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Obama And Romney Are Wrong: Outsourcing Is America At Its Best

by Harry Binswanger | July 26, 2012 |

Mitt Romney and Barack Obama are currently fighting over who is the more patriotic. Obama slams Romney for having outsourced jobs to China during his Bain Capital days. Romney punches back by labeling Obama “Outsourcer in Chief.” The latest is that both John Boehner and Harry Reid are voicing outrage over America’s made-in-China Olympic uniforms. “Burn them!” thunders Reid.

Republicans and Democrats strangely agree that outsourcing is unpatriotic, and that the moral and patriotic thing to do is to “Hire American” and “Buy American.”

Well, no. Not in a thousand years. The fear of outsourcing and international trade is economic nonsense and moral blindness. More than that: this anti-profit attitude is un-American.

Despite the ongoing Europeanization of America, America still symbolizes the land of freedom, entrepreneurship, profit-making, and, above all, individualism.

But collectivism is the premise of “Hire/Buy American”: we are to view ourselves and others not as individuals, but as units of a nation. Businesses are urged to pay more in labor costs, simply to hire workers who are American; consumers are urged to forgo Walmart’s low prices and pay more, simply because the pricier goods were made by “our guys.” This is not rational patriotism, it is not Americanism, it is primitive tribalism.

American individualism means making buying decisions on the basis of economic merit, giving no regard to the nationality or race of the seller. Let’s not hide behind patriotic-sounding slogans. Let’s name things straight for a change: giving preference to American sellers over foreign sellers is the same mindless injustice as giving preference to sellers who are white over those who are black.

Economic nationalism is as morally outrageous as racism. Buying on the basis of nationality or race is the same collectivist evil: judging men and their products by the group from which they come, not by merit.

The anti-outsourcers view trade as if it were a form of war. “It’s them or us!” seems to be their motto. But, in fact and in the American outlook, international competition is not combat but cooperation. Trade is the exchange of values not the exchange of gunfire; it is productive not destructive.

The benefits of international trade flow to both trading partners. It’s win-win. This applies even when one of the countries is more efficient across the board: the wealth of the world grows when each country specializes in its area of comparative advantage. It’s even called the “Law of Comparative Advantage” in economics textbooks.

The bigger picture is this: the beneficial nature of trade does not depend upon lines drawn on a map. Trade between people in different nations is mutually beneficial for the same reason that trade between people in different states is. And trade between people in different cities. And crosstown trade. There is no difference in economic effect between outsourcing a job to Poland and outsourcing it to a firm across the street. If outsourcing the job saves money, it saves resources and is to be applauded. The name of the region or country the new hire lives in is economically irrelevant.

What is supremely relevant is how the new hire affects production — does it make production easier or more difficult?

This emphasis on production is not popular today.  Most people, including many economists, are blind to the whole issue of production and its needs. They view wealth as a static quantity, a fixed pie to be divided among claimants.

But wealth has to be produced before it can be traded or stolen. Without production, there is nothing to steal. Production not theft is the motor of human history. Man did not rise from the cave to the skyscraper by stealing his neighbor’s roots and berries. The buildings, cars, and computers were not there to be stolen — they had to be thought of, invented, produced.

In the process of creating wealth, whatever saves costs is to everyone’s interest. It is irrelevant whether your saving is maximized by hiring your cousin or a stranger in Bangladesh.

The “Hire American” premise is the opposite: everyone must cling to his own tribe and fight all the other tribes for a share of a static supply of goods. If China is getting richer, then we must be getting poorer. And this tribalist, xenophobic attitude is supposed to reflect Americanism? America — born in a rebellion *against* English interference with our international trade?

American individualism looks at men as individuals. It holds that a man’s personal identity, moral worth, and inalienable rights belong to him as an individual, not as a member of a particular race, class, nation, or other collective.  In the truly American view, men are not natural enemies but allies. The interests of men do not conflict — not men who are self-supporting and earn what they get.

The interests of free nations do not conflict either. One nation’s gain is all other nations’ gain. As India gets richer, our standard of living goes up. Evidence? Just ask yourself: which nation adds more to your standard of living: a richer nation or an impoverished one — Germany or Uganda? And do the economic tribalists dare suggest that  Americans would be better off if Germany were suddenly reduced to the economic level of Uganda? Yet that is what is implied in their paranoid, beggar-thy-neighbor outlook: we should, on their premises, want to live in a world where everyone but Americans is starving. Strangely, they don’t want to live in a city or neighborhood where everyone else is starving.

It’s time to drop the xenophobia and paranoia. No one benefits from the poverty or incompetence of others. It’s just the opposite: it is in your interest that other men — in every country — be smart, ambitious, and productive — not stupid, lazy, or incompetent. Would you be better off if Thomas Edison and Steve Jobs had been dim-witted? Nothing is changed if we change the example to an inventor in India or an entrepreneur in China.

Loss of jobs? Quite the contrary. Outsourcing means better or better-paying jobs for Americans. When individuals are fired from one line of work, it’s to release capital to do other work — the law of comparative advantage again. Outsourcing changes the composition of the labor force — fewer Americans are employed to make computer chips, say — but it does not decrease the demand for labor as such, and displaced workers find more productive employment — and thus higher wages — in other lines of work.

Contrary to the tribalist assumption, cost-savings are good for all men, everywhere. He who cut costs saves money, expands production, and raises the standard of living of everyone participating in the global economy. And we’re not not just talking more shirts for Walmart: the money saved goes into the global capital market — to fund also the next generation of CPUs, research into anti-aging drugs, the private exploration of space, and any other potentially profitable endeavor.

Any outsourcing that saves costs and increases profits is to be celebrated. A Congressional Medal of Honor should go to the CEO who cuts his costs the most, whether he does it by outsourcing or any other means. He is the true friend of humanity.

About The Author

Harry Binswanger

Member, Board of Directors, Ayn Rand Institute