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Suppose tomorrow I invented a box - call it the DMV machine - which, when connected via telephone lines to computer terminals in offices around the state, could perform every task now assigned to the Department of Motor Vehicles, faster and at a fraction of the cost.

Motorists would be happy because they would be getting great service from an office often considered the poster child for frustratingly slow bureaucracy.

Taxpayers would cheer because they'd be paying less to provide a better product.
The only ones out of sorts might be the current employees of the department, who would be forced to find new jobs in state service or in the private sector.

On balance, though, most Californians would probably consider the trade-off a good one.

Which brings us to the topic of outsourcing.

The scenario I've described above is the technological equivalent of outsourcing, or farming out tasks to a third party that can perform them just as well, or better, for less money.

When we do this with machines - automated tellers, self-serve gas pumps, robots on the factory assembly line - we generally acknowledge it's a good idea. Technology increases productivity, allowing us to produce more with the same amount of labor, or even, sometimes, with less manpower.

But when the "DMV machine" is not a magic box and is instead a rather mundane company employing humans, suddenly outsourcing becomes a hot political issue. And when that company is headquartered in another country, watch out. Offshore outsourcing is about as evil as it gets.

The truth, however, is that international trade, in goods or in services, helps America and California.

It allows our domestic firms to become more productive. And it creates economic growth overseas, which then translates into more demand for our own products and skills. It lets us do what we do best, while others do what they do best, for the benefit of all.

Outsourcing also goes both ways. Just as American firms invest overseas, foreign companies also create jobs here. U.S. subsidiaries of foreign firms employ an estimated 6.4 million Americans, many of them in high-skilled jobs. About 700,000 of those jobs are in California, and the number is probably climbing monthly.

But all of this activity, even if it is ultimately positive, causes some dislocation, as people in jobs that can be done elsewhere either lose their position or fear they might. This kind of discomfort is the inevitable byproduct of our advancing age, ever since the buggy whip industry was extinguished by the automobile.

It's not always pleasant or easy, but it is the price we pay for the breathtaking improvement in our standard of living over the past century.

The way to deal with that individual pain is to help people through the transitions, with unemployment benefits, re-training, and job placement. It does not help to try to stop the world and get off.

Yet that is exactly how some politicians are reacting. The California Legislature is currently considering at least eight proposals that seek to regulate outsourcing.

The most serious of these proposals is probably AB 1829, by Assemblywoman Carol Liu of Los Angeles County. This bill would essentially prohibit the state from contracting with companies that provide goods and services from outside the United States.

"States and local governments should not use tax dollars to support the off-shoring of service and technology when so many Americans are out of work," Liu said. "The first, most sensible step is for Californians to say 'not with our money' and prohibit companies from filling California state and local contract services with overseas workers."

That sounds good, but Liu has got it wrong. California's government should not be in the business of creating and protecting public-service jobs. It should be in the business of providing services to the residents of the state, in the best and most cost-efficient manner possible. If that means using state employees, fine.

But if it means using workers located elsewhere, that option should also be available.

Liu's bill, ironically, wouldn't stop the government from hiring companies that use employees in other states. So a firm doing business with California could ship its jobs to Texas or New Mexico but not to Canada or India. The bill, then, would do almost nothing to help preserve California jobs. In that light it appears to be simple xenophobia.

Finally, if Liu were successful in walling off California, her bill might draw retaliation from other countries, which would feel compelled to ban their own governments from doing business with companies headquartered here. But a trade war focused on services would hurt California more than it helps.

Opponents of outsourcing often say the practice is short-sighted because it saves money up front while creating costs down the road.

But the truth is just the opposite. There is nothing more forward-looking than a policy that sees the entire world engaged in free, open and competitive commerce, improving everyone's well-being by encouraging each of us to maximize our potential while letting others do what we cannot or should not be doing ourselves.

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''Give it a Break''

Business Standard of New Delhi, 12/22/08