The Outsourcing “Debate”

Obama: You did outsourcing!

Romney: No, offshoring!

Obama: Same thing! Shipping jobs overseas!

Romney: Did not!

Obama: Did so!

Romney: Did not!

Obama: Did so!

If we’re to have a debate about outsourcing, fine, let’s have it. But this isn’t it. Romney’s lame response is baffling. It’s like, “when did you stop beating your wife?” He can’t win that argument.

But there is a debate Romney could win, if he weren’t such a wuss. He should defend outsourcing, and call Obama not merely on lying, but on economic folly. Yes, most voters have been demagogued into thinking outsourcing is a crime on par with using children’s blood to make matzoh. But it’s a bum rap.

While some individual workers do lose jobs, those losses are balanced by even greater benefits. “Shipping jobs overseas” is good for the overall economy, in two basic ways.

First, it benefits consumers through lower prices and less inflation. If a company can get some work done more cheaply, it can keep prices down, to beat the competition.

 Second, if it doesn’t do that, competitors will eat its lunch and put it out of business. An exporting company must compete against overseas rivals; if it can’t match their costs, and prices, it will fail. (That’s what happened to Solyndra!) And even regarding products sold at home, it’s unrealistic to keep lower-cost foreign competitors at bay. In sum, if outsourcing can reduce costs, then it’s outsource or die. And a dead business provides ZERO JOBS.

So outsourcing is good for U.S. jobs, by keeping employers in business. In fact, studies have shown that companies taking advantage of outsourcing are more successful, they sell more product, expand their markets, and in consequence wind up actually hiring more Americans.

 No responsible economist, of any stripe, would disagree with any of this. It isn’t rocket science, or convoluted economics. It’s plain common sense (in short supply in America’s economic debates). And it would help Romney’s killer line of argument: that Obama bungles the economy. The misguided outsourcing witch-hunt exemplifies this administration’s economic cluelessness.

But if Romney did have the balls to defend outsourcing, imagine the brain-dead hooting and hollering of pundits, let alone Democrats. No wonder Romney won’t do it.

There is a further point. It’s okay to care about our own. But foreigners are our brethren too. They too deserve good jobs; and those “outsourced” by U.S. companies tend to be very good indeed, compared to their alternatives. Outsourcing helps people live better lives, and makes a better world for us all to live in. It’s not a crime; it’s a mitzvah.

NOTE: I posted this before seeing David Brooks’s uncannily similar latest column. Honestly I did!

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7 Responses to “The Outsourcing “Debate””

  1. JAN Says:

    Frank, I have to disagree here. You are saying that treating the symptom is preferable to treating the disease.

    The biggest problem (as I see it) are the unions. When a company is forced to pay an employee $30 an hour to do a job that you could train a brain damaged monkey to do, of course the cost for the product is going to go up and make it impossible to “beat the competition”.

    What has happened is that the cure for one disease has become a malignant cancer. Labor unions did great good at one time and really lifted this nation out of a very dark place. But they continued and so did the politicians pandering for votes. Now, what was intended to ensure that people were able to earn a decent living in a safe environment and be treated fairly is causing millions of people to lose their jobs.

    Even positions that can not be outsourced have been “hijacked”. From an broader economic standpoint I would rather have three people earning $15 an hour plus benefits fixing roads than have one person earning $60 an hour plus benefits and whether or not they are good workers, they can not be replaced. This is one of the reasons why our bridges are falling apart and our roads are full of potholes. It has become so incredibly expensive to get things done that we can no longer do them effectively.

    I was in a union and I also owned a company that was unionized. It made me sick to my stomach to see the corruption in play. It also made me sick to my stomach to see prevailing wage force me to pay a helper an extra $20+ an hour to do a job just because it was being done for the City of New York. These helpers were 18-20 years old, did not have college educations and I was helping them learn a trade. Did they earn a salary of $32 an our? NO. We are teaching a whole generation that they did not have to pay their dues and struggle to “make it”, that it requires work, effort and commitment to succeed and excel.

    I don’t blame companies for wanting to outsource. What we need to do is make a (more) business friendly environment. Strip away the unfair powers of the unions and do away with prevailing wage for starters.

    But to say that outsourcing is a “good” thing? That’s like saying that losing your hair is a good thing, when the cause for the hair lose is chemotherapy to fight an aggressive cancer.

    [FSR comment: Well, I suppose it’s true that outsourcing is a “symptom” of U.S. workers earning high wages compared to Chinese or Indians. I don’t understand why Americans feel an entitlement to high wages when others equally good will do the work cheaper. And it’s true that the outsourcing “problem” would disappear if American wages plummeted. But I doubt many Americans would agree with that “solution.” We can maintain our high living standard by playing as hard as we can in the globalized market — not by trying to make it go away.]

  2. JAN Says:

    Frank,, what incentive do American’s have to get a college education? To build a skill set? I hear teenagers talk about wanting city jobs painting roads because it is “easy, pays very well”, etc.

    Why should we artificially inflate the value of labor just so that someone can buy the second 50+ inch flat panel TV or buy their second 8 cylinder pick-up truck? Why should a painters helper make as much as a nurse or doctor? Why should a truck driver earn more than the engineer that designed the truck?

    I am sorry, but I see this as faulty reasoning and I find that this very reasoning is a danger to the stability of the future of our national economic stability and security.

    [FSR comment: If you ran the country as a dictator, you could set everyone’s wages as you deemed appropriate. But while our economy inevitably has certain irrational distortions, by and large it is a free economy in which wages and prices are set by market forces. And I would NOT want a system where some exogenous power (government) tries instead to dictate wages and prices. A recipe for disaster, as we know very well from historical experience.
    P.S. A college education still pays. Most people without it are economic road-kill.]

  3. Gregg Millett Says:

    Pretty ironic that that ‘ol socialist/communist Obama doesn’t want any of “our” jobs to go to people in other countries!

  4. JAN Says:

    Frank, my point exactly, but you are arguing it from a different vantage point. Why should the government dictate wages and prices by allowing unions to essentially “control” the entire process? Not only do they control the process, but government further “gifts” unions with prevailing wage and work-right exclusivity. New York is SUPPOSED to be a right to work state, but good luck getting a contract if you are not in the “right” union, it just wont happen.

    When you give too much control to a group, as is the case with the laws that exist which dictate labor and labor disputes, it creates an uneven playing field. What should dictate wages and price is what the market can bare. There is enough competition out there for jobs, if someone is only offering $15 an hour and the competitor is offering $15.50 an hour, the first will have to find other ways to compete. The only thing that government should be doing in this situation is laying out fair rules- a minimum wage, safety and health standards, unemployment and disability insurance, etc. All things which already exist.

  5. The Outsourcing “Debate” « The Rational Optimist « Outsourcing Yes Says:

    […] The Outsourcing “Debate” « The Rational Optimist Comments […]

  6. Scott Perlman Says:

    Along the same lines have you heard about the brouhaha concerning the suits for our Olympic athletes? Seems various members of Congress are upset that they were made in China. This is getting a fair amount of publicity. If it was not so tragic it would be hysterical. They need to focus on more important things, like whether Roger Clemens shot anabolic steroids in his rear to enhance his pitching performance.

    Some statements from our political leaders:
    “I think the Olympic Committee should be ashamed,” Reid told reporters on Capitol Hill. He said they should “burn” the current uniforms, and would rather America’s athletes wear shirts with “USA” hand-painted on them. …

    “And they should be wearing uniforms made in America,” Pelosi said.

    Boehner, meanwhile, said: “You’d think they’d know better.” …

    As I said, I would laugh but…..

    [FSR comment: No, no, this is exactly what we have Congresspersons FOR.]

  7. Lee Says:

    If the playing field were level, with employees given as much cross-border freedom as employers, I’d agree with you 100%. The present situation of allowing nearly total freedom to employers, but extremely limited border-crossing freedoms for employees needs to be fixed. More freedoms for employees is my first choice. Less freedom for employers is my second choice. The present situation comes in last.

    [FSR comment: One must live in the real world, where few American workers would consider emigrating for better job prospects.]

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