The dire predictions were wrong. American semiconductor makers shifted to higher-value microprocessors. Computer companies bought commodity memory chips and other components, from keyboards to disk drives, abroad. Businesses and consumers enjoyed cheaper and cheaper prices.
Far from an economic disaster, the result was a productivity boom.