The Chinese Want to Innovate, Too. (Innovation Will Not Save the U.S. Economy.)

If you have ever followed or participated in the debate over Global Labor Arbitrage and foreign outsourcing, then you probably know that one of the common arguments put forth by the free market dogmatists is that we don't need to worry about filthy low-value-added manufacturing jobs because innovation is the future.  They argue that we must become a nation of innovators producing high-value-added goods and services and that innovation will produce tomorrow's jobs.  They will also sometimes argue that Americans almost have a monopoly on innovation and that we are the best at innovating, as though we have some sort of a racial advantage on innovation.

I don't disagree that innovation is good and that it's important.  It is certainly a touchy-feely notion that just about everyone would agree with.  However, I do take issue with their claims that we don't need to worry about global labor arbitrage because innovation will save us.

First off, any manufacturing or production-type jobs created by innovation can be performed less-expensively with fewer environmental and labor regulations in a far less litigious environment overseas.  Secondly, "necessity is the mother of invention", and the people who are directly involved with the act of manufacturing will end up making many of the improvements to the manufacturing process.  Thirdly, the cost of innovation--the cost of R&D--might very well be less expensive in other countries.  (We have been training foreign graduate students for years with our taxpayer supported universities.)

High Tech Research Going to China with Devastating Effects on Our Ability to Compete and on Our Future by Craig Harrington

It was one thing when America lost its textile industry, its toy making, and the production of basic consumer goods. It is another when we begin losing the core research and development that makes our companies operate. There is a growing shift in innovation. We are now outsourcing more than basic goods and simple service jobs. We are outsourcing high-paying work and sparkling facilities that were once Silicon Valley staples.

Multinational corporations have no reason to stay in the United States; they have no incentive to remain in our expensive market. We cannot expect them, and the jobs they support and create, to stick around based on altruism alone. Industries locate, relocate, and grow wherever the economy presents them with the best opportunities. The U.S. was once the focus of those opportunities, but it is no more.

Furthermore, people in other nations want to innovate, too.  For example, in 2004 India produced about 290,000 new engineers.  And guess what?  China wants to innovate too!  Surprise surprise!  According to this NPR report, the Chinese Aim to Build the Next Silicon Valley.

According to the free market dogmatists, we don't need to worry about the loss of manufacturing jobs and we don't need to do anything to protect ourselves from global labor arbitrage because innovation will save us and only Americans are capable of innovation and the Chinese will be content to work the filthy low-value-added manufacturing jobs.  I call bullshit!