Re: National Socio-Economic Security Need for Encryption Technology

[Arun Mehta <amehta@giasdl01.vsnl.net.in>]

At 19:36 11/08/96 -0400, Perry E. Metzger wrote:
>
>Bart Croughs writes:
>> 	 But there is another axiom of economics which the
>> nationalist/socialist can use for his case against the free movement of
>> capital. This axiom states that the wages of workers depend on the
>> amount of capital invested. The more capital invested, the higher the
>> wages are.
>
>This must be some new axiom of economics that I had not heard of.
>
>>  If American companies are moving capital to Third World
>> countries because of the low wages in these countries, then the workers
>> in the Third World will of course be better off. But in the US, the
>> amount of capital will be lowered.
>
>????
>
>> So the American workers will be able to get other jobs, but these
>> jobs will pay less, because of the diminished amount of capital in
>> the US.
>
>This is truly one of the oddest economic theses I've seen in years.

Indeed. Bart makes a very remarkable assumption, which is that the total 
amount of capital in the fastest growing industry in human history  is constant.

As I mentioned in my note (which was a bit long by my standards, so you are
forgiven if you haven't read it) software producers are software consumers
as well. So, if the software industry grows in the world, it can only benefit
the producers in the US, who make most of the compilers and sophisticated
utilities that programmers need in order to develop software.

The danger to the US software writer comes from another direction, one which
this list is thoroughly familiar with: government policies, such
as ITAR. Gilmore,
I believe, plans to get the software written for secure Internet
routing outside the
US, to not fall foul of ITAR. As security, internet commerce and
other applications
needing crypto become a more important part of software development,
others might follow -- of course it won't hurt that the move reduces costs, but
that will not be the prime motivation.

This will not be the first industry that the US government
developed and nurtured,
only to hand on a platter to foreign competitors: CNC machine tools is an
example I am familiar with. For long, the writing was on the wall, but when the
debacle came, it was swift. If I'm not mistaken, the Japanese share in the US
market of CNC machining centers increased from 2% to 51% over a 2-year
period. The problem there, at least partly, was that government encouraged 
machine tool R&D and industry to cater to the needs of defense, rather than
the rest of us. Sounds familiar?

So, while US software isn't in any danger of losing quite that badly, as I have
explained, if the US loses revenue and capital in this sector, it will only 
have its own government to blame.

Arun Mehta Phone +91-11-6841172, 6849103 amehta@cpsr.org
http://www.cerfnet.com/~amehta/  finger amehta@cerfnet.com for public key