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"Outsourcing"? Good! Very Good!

Required Reading: This most excellent piece by Harry Binswanger body-slams the nonsensical, blathering of collectivist politicians, labor thugs and other hustlers who stampede through the paradigm preaching the intellectually bankrupt sermon of "economic xenophobia and paranoia". Take a copy to your next debate! BW

OUTSOURCING -- American At Its Best

Mitt Romney and President Obama are currently fighting over who is more against outsourcing. Obama slams Romney for Bain Capital’s outsourcing of jobs to China. Romney counters by labeling Obama “Outsourcer in Chief.” John Boehner and Harry Reid are both outraged over America’s Chinese made Olympic uniforms. “Burn them!” thunders Reid. 

Republicans and Democrats agree that outsourcing is destructive and unpatriotic, and that the practical and patriotic thing to do is to “Hire American.” 

Wrong on both counts. Count one: Protectionist economics is as fallacious in regard to importing labor services as it is regarding importing goods. Count two: Hire American, far from being patriotic, is un-American. 

Americanism means individualism, but “Hire American” is collectivist, urging businesses to pay more just to patronize “our guys.” This is not rational patriotism, it is not Americanism, it is primitive tribalism. 

An individualist makes his purchases based on economic merit, not nationality. Let’s be clear: Economic nationalism is as outrageous as racism. Men, their products and their services must be judged on the basis of their individual, factual qualities, not on issues of race or nationality.

Purchasing labor services abroad, if it saves money, is beneficial to everyone, including American workers. Outsourcing does not destroy American jobs, it simply changes the kind of work Americans specialize in. If fewer Americans need to work in manufacturing, then more Americans will be hired in non-manufacturing jobs. That’s the Law of Comparative Advantage, covered in any decent economics text. It pays each country to specialize in producing the things in which it is relatively more efficient. 

Outsourcing reduces cost per unit. That means more can be produced with the same supply of capital. More products mean a higher standard of living. The equation is: cost-saving = more for less. 

Outsourcing reflects the win-win nature of all forms of international trade--in fact from all trade on any scale. The mutual gains from trade do not depend upon lines drawn on a map. There is no economic difference between outsourcing a job to India and outsourcing it to a firm across the street. If the outsourcing saves money, it saves resources and is to be applauded. 

Hire American assumes everyone must cling to his own tribe and fight all the other tribes over share of a fixed pie. China is getting richer? Then we must be getting poorer.

But the interests of nations do not conflict. It is in America’s interest that other nations be prosperous and productive. Just ask yourself: Which nation adds more to your standard of living--Germany or Uganda? And would you be better off if Germany were reduced to the economic level of Uganda? Yet the Hire American attitude implies we should fear other nations’ productiveness--as if we should desire a world in which everyone but Americans were starving. 

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

Cost-savings are good for all men, everywhere. He who cuts costs saves money, expands production and raises the global standard of living. The money saved goes into the global capital market--to fund existing production and technological innovation. 

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. 

Harry Binswanger is a member of the Ayn Rand Institute ‘s Board of Directors and has taught philosophy at Hunter College (City University of New York) and the University of Texas at Austin. 

As seen in Forbes

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