Skip to comments.Romney’s Chance to Embrace Outsourcing (Give a full-throated defense of capitalism’s benefits)
Posted on 07/18/2012 7:20:02 AM PDT by SeekAndFind
There is a story, perhaps apocryphal, that Milton Friedman was touring the Chinese countryside when he came upon a government project where workers were digging a canal. Friedman was surprised that instead of bulldozers and modern earth-moving equipment, the workers were using shovels and wheelbarrows. Thinking this was remarkably inefficient, he asked the bureaucrat in charge of the project why this was so. You dont understand, the bureaucrat responded. This is a jobs program. Oh, Friedman replied, I thought you were trying to build a canal. If jobs are all you care about, take away their shovels and give them spoons.
One wishes that Mitt Romney would display a bit of Friedmans common sense in responding to the silly controversy over outsourcing at Bain Capital companies. Instead of defensive technical explanations about when he left the active management of Bain Capital, Romney should point out the central fallacy of Obamas argument. Contrary to the presidents complaints, outsourcing is generally good for America.
As Friedman pointed out, economic policy is not about preserving every single job that currently exists at any cost. Rather, it should be about creating general prosperity. The United States once had a thriving buggy-whip industry. Would we be better off if we had blocked development of the automobile in order to preserve those jobs?
Thats not so farfetched. After all, President Obama has already blamed ATMs and self-service gas stations for unemployment.
Outsourcing is based on an unpleasant truth: Certain types of operations, such as call centers, for example, or unskilled product assembly, are simply too costly for companies to do in the United States. By having those jobs performed overseas, companies are able to preserve their resources for the things those companies do best, their core competencies.
There is a reason, after all, why LeBron James doesnt mow his own lawn. Even if he were the worlds best lawn mower, his talents are much more valuable directed elsewhere. It is what David Ricardo referred to as comparative advantage.
Additionally, having some jobs done overseas makes it easier for U.S. companies to serve foreign markets, by shortening shipping distances, avoiding foreign trade barriers, and creating an on-the-ground presence in emerging markets. If Ford is going to sell cars in China, it makes sense for them to build those cars in China rather than build them here and ship them across the Pacific. Far more outsourcing occurs because of the need to serve foreign markets than because of a search for cheaper labor. In fact, studies suggest that more than 90 percent of outsourcing jobs involves foreign-market considerations rather than labor costs.
All of this makes U.S. companies that outsource more competitive in a world market, allowing them to hire more workers here at home. And generally the jobs created here are better paying than those unskilled jobs that have been forgone. Reduced production costs also mean lower prices for Americans, especially on basic goods such as clothing. One would think that a president who was concerned about the plight of the poor would favor policies that helped low-income Americans to stretch their dollars. And, finally, lower production costs increase profits and stock prices. And who benefits when stock values go up? Everyone who owns stocks, including all Americans with a 401(k), as well as institutional investors such as universities and charities. Bain Capital was managing funds for precisely these types of institutions.
But for some reason, on this issue as on so many others, Romney has been unwilling to make a full-throated defense of capitalism. Over the weekend, Romney and his surrogates were repeatedly asked whether outsourcing was a legitimate business strategy. They declined to answer. Worse, Romney has indulged in his own demagoguery, attacking the president for being the real outsourcer-in-chief.
The American people are rightly concerned about jobs. But our nearly jobless recovery has nothing to do with outsourcing. To pretend that it does is to ignore the real job-destroyers debt, taxes, regulation, and the burden of government.
Its time for Mitt Romney to stand up and say so.
Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.
How to do it; why do it; does it work?
I could write a book on that topic, so I won't. However, if your company is tired of spending so much time dealing with whiney New Yorkers and strung out Californians on the phone about your product's performance, I'd suggest you hire on an Indian call center.
They'll cut that time to nothing!
RE: I’d suggest you hire on an Indian call center.
Actually there’s another country that is fast replacing India as the premier English speaking call center of the world — the Philippines.
PHILIPPINES OVERTAKES INDIA AS HUB OF CALL CENTERS
If the difference between continued survival as an American company is off-shoring 10% of some of the less technical and less skilled labor to India - well then I am happy that the American company is still in business and still employing 90% of the people they previously did.
But fanatics will only look at that 10%.
DEY TOOK UR YOBS!!!!
US companies wouldn’t need to outsource if we didn’t have the world’s highest corporate tax rate and a stifling regulatory environment requiring massive compliance expenses.
It’s not raging idealists, it’s raging idiots with a kindergarten-level understanding of economics.
They literally believe the overriding goal of any country should be to import nothing but raw materials, and that anyone that participates in, or facilitates, the purchase of manufactured goods, or services, from a foreign country is a “traitor.”
For a contrary view:
Sheesh. You should have seen us dancing is the aisles when we found a fan made in the USA.
How many people (and pets) do the Chinese have to poison by slipping toxic waste into consumer products, how much slave labor and summary executions and mass suicides will it take; before American consumers decide to not buy from China?
“The United States once had a thriving buggy-whip industry. Would we be better off if we had blocked development of the automobile in order to preserve those jobs?”
Problem with that analogy is that 100 years ago the laid-off whipmakers could get BETTER jobs in an automobile factory. Now, the laid-off worker has MickeyDs and Wal Mart fo fall back on. Big step down.
Why won’t Mitt point out that the “o” is the king of “throwing good money after bad”? The green fraud committed by his administration is a perfect point. This point cuts to the core of his economic decision-making ability.
That's fine as long as James' team owner doesn't outsource his basketball job to a tall, cheap chinese guy. If he has to borrow money from China to pay his living expenses, he might want to re-exaamine his lawn-mowing strategy.
Sorry, you want to get rid of the abusive customers or customer abuse you go to India. The Philipinos are entirely too polite, and they don’t speak in a Welsh brogue either.
I think Romney should contrast his record as a capitalist versus Obama’s.
Romney invests (puts at risk) private capital to build businesses (Staples, LinkedIn, Kiva Systems, ...).
Obama invests (risky investments) public funds to push an agenda with the expectation of campaign funds to purchase re-election. Look at all the failed (Solyndra, Ener1, Beacon Power, ...) and crony companies (Nevada Geothermal, First Solar, Solar Reserve, Bright Source Energy) that misused stimulus funds or are failing concerns.
Add to that the GM bailout where Obama screwed bondholders, to the benefit of tha unions. Ask any of the non-union employees at Delphi whose pensions were sacrificed to the benefit of the GM union pensions.
Obama would lose his shirt if he had to risk his personal funds.
RE: That’s fine as long as James’ team owner doesn’t outsource his basketball job to a tall, cheap chinese guy.
That can happen, with one proviso — the tall, cheap, Chinese guy wins championships at half of LeBrone’s salary. Good luck finding someone just as good and willing to do that in the NBA.
When that has occurred, I have contacted the company in other ways and explained that if they wanted to continue doing business with me, they'd better get someone on the line that can actually help. (I don't care if they are in India - I just want to be able to understand them!)
So far, that's worked for me.