Not a Dirty Word

If we’re going to have a conversation about “outsourcing” –  and we are – the first thing we need to do is have a short lesson in economics.


Every day business owners make judgments about how to make money. If a business is to be successful, it must find innovative ways to produce its product and get its widget into the hands of consumers all over the globe at the least possible cost. This, of course, involves finding places where a business friendly climate exists. An ideal place for any business would be a place where an educated work force exists, taxes are lower, wages are cheaper and regulations – including environmental ones – are less oppressive. Of course, such a place would also be located near shipping hubs so that distribution of the widgets we make can be accomplished in the cheapest way possible. Outsourcing gets all of this done.


Even though politicians and talking heads will use the word outsourcing as if it were an Anglo Saxon expletive, in doing so they are being deceptive and are playing on your emotions.


When politicians throw the word outsourcing around, they want you to imagine closed factories and unemployment line. They want you to imagine that American jobs are being sent overseas because greedy capitalists want to become wealthier. This imagery is convoluted at best.


In our increasingly global economy, outsourcing is not only a key part of manufacturing success it’s also healthy for America. An American company such as General Electric (and trust me when I tell you that I never envisioned a day when I would be defending GE’s corporate kahuna and Presidential buddy Jeffry Immelt,) very much wants to sell light bulbs and refrigerators to Chinese families. The best way to do this, of course, is through outsourcing. It simply makes sense to build factories in China where the Chinese consumers are. As a matter of fact, 90% to 95% of American outsourcing is done in order to serve foreign consumers. Less than 10% of the products built by American companies in other countries ever make it back to the United States.


Other nations make the same kinds of decisions with regard to building their products in the United States. This concept may make more sense if one looks to the states in the Deep South where Japanese owned companies Toyota and Nissan are rolling cars off assembly lines there in record numbers these days.. These cars are American made and, as it works out, are sold to Americans in America.  In the State of Alabama, Airbus is making an investment of 600 million dollars in Mobile bringing another 1000 jobs to the area.


From Daimler-Chrysler to Mercedes Benz to recreational toy, train and plane manufacturer Bombardier, direct foreign investment in America’s manufacturing industry – probably decried as outsourcing back in Germany and Canada – amounted to 2.3 TRILLION dollars in 2011, and created 5.3 million jobs in our country.


Instead of sniveling about outsourcing, our politicians ought to be concerning themselves with the fact that the United States ranks 50th among 142 other economies when it comes to our government’s penchant for meddling with industry. Crony capitalism has a tendency to poison the well when it comes to foreign investment. When one then considers that our Nation’s corporate tax structure is among the highest in the world and – depending upon what happens in 2013 – that taxing climate is uncertain going forward, one can begin to understand why the future of American manufacturing jobs in this nation are shaky and why outsourcing makes more sense every day.


It is incumbent upon us as voters to understand that outsourcing is not a dirty word. While candidates clamor to hit each other over the head with the “O Word,” we need to guard against being caught up in this dishonest “political football” game. Instead, we need to insist that our leaders adopt business friendly policies and tax structures, and squash crony capitalism in order that the outsourcing done by other industrial nations benefits our own.