Free market seeks equilibrium !

There is a lot of hue and cry over Obama's Bangalore talk today. Everyone is predicting doom for India's knowledge industry, that has thrived with outsources products and services from USA and other richer countries over last decade.

Now, Obama wants to clip the move, to save jobs for Americans, who are going jobless in hordes.
Companies, who set up shop outside USA, if they did not repatriate the profit from the operations back in to USA, they paid a lot lower tax.

Now, that the hole Obama wants to plug, and analysts believe this would raise the cost of outsourcing by 50%, which could make India not-so-competitive among the other service providing nations.

Now, look at it this way. If you have a Pot of a crazy crazy shape, and you pour enough water in to it, the water top level is always the same. Irrespective of the shape below it.

When we say, economy should be "Free" - this is what would happen.
- Businesses would look for cheaper places to go to produce. For e.g. USA to India

- The cheaper places will make more money e.g. Indian working on these would be wealthier

- More money brings more greed, and the salaries and comp. of the workers in the cheaper place would keep increasing, much more than the source (USA)

- When a lot of these job moves, the source country will have joblessness. And their spending will decrease. And more free workers will attract less wages.

- This cycle would continue till US and India (in this example) workers would cost similar !

This is free market. It will seek equilibrium.

Only thing is that, the time to equilibrium is probably expedited by such policy decisions, which are not so free market in nature ! Its like vaccination. Inject bacteria to make one bacteria free :)