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The Lighthouse is the weekly email newsletter of the Independent Institute.
Subscribe now, or browse Back Issues.

Volume 6, Issue 16: April 19, 2004

  1. Outsourcing and Adam Smith
  2. Why Counterterrorism Took a Back Seat
  3. DRUG WAR CRIMES -- featuring Jeffrey Miron, Joseph McNamara, and Ethan Nadelmann (5/06/04 in Oakland)

1) Outsourcing and Adam Smith

The current outcry against business outsourcing is as flawed as the protectionist tariffs and subsidies that economist Adam Smith discredited more than two hundred years ago, according to award-winning business executive Robert W. Galvin.

In a new op-ed published in the SAN FRANCISCO CHRONICLE, Galvin -- former CEO of Motorola Corp. -- argues that just as the free-trade policies inspired by Adam Smith's theories led to increased wages and living standards, so today's much-discussed practice of outsourcing business services to low-cost subcontractors overseas also helps foster prosperity.

"As individuals, we benefit from outsourcing in ways ranging from better customer service to ever-improving technology at ever-decreasing prices," writes Galvin. "As services such as X-ray reading are becoming more competitively provided overseas than at home, consumers are likely to benefit from lower health-care costs or even greater choice of such services. For business firms, cost savings from outsourcing mean more money is available for new investment."

Especially noteworthy is Galvin's recognition of what 19th-century French economist Frederic Bastiat referred to as "the unseen" effects of everyday economic events. In this case, the "unseen" (or, more accurately, the under-reported) is the outsourcing by foreign firms that has increased commerce in the United States.

"Just as American firms have been increasing their presence overseas, foreign firms have been seeking access to American markets and talent by locating here," Galvin continues. "According to the Organization for International Investment, California has been the state benefiting most from this trend, garnering more than 700,000 jobs from foreign firms’ 'insourcing' to the United States. Nationwide, the creation of such insourced jobs is outpacing those outsourced by U.S. firms 2 to 1, and the pay for these jobs averages 16. 5 percent more than that at all U.S. firms."

Concludes Galvin: "Creating anti-outsourcing policy based on unemployment fears makes as much sense as bemoaning the loss of American careers in the stenographer pool, slide-rule assembly line or coal shoveling. The loss of such jobs has netted us more and better-paying jobs and extended higher living standards wherever the division of labor has been allowed, to paraphrase Adam Smith, a free, 'invisible' hand."

See "Sea Changes in the Corporate World -- Outsourcing and Adam Smith," by Robert Galvin (SAN FRANCISCO CHRONICLE, 4/19/04)

For more about Robert Galvin, see "Wireless Visionary: Robert Galvin, Motorola Icon, Still Thinks Tech" (SILICON VALLEY BIZ INK, 4/16/04)

Information about "Innovation, Entrepreneurship, and the Global Marketplace" -- a gala dinner featuring Robert Galvin, Peter Thiel, and Daniel Edelman (4/21/04 in San Francisco)

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2) Why Counterterrorism Took a Back Seat

"CIA and the FBI are investigating a call to our embassy in the UAE in May [2001] saying that a group of bin Laden supporters was in the U.S. planning attacks with explosives," according to the now-famous 8/06/01 memo, "Bin Laden Determined to Strike in the U.S."

Despite the ominous warning, and the large amounts of intelligence "chatter" intercepted that summer, a cabinet-level meeting on counterterrorism was not scheduled until one month later -- a week before September 11th -- because the White House had, as National Security Advisor Condoleeza Rice told the 9/11 commission, "other priorities."

Those "other priorities" -- North Korea, the Middle East, the Balkans, China, and missile defense -- received attention at the expense of counterterrorism because those issues had organized interest groups "howling for the U.S. government to address their pet concerns," writes Ivan Eland, director of the Center on Peace & Liberty at the Independent Institute, in his latest op-ed.

"For example, the missile defense contractors receive billions to construct what promises to be a white elephant.... Similarly, the Middle East is always a concern because the oil companies want to ensure that the U.S. government is defending their interests in the region, despite the skepticism of economists -- on both the right and the left -- of the need to defend oil supplies. And China is always high on the president’s docket because of all of the economic interests involved there. You get the picture.

"The laziness with which the administration treated a potentially fundamental threat to America’s citizens and their homeland occurred principally because there were no vested interests pushing action," Eland continues. "Instead, interest groups were pressuring for U.S. interventions in far-flung places overseas. Such pre-September 11 sloth was so embarrassing that for two years after acknowledging the August 6th intelligence briefing’s existence, the White House has stonewalled its publication. Now that the briefing finally has been released, such chagrin was well-founded."

See "Laziness in the Face of Mortal Danger," by Ivan Eland (4/13/04)

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3) DRUG WAR CRIMES -- featuring Jeffrey Miron, Joseph McNamara, and Ethan Nadelmann (5/06/04 in Oakland)

Each year, the U.S. government spends over $30 billion on the drug war and arrests more than 1.5 million people on drug-related charges. Currently more than 318,000 people are behind bars in the U.S. for drug violations -- more than the number of people incarcerated for all crimes in the United Kingdom, France, Germany, Italy, and Spain combined. Have current drug laws deterred drug abuse and reduced crime? What are the real costs of this country’s war on drugs? Is there a link between the homicide rate and the amount of resources given to drug prohibition?

Please join us as Boston University economist JEFFREY MIRON (author of the major new book, DRUG WAR CRIMES), former San Jose police chief JOSEPH McNAMARA, and drug-policy expert ETHAN NADELMANN examine these questions and explore real alternatives to America’s “War on Drugs.”

SPEAKERS:

JEFFREY A. MIRON is a Professor of Economics at Boston University and author of the new book, DRUG WAR CRIMES: The Consequences of Prohibition. His articles on Drug Policy have appeared in SOCIAL RESEARCH, BOSTON GLOBE and the LONDON OBSERVER. He received his Ph. D. in economics from the Massachusetts Institute of Technology.

JOSEPH D. McNAMARA is a Research Fellow at the Hoover Institution and former Chief of Police, San Jose, CA and Kansas City, MO. He has published articles in the NEW YORK TIMES, the LOS ANGELES TIMES, the WALL STREET JOURNAL, the WASHINGTON POST, and other publications. He has been a commentator for NPR and has appeared on "Meet the Press," "Good Morning America," "60 Minutes," and other television programs.

ETHAN NADELMANN is founder and executive director of the Drug Policy Alliance, the leading organization in the United States promoting alternatives to the war on drugs. Nadelmann received his PhD from Harvard, and a Masters degree in International Relations from the London School of Economics. His speaking and writings on drug policy have attracted international attention and appeared in SCIENCE, AMERICAN HERITAGE, NATIONAL REVIEW, and elsewhere.

WHEN:
Thursday, May 6, 2004
Reception and book signing: 6:30 p.m.
Program: 7:00 - 8:30 p.m.

WHERE:
The Independent Institute Conference Center
100 Swan Way
Oakland, CA 94621-1428
Map and directions

TICKETS: $15 per person ($10 for Independent Institute Members), or $25 for admission and a copy of DRUG WAR CRIMES. (37% off cover price!) Reserve tickets by calling (510) 632-1366 or ordering online at http://www.independent.org/tii/forums/040506ipf.html.

Praise for DRUG WAR CRIMES: The Consequences of Prohibition, by Jeffrey A. Miron (The Independent Institute, 2004):

“Miron’s arguments are lucid, well-reasoned, and powerful. Everyone can benefit from reading this important, insightful work.”
-- Margaret M. Russell, Former Vice President, ACLU; Professor of Law, Santa Clara University

“A highly significant improvement to the canon of drug war literature … can well be used as the standard for judging all else in the field. A reasonable mind will find this book exceedingly valuable. It has been needed for a very long time.”
-- John L. Kane, Jr., Senior Judge, U.S. District Court

More information about the event "Drug War Crimes" -- featuring Jeffrey Miron, Joseph McNamara, and Ethan Nadelmann (5/06/04 in Oakland), see

More information about the new Independent Institute book DRUG WAR CRIMES: The Consequences of Prohibition, by Jeffrey Miron.

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