Offshoring strategy central to industrial policy

U.S. industrial policy should aim to identify competitive dynamics and limits of offshoring, and feed this understanding back into the educational and research grant system.

Note I don’t say, “stop offshoring,” or “do more offshoring.” Offshoring is just a plaything of Adam Smith, like the electric motor. It happens, and you plan around it. All you can do is build a society that is competitive in the new circumstances.

For example, suppose — and this is just one possible direction — suppose that we’re on a trajectory in which 99% of software development ends up in well-educated developing countries. This might mitigate toward U.S. universities teaching abstract system design instead of implementation. It might imply creating new, extremely high leverage programming languages like Ruby. It might imply new modes of industrial organization such that a substantial part of the value chain is still captured here.

At minimum, the U.S. should be funding university research on this subject. While they still can. As the founder of India’s InfoSys told The World Is Flat author Thomas Friedman, “The global playing field has just been leveled, and you Americans are not ready.”

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