What the Candidates Won’t Explain about Outsourcing

Like almost everything about the 2012 presidential campaigns, the bickering between the major party candidates over who is most responsible for shipping jobs overseas has been banal and utterly uninformative. While politicians have scared many Americans with hyperbolized sales pitches about the costs of foreign outsourcing, most people remain in the dark about the causes and benefits of outsourcing. What is foreign outsourcing anyway? Why do some businesses invest in sales operations, research and development, production and assembly operations, or the provision of services abroad? Are low wages and lax environmental and safety standards in poor countries really the magnets attracting U.S. investment? If so, why is 75% of U.S. direct investment abroad in rich countries? What explains the fact that the United States (high-standard, rich country that it is) is the number one destination in the world for foreign direct investment? Doesn’t the fact that businesses have options in our globalized economy serve to discipline some of the worst government policies?

As I suggested in this recent post:

In a globalized economy, outsourcing is a natural consequence of competition. And policy competition is the natural consequence of outsourcing. Let’s encourage this process.

Answers to the questions raised in this post and some other thoughts about outsourcing are expressed in this cool 4+ minute video produced by Cato’s Caleb Brown and Austin Bragg: