Third Party & Independents Archives

Some Sanity about Outsourcing

There is no issue that has frustrated me as much in his election cycle as the so-called outsourcing “crisis” the democrats have all been harping about. These politicians have picked up on America’s anxiety about jobs and have turned it into disingenuous rhetoric which, if taken seriously, will take our country and the lives of poor people around the world in the wrong direction. All of a sudden John Kerry, whose chief merit as a politician was his support for free trade, has now turned into a so-called “fair trader”, decrying the outsourcing of American jobs. This is a dangerous and economically illiterate trend- but why does it always keep happening?

First- what is outsourcing, really? Well a poignant example came from Colin Powell’s visit to India- the Indians questioned him about the American rhetoric on about outsourcing, since many Indians survive on the tech jobs that American companies send over there. Thankfully, Powell assured India, in language heartening to hear from a modern political figure, that America would not take away the jobs away from Indians who can do them more efficiently (in terms of cost for service provided) than Americans, and who need the jobs a whole heck of a lot more. Outsourcing is simply moving jobs from people who them less efficiently to those that do them more efficiently. The people who will get the jobs are the poor people in other nations.

Almost all seriously economists agree that free trade is good for both countries engaged in it, but free trade is continually under attack in nearly every nation. Why is that? Well, the labor unions and workers in general are a powerfully organized special interest group, and they can buy influence with politicians through money and votes. Meanwhile the two groups hurt most by anti-free trade policies do not have such a voice- consumers and foreign workers.

Under a protectionist trade policy, consumers basically subsidize the jobs of those who can no longer efficiently provide their services- as Milton Friedman points out in his brilliant concise defense of free trade (a MUST read), if they aren’t working productively and we have to basically “pay” to keep them in their jobs, we might as well hire them to just dig ditches in the desert. Also keep in mind that if goods are cheaper, who exactly benefits most from this? of course, the poor who need to watch every dollar. The problem is consumers are an overbroad group and the benefits to them from more efficient labor are so defuse that they rarely get organized enough to stop the power and organization skill of the workers groups. So while they make up a majority of the people, consumers lose in the political battle.

The second group that is harmed by stopping “outsourcing” is foreign workers. Imagine the situation of being a tech-support person in India- your standard of living is embracing compared to even “poverty” in America, you are willing and able to do a job as well as an American but for a lower rate, and you hear that special interest groups have pressured Congress to pass yet another protectionist measure which basically insures that you will not get that tech support job- moreover, the American taxpayers and consumers are actually going to PAY the tech support person in America (through higher prices) to take that job away from you!! Of course you have no voice in American politics to stop this nonsense, but you suffer the result of the injustice. Liberals who claim to care about human suffering and poverty in other nations should be appalled that the party has adopted this Pat Buchanan-like rhetoric of ignoring the people in other in countries who want, need and, yes, deserve these jobs (because they are willing to do them at a lower rate). On any calculus of bettering the lives of the poor around the world, outsourcing is a good thing.

Yet, the problem remains. Workers who cannot deal with the fact that their job is no longer required under the principles of freedom and free exchange refuse to accept this result and decide to use their political power to retain their jobs by force, protectionism and spitting in the face of people in other countries who are literally dying to perform these same jobs, at the same proficiency, for a much better rate. Fear of change is always prevalent, as people are conservative by nature- but our economy and job market will move beyond the jobs we export and will find new efficient ways to create better goods, better products and better jobs- meanwhile the people in other nations will be able to earn a decent living while benefiting us by making the goods we buy cheaper. This can all happen if the politicians don’t get to the economy and the free market first. We should be “outsourcing” principles of free trade, voluntary exchange and freedom, not xenophobia and Pat Buchanan-like isolationism which makes neither economic, political nor moral sense.

(P.S. I urge you all to read the Friedman article I linked to above for a much fuller treatment of this issue- it also gives a quick response to the most common complaints about free trade).

Posted by Misha Tseytlin at March 17, 2004 8:27 PM