Is Outsourcing American Jobs Wrong?

I think a lot of people have a pretty strong gut reaction to this question, and the popular answer is a clear “yes”. You can see this in the charges against Mitt Romney that he was outsourcing jobs at Bain Capital, and that he would have been our “outsourcer in chief”. There are non-intuitive arguments that outsourcing is good for Americans due to the importance of a dynamic economy, the lower costs of goods and services, and the usual gains from trade and specialization. But these are non-intuitive stories, whereas the moral case for outsourcing I think is clear. I’m not a huge fan of socratic dialogues as a writing form, but I genuinely think this is the best way to get the idea across in this case. It will also make it easier for you to remember the argument and use it to disarm your friends and relatives anti-trade and anti-outsourcing attitudes. I’ll use the specific example of outsourcing to China, but it applies broadly.

Mr. Gephart: It is wrong to outsource American jobs to China.

Mr. Ricardo: Why is that?

Mr. Gephart: when you do this you are aiding someone in stealing a good American jobs, you take a job from an American and give it away.

Mr. Ricardo: Tell me Dick, you don’t think it is wrong to spend a little less money on stuff for myself and donate it do you?

Mr. Gephart: No, I would say that is a good thing to do.

Mr. Ricardo: What if I give the money to poor Chinese people, is it wrong for me to decide that I wish to spend my money which I have freely and fairly earned and benefit poor people in China? They are very poor there, after all.

Mr. Gephart: No, charitable donations are a good thing and it is your money, not someone else’s job so I accuse you of stealing from American workers unlike in the case of outsourcing, so I don’t quite see the relevance of the comparison.

Mr. Ricardo: But before I made this hypothetical donation I told you I was spending it on stuff, and most of the stuff I buy supports some American jobs. Maybe I would have otherwise spent the money on seeing a movie, so the money would’ve gone to the workers at the theater, the owner of the theater, and everyone involved in the movie. Or maybe I would’ve spent it at a restaurant and it would’ve gone to the waiters and waitresses, the restaurant owner, the suppliers, and so forth. There is as much reason to believe if I donate enough money to China that I was spending here some jobs will be destroyed as there is to believe outsourcing actually destroys American jobs.

Mr. Gephart: Ah but I know you, and you don’t have enough money for that to be true.

Mr. Ricardo: True, but neither am I actually outsourcing. In contrast, rich business owners who outsource are. And these same rich business owners do in fact have enough money that they’re individual spending would be enough to create jobs. Look at Bill Gates, he sends billions of charitable donations to the third world. He could have spent that money on big houses, fancy meals, big boats, and other things that would have created jobs in this country. If Mitt Romney is a villain for outsourcing, than Bill Gates is massive villain too.  And in any case, even normal folks like you and I support American jobs and income with our spending. The small amount of charity I could afford to send to China should be morally equivalent to a small amount of outsourcing, which means you should chastise me as immoral.

Mr. Gephart: Well charitable donations to China are hardly destroying the middle class.

Mr. Ricardo: And neither is outsourcing. But more importantly, rich world charitable donations to China also aren’t lifting hundreds of millions out of desperate poverty like our willingness to trade with them and outsource to them is. If charitable donations to China were driving as much of an improvement in lives as trade, would you be arguing I am morally obliged to stop these charitable donations?

Mr. Gephart: No, I suppose I wouldn’t, but charity isn’t stealing jobs.

Mr. Ricardo: So let me get this straight, if I shut down a factory, sell the parts, and donate the money to China is that stealing American jobs?

Mr. Gephart: Um… well, kind of.

Mr. Ricardo: What if instead of the factor owner I am just a large consumer of the goods made there and I stop buying the stuff and donate the money instead to China, and as a result the factory must shut down and be sold for parts. Is that stealing American jobs?

Mr. Gephart: Well… I’m not really sure.

Mr. Ricardo:  Then I think you’ve accepted my point that outsourcing is not wrong.

courtesy - Forbes