PriceSCAN Blog

As low-skill, low-pay jobs migrate to China and other vast foreign pools of cheap labor, America finds itself locked in a global battle for brainpower with the rest of the world. This is a struggle for which we are well armed, sporting an arsenal of research universities second to none and an economic system that handsomely rewards entrepreneurial innovation. Yet rising nations can build excellent schools; consider the Indian Institute of Technology system, for example. China itself is investing massively in an effort to pull its research universities into the first tier, and has announced plans to increase R&D spending from 1.4% of GDP in 2004 to an estimated 2.5% of GDP by 2020. Further, the blistering growth seen in emerging economies (when they're not going through one of their periodic bust phases) presents a fertile and tempting environment for the gifted and ambitious. Nowhere is this more true than in China, which combines ferocious growth with a gargantuan internal market potential and a ready supply of inexpensive workers.
So where is the United States to find an added competitive advantage? Where it always has: in the repressive policies of its rivals. Numerous academic studies demonstrate that, throughout our history, U.S. economic expansion has been powered by immigration. Those waves of newcomers invariably include some of the most talented, creative minds in the world, driven from their homelands by noxious governments strangling freedom of inquiry and expression.
And that's where China's "Google policy" comes in. Censored searches can restrict more than just what the government sees as ideologically unacceptable, since its not so easy to separate such information from discussion of policy and technology that impacts business decisions and competitiveness. Monitoring of searches can have a further dampening effect on commerce, since now one has to worry one's inquiries might be seen as subversive, or perhaps even passed on to a competitor with superior government connections. And, even beyond the merely pecuniary, as people become better educated and wealthier, their appetite for new knowledge and experience tends to sharpen, and it is precisely this desire which the PRC’s restrictions will make difficult to satisfy.
Search censorship is just one facet of barriers to the free flow of information that makes life less pleasant for China's best and brightest, and frankly, that's great for us. Because the less attractive China makes itself for such people, the brighter the prospect of coming to this country shines. And every time a Chinese grad student in Cambridge or Palo Alto considers sticking around here, the U.S.'s potential GDP growth rate rises. A calculation of this nature was in the mind of most of America's forbearers, save for the fact that the oppression they faced was often more acute, if not life threatening. There is, after all, a reason economics is called the dismal science, and political economy tends to be more dismal still. China's actions may violate human rights and basic decency, but the fact is that a formidable competitor is voluntarily handing us a rare advantage. And just think: we didn't even have to impose protectionist tariffs or mess around with the WTO.