An Historian's Take on Outsourcing

Economists of all political persuasions seem to agree that the debate over offshore outsourcing is about free trade vs. protectionism. Economics has never been my strong point, but economists seem to be missing the point. Shipping jobs overseas is only partly about trade. It's mostly about time travel, about globalization allowing American capital to return to the nineteenth century.

In my unprofessional opinion, I thought trade and protectionism were about industries, that they were about jobs only secondarily, insofar as the industries did or did not prosper. Offshore outsourcing, though, is primarily about wages and salaries.

If a widget manufacturer told his employees they could keep their jobs only if they agreed to take 50 percent pay cuts and give up their health insurance, that wouldn't be considered trade. It probably wouldn't get very good press, either. Apparently it does become trade when he fires those employees and moves his plant to China. Instead of destroying American communities, he's now promoting the long-term strength of our economy.

We all understand the argument: The widget manufacturer is doing what he has to do to remain competitive, which is what all American companies must do if our economy is to remain strong in the future. Of course, there are "costs." That's the offensive euphemism for the financial and personal crises inflicted upon American employees who are guilty only of making more money than is required by programmers in India or child laborers in China. Those of us who are so shortsighted as to worry about these costs are assured that they are outweighed by the long-term benefits.

Repeated incantations of "long-term benefits" seems to be an affirmation of faith in the Whig theory of economic history, the belief that the growth of capitalism is the history of progress. Technology has been destroying jobs in the short run and building stronger economies in the long run at least since the days of Captain Ludd. Even today, almost 200 years later, the term "Luddite" is used to label someone as an ignorant opponent of progress. The term is never used to describe people who are trying to reduce the price they're paying for their bosses' progress.

In our more enlightened age, we complain not about shipping jobs overseas but that the government isn't doing enough to finance retraining and job creation programs. Retraining for what? Are good jobs going begging? Or are people supposed to be trained for the jobs we would create if we had funding for programs to do that? It's true that in the past new jobs appeared to replace the ones that were lost. But those new jobs were long-term benefits -- they didn't appear soon enough to help the people who lost the old ones. And weren't those new jobs created by the eventual rise of new industries, by clever entrepreneurs doing what entrepreneurs do? Has the rise of new industries ever been the result of a government jobs program?

But let's not waste time on short-term distractions. Who's going to get the long-term benefits? Not the people who are losing their jobs. Except for the youngest ones, there is no long term for them. Most of them will find work that requires little of their talent and experience and doesn't pay well. They will bear the cost of progress for the rest of their lives.

So maybe it's the next generation, the children of the displaced workers, who will benefit. One obstacle there is that prophets of the long term also tell us that education is crucial for survival in an increasingly complex economy. No doubt education was high on the list of things Mom and Dad had planned to give their children. But how many of them will be able to afford a good education after the family support system collapses? They can still make it, but only if they figure out a way to reduce their own share of the costs of progress.

The key to understanding offshore outsourcing is that it's still the nineteenth century in most of the rest of the world, and American companies now have the technology to get back there. Fifty years ago, Americans could be pardoned for thinking that, after decades of labor struggles and reform legislation, they had solved the biggest problems of industrial capitalism. Unions brought good wages and job protection, there was an eight-hour day, overtime pay, unemployment insurance and social security, and inequalities of wealth and opportunity were smaller than ever.

It's clear now that those solutions were merely a lull in the long battle to make commerce serve community, not rule over it. We used to think the social progress of the twentieth century would spread to the rest of the world. What may happen instead is that our communities will join the rest of the world by falling back into the 19th century, and back into the old battles. Anyone who thinks this is nothing to worry about should brush up on American history.