A few thoughts on Outsourcing

At the bottom of this page is a banner that suggests the heart of American opposition to outsourcing is closet racism. Indeed, for many people I have spoken to this has seemed to be the case. Somehow foreigners just don't deserve the same jobs Americans work. For some reason employers are evil when they choose to fire an American and hire someone else in another country to do the exact same job, especially if it's to pay him less for it than the American would get--which seems to add insult to injury... somehow. But of course it really isn't that simple. A touch of racism or nationalism may be behind some or even most people's opposition to outsourcing, but what really drives them are a few misconceptions.

The most important thing to remember when discussing outsourcing is that the economies of the world are neither fully globalized or fully isolated. Outsourcing is not a myth that you can discredit by simply pointing out the global economy and saying: "Nobody complains when jobs go from Florida to Ohio except in Florida." There is a global economy, but there are still national economies too, and these national economies do still compete with one another for everything under the sun. When jobs go from Florida to Ohio or wherever in the United States it's not a net loss of jobs for the United States economy. When jobs go from the United States to China, or any other country, it really is a net loss for one and a net gain for the other. The reason is because those economies are separate. They do depend on one another. Each has products, resources and markets the other does not, and the resulting trade conducted between them knits them both into the global economy. But the global economy itself is just a patchwork quilt of national economies, instead of person A and B, and company A and B, trading with whomever and wherever like it's often depicted. This depiction is like saying you can get on a commercial plane and fly from any airport straight to any other airport with no detours. In reality there is a hub and spoke system in place which often requires travelers take huge detours, sometimes even passing their final destination before reaching it.

The economic version of hub and spoke results from tariffs, customs and all obstacles to free trade and free movement inter and intra the national economies. Some of these deliberately isolate the economies from one another, while most simply cause them to function differently from one another, which does the same thing. What this means is that people have a legitimate reason to fear outsourcing from their country. It doesn't just threaten your job, it threatens the economy you depend on with a net loss of jobs and capital. So what should we do about it? Do we wall our business in? Do we outlaw banks from investing abroad? Maybe we should first ask the folks who applied this philosophy to its extreme to fight a different kind of outsourcing. At times during the history of the Soviet bloc, citizens of the Soviet Union and her satellites fleeing life under Communism represented a huge net loss of productivity in the Soviet economy and may have contributed to their low standard of living. Yet history doesn't look back on these refugees with malice, because history remembers the Soviet standard of living was pretty low to begin with. The Soviets and allies were a technocracy who depended on specialists and educated people to plan and manage their huge economy. Yet despite how important these people were, and despite how much honors and favors they were given, and despite how much of a blow it was for the economy to lose even one of them, these were the people most eager to flee and seek their fortunes in the West. No matter how better off they were than most other people in their country, they were still worse off than they knew they could be in many other countries with freer markets, where they could sell their knowledge and skill for a profit. And they risked torture, barricades and death to do it.

Nobody would have ever fled the Soviet bloc if they didn't think life would be better on the other side of the iron curtain, and we don't think ill of them for it because we know it is not immoral to seek a better life. Maybe it was at the expense of others, but those others were not innocent. So now do you see? It's not that every economy suffering from outsourcing is trying to emulate the Soviet Union, but that for one reason or another people are being chased out or lured away. It might have nothing to do with policy, but could simply be an unfortunate reality like a plant resource running dry or becoming obsolete. More often than not however, it is policy, just like in the Soviet Union. And just like in the Soviet Union, the policy usually involves limitations on economic freedom. Even if less severe, nobody in their right mind wants a small injury any more than a big one. They'd rather not be injured at all, and if they have the option of avoiding injury they will probably take it. It is not just to demand anyone hold still and take one for the team, at least not under any normal human circumstance.

Well now I've rambled for a bit too long. Gotta' conclude. Abolish the national economies. Not the nations themselves, oh no; those haven't failed us yet. But the national economies are now effectively obsolete. The only reason they're even still around is because we still want them; because we're afraid of life without them; because we still entertain the idea of a self-sufficient country that produces as much of what it needs and wants as it can. We're afraid to fully merge with the global economy because we believe this would threaten our autonomy and sovereignty. We want them in case of war, to be able to provide for ourselves in wartime, but in reality the national economy is what makes war possible, and the global economy what could make it almost impossible to be an aggressor. Even when the global economy was much less stronger than it is today powerful aggressor nations were defeated after being cut off from it long enough. Imagine if every nation was absolutely dependent on every other? It Is kind of scary when you think about it, but in reality we all, and have always, "depended on the cooperation of strangers".

Not only would a truly global economy abolish outsourcing, at the same time it would abolish every economic incentive to make war, and create many incentives to preserve peace and order. When investments and people can freely and easily go wherever they like with minimal obstacles and risks, then they will go wherever and do whatever they can to be the most useful. A whole nation may find it largely produces grains, while another fruits, and another industrial appliances; none of which either could survive on if denied the others. Many might do it all and then some, but not in sufficient quantity to provide for their entire population; a little bit of each, but not enough of any except for a few. Still others might produce virtually nothing, but maintain safe ports to shelter and organize trade. The possibilities are endless, and the planet Earth is so rich in geographic, demographic, and resource diversity as to make autarchy impossible without conquering the whole globe. And why steal resources or labor when they can be so much more easily bought?

Of course outsourcing would be gone for the same reason it isn't there in a national economy. Jobs might go from Hong Kong to Mexico city, but this is not a net loss of jobs for planet Earth. And even Hong Kong isn't worse off for it; their labor and resources would be freed up to do something the global consumer deems more important; something more fit for Hong Kongians to do. If it wasn't otherwise, they simply wouldn't have lost the work.