Outsourcing Is Bad for the Economy? It Just Ain't So!

By Watts, Tyler | Freeman, November 2012 | Go to article overview

Outsourcing Is Bad for the Economy? It Just Ain't So!


Watts, Tyler, Freeman


Presidential campaign demagoguery hit full stride when President Obama released ads accusing Mitt Romney of "shipping jobs overseas" as CEO of private-equity firm Bain Capital. Romney responded not by denying this aspect of Bain's operations, but rather by insisting that he was no longer actively managing the company at the time the alleged outsourcing occurred.

I can understand why a politician would downplay such charges. After all, "the economy" is supposedly the top issue this year, and many voters buy into the rhetoric that companies involved in outsourcing are somehow responsible for a net loss of employment opportunities in the United States.

But outsourcing, far from being a cause of economic trouble, is actually part of any highly developed market economy. Outsourcing, in a fundamental sense, is the source of all wealth.

To tackle the misconceptions surrounding this controversy, let's start with a definition. In the Bain Capital case, outsourcing means "hiring foreign workers to do a particular task, as opposed to hiring domestic workers." Now why would an entrepreneur do this? It should be pretty obvious that the foreign labor costs less. Outsourcing therefore generates some combination of lower prices for the company's products and higher profits for its owners - indicating that the company is creating more value with the resources it uses. So, as a corporate executive might say in defense of an outsourcing announcement, "It just makes economic sense for our customers and shareholders."

But what about the workers? The media focus on the horrid "shipping American jobs overseas" aspect of outsourcing. Even if they acknowledge the gains for consumers (lower prices) and shareholders (higher business profits), many commentators will complain these are offset by the losses to American workers.

First off, let's recognize that, in a free society, workers aren't entitled to their jobs; most employment is an arrangement subject to termination by either party at any time for any reason. Individual workers are always losing jobs for all manner of reasons and finding new ones - even in a recession. The mass layoffs associated with outsourcing are not economically different, just more noticeable, and therefore more subject to political demagoguery - especially in a recession.

We shouldn't ignore this kind of labor upheaval, whatever its cause. There is obviously going to be some pain associated with the adjustment process. It's never easy for people to find new employment opportunities, let alone a large pool of workers released onto the market at the same time. Readjustment costs are especially acute for people with strong local ties, such as family obligations. Underwater mortgages make it difficult for some people to migrate. Retraining for new industries is especially tough for older folks, and so on. Sad stories abound, which politicians artfully manipulate in order to enact laws and programs that purport to "save American jobs."

But economic change happens for a reason. In a free market, when outsourcing becomes viable, market forces are telling entrepreneurs, workers, and resource owners, essentially, "The old ways of doing things, the old places, the old patterns that you were so accustomed to - they're not working so well anymore. There are better ways, better places, and better patterns available. For the good of all mankind, to take advantage of the greatest possible global opportunities, we need some rearranging. A large group of people in place ? will now be able to do what people in place F used to do, but at lower costs. That means people in F need to find something else to do, whether that involves moving to place Q, joining industry Y, retraining, or what-have-you."

Of course the market is not a person and has no motives. What we call markets are just the systematic patterns of exchange, production, and specialization that take place between and among countless individuals across the world. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Outsourcing Is Bad for the Economy? It Just Ain't So!
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.