So now that the global economy has officially arrived, how will the United States adjust? Will we as a nation bury our heads in the sand? At the behest of threatened industries and professions, will we erect new barriers to trade and labor flow? Or will we invest in the education, training and infrastructure that will empower U.S. companies to exploit their competitive advantages, while making it easier for enterprises to take risks and profit from their innovations?
Look no farther than Europe to see what happens to economies when governments shield industries and workers from creative destruction in the name of fairness and compassion. Europe is a land of generous unemployment benefits, regulations that make it hard for companies to fire workers and close facilities, state subsidies of "national champions"--and stiff personal and corporate taxes that pay for this protection racket. The result? Stagnation. Between the first quarter of 2003 and 2005, the economic growth rate in the European Union has averaged 1.5 percent, compared with 3.7 percent in the United States, while EU unemployment has averaged 8.7 percent compared with 5.6 percent in the United States. The likes of Germany and France are reeling with 10 percent unemployment rates because few multinationals dare to set up operations and take on people in those countries, while domestic companies are fleeing abroad.
Juniper Networks CEO Scott Kriens tells of the time during the recent tech downturn when his company was forced to lay off some employees in Germany. In one case, the German government insisted that Juniper terminate an unmarried professional instead of a married one with fewer skills--one reason you'll find a rejuvenated Juniper now hiring developers in China, India, Israel and the United States, not in Germany. The German labor laws may seem fair and compassionate, but their long-term effect is to send employers packing.
So if you think U.S. workers are entitled to Euro-style benefits and protections, think again. In a "flattened" global economy, work and output shift at fiber-optic speeds to those countries whose regulations are less onerous and whose people are more eager to hustle and deliver. Just because we don't like the fact that lower-compensated engineers and developers in China, India and elsewhere are "stealing" tech jobs doesn't mean we can reverse the trend.