"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Thursday, July 12, 2012

The Outsourcing Argument

I guess from a political perspective it matters for Mitt Romney to be able to argue that he didn't "outsource" jobs while at Bain.   But it would be helpful for the sake of intellectual clarity for someone to mention that no one "sends jobs overseas" to injure Americans.   A business owner might choose to build a factory overseas and hire overseas labor because doing so is cost-effective, and therefore beneficial to his shareholders, to whom he owes a fiduciary duty.   But he would do so only where the economics of doing so made sense.   If the economics made sense to build a factory in America and hire Americans, he would do so, again because he would owe it to his shareholders to maximize their profits.   But there are, in fact, not only jobs Americans won't do, but jobs Americans shouldn't do -- this is the theory of "comparative advantage" in economics, where higher-skilled workers who can add more value utilizing those skills should do so, while lower-skilled workers should be hired (wherever they may be) to do jobs that require only lower skills.   Oftentimes manufacturing goods overseas using lower cost labor has the effect of lowering the end price for American consumers, which is all to the good.   Democrats sometimes think the world would be great if everything was "made in America" using high-wage, high-benefit union jobs; but, then, average Americans would be paying much more for the goods they want.   (This is somewhat analogous to the liberal environmentalist who wants everyone to eat "organic" vegetables grown without any herbicides or pesticides.   Well, fine, but the result will be that average people will eat fewer vegetables, and poor people around the world would starve.)

Oh, and by the way, when Romney was at Bain he owed a fiduciary duty to his shareholders and investors, period.   He was a private citizen running a private business.   He wasn't obliged to keep any jobs in America if it was bad for his investors.    But Barack Obama is the President.   He owes a fiduciary duty to the American people.   So when stimulus money went to manufacture electric cars in Finland for Fisker, in my view he was breaching that duty.

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