To Outsource or to Stagnate
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To Outsource or to Stagnate?

by Onkar Ghate | August 01, 2004

A free society requires and rewards individuals who are active-minded, forward-looking, keen to better themselves. A society moving towards state control of the economy requires and rewards individuals who want tranquility, passivity, lethargy. In the debate about the legitimacy of “outsourcing” white-collar jobs to foreign countries, you must decide on which side you stand.

The opponents of “outsourcing” white-collar jobs eagerly present it as an unprecedented, catastrophic phenomenon. The facts belie this. Economists estimate that roughly 100,000 white-collar jobs “move” offshore annually. This figure excludes new jobs created in the United States because of the increased economic efficiency and is in the context of a U.S. economy of some 140 million jobs, in which 15 million unneeded jobs are eliminated annually, with even more created. Moreover, for decades U.S. companies (and the U.S. economy) have thrived by hiring manufacturing and agricultural workers abroad. We are witnessing but a normal evolution of specialization and trade, cornerstones of American prosperity. 

Why then the heated opposition?

Observe that whatever the particular forces that lead American businesses to hire foreign workers — be it a Coca Cola expanding into new markets in Asia, an HP manufacturing products more cheaply in Singapore, or an Intel hiring superior engineers in India — the fundamental reason they do so is to grow. They seek to increase sales and profits. 

This is the nature of a free society: economically, it does not stand still, it advances. It demands the same of its citizens.

When Henry Ford introduced mass production of the automobile in the early 1900s, he changed transportation. This inevitably caused disruptions. The days of the horse and buggy were numbered. But those in the dying industry who chose to face the reality of Ford’s advance, whether a business owner who learned to produce gasoline instead of buggies or a worker who learned to repair automobile engines, prospered. 

Later, when men like Steve Jobs, Bill Gates and Michael Dell ushered in the personal computer revolution, almost no industry was unaffected. The businesses and employees that embraced the new invention, a retailer that computerized its inventory or a worker who learned to program a computer, prospered.

Today, as businesses hire white-collar workers abroad, similar opportunities will abound for those ready to change and grow. As in earlier eras, the capital accumulation made possible by the increased efficiency and specialization at American companies will fuel demand for employees with new skills, such as managers able to integrate a company’s activities across countries and cultures. 

It should not be surprising, for instance, that from 1991 to 2001, 2,500 U.S. multinational corporations added 2.8 million foreign jobs and 5.5 million new U.S. jobs (the latter above the average U.S. employee growth rate for the period), or that 25 percent of Americans now work at jobs not even listed in the 1967 Census Bureau codes.

Those who prosper in a free society are individuals who choose, no matter how severe the change, to adapt, to expand their skills, to increase their knowledge, to grow. For this type of individual, trade and specialization — across one’s city, state, country or globe — are acknowledged as beneficial; the progress of a global economy, including “outsourcing,” is not feared but welcomed. 

There are, however, those who resent the growth that a free society demands. Typically, they pursue one of two courses of action. Either they simply cling to the old way of doing things, like a manufacturer who claims that if horse buggies were good enough for our forefathers, they should be good enough for us. Or they cry for governmental protection — and demand that the government restrict the cotton gin, steam engine, automobile, locomotive, Japanese imports, factory automation, etc.

This last is the opponent of “outsourcing.” He does not advance even a semi-cogent economic argument, as economists have pointed out repeatedly. But he does resent the fact that his life has been or may be disrupted by the freedom of other people advancing their interests — that others’ progress may require him to grow or be left behind. So in an attempt to freeze reality, the opponent of “outsourcing” demands that the government forcibly restrain the success of his fellow citizens — by restricting them from dealing abroad.

Unscrupulous politicians then pander to this backward mentality. Thirty-five state legislatures have introduced “anti-outsourcing” legislation. John Kerry denounces management as “Benedict Arnold CEOs” — even though the CEOs are being quintessentially American in pursuing their (and their shareholder’s) happiness.

The demands of the “anti-outsourcers” must be rejected; there is no right to stagnation. But there remains nevertheless one thing to ask of our government.

Some companies are moving offshore because they find greater economic freedom there. Don’t demand that they be prevented from relocating or hiring foreign workers; that would just further restrict freedom in America. Demand instead that the government rescind the plethora of regulations — from workers’ compensation to Social Security to governmental education to governmental healthcare — that is strangling us.

We need the American solution: to once again fully embrace freedom and the growth it both creates and requires.

About The Author

Onkar Ghate

Chief Philosophy Officer and Senior Fellow, Ayn Rand Institute