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Aug 17

Outsourcing America’s Past

Just because.

Let’s talk politics. Let’s talk nationalism, aspirations, and business.

I’m going to try to walk an objective line here so if you hold different social or political views than I do I hope you still continue to read and listen to what I’m trying to say.

I don’t want to go off on a tirade about how broken and corrupt politics are in our country so I’ll keep it focused. As with all political campaigns, both parties and candidates have to appeal to and convince the lowest common denominator. That means that the rest of us have to put up with baseless accusations and meaningless attack ads. These days with all of the Super PACs being able to air anything they want whether it’s factual or not, we as responsible citizens need to do our own critical thinking. If it sounds fishy, it probably is. If it’s extreme, it’s probably false. If it’s something worth really changing your opinion over, it’s worth verifying.

That said, the Obama campaign has been running these ads and making the argument that Mitt Romney shipped jobs overseas when he was working for Bain Capital. Semantic arguments about how one cannot actually “ship” a job aside, this is something I’d like to look at. Yes, Bain Capital does everything in its power to avoid paying taxes. Yes, they’ve engaged in some nefarious business practices from the looks of things. And yes, Mitt Romney profited in a major way from all of these activities and probably will for the rest of his life. But let’s take a step back for a moment and talk about what is being said.

First off, almost every business capable of affording competent accountants will do their very best to avoid paying taxes. They’ll mostly stay within the confines of the law, but the laws are written by extremely wealthy men so there are loopholes all over the place. Any company that doesn’t use the same tools and gain the same financial benefit from intelligent and legal tax evasion will be hindered and slowed down compared to all of their competitors who do.

Steroid use is the classic example. If one person starts to use steroids, he gains a unique advantage over everyone else. To overcome that singular advantage, more and more people start using. The end story: the only way to be competitive in any way is to use steroids. The same goes for tax evasion.

Secondly, and most importantly, let’s talk about outsourcing. Outsourcing is basically when a company decides that someone else can do a certain task in a cheaper, more effective or more efficient manner than they can. Everyone probably works for companies that have data they need to store somewhere. There is an entire sector of business dedicated to managing and storing that data. This is one of the many things IBM does. So your companies are outsourcing their data management to IBM, or EMC(2) or any of the other companies who do such things.

They outsource that task because what makes them successful isn’t their expertise at data management, it’s at designing widgets, or at providing an online service like eBay, or designing clothes. This idea goes hand in hand with the idea of specialization. You specialize in something and gain a competitive advantage because you are especially skilled at that one thing, at the exclusion of others. So you take the things you don’t excel at and you see if there is someone you can pay to do it for you for less money than it would cost to do yourself.

Most people think of China or India taking our jobs when they think of outsourcing, but as I just said above that’s not the whole story. So when politicians attack companies or each other for shipping jobs overseas it’s somewhat misleading. We, as a country, have taken jobs that we aren’t the most efficient at and given them to someone who can not only do them better than us, but do it cheaper than us.

Consider this from an economic standpoint: What resources do we have at our disposal here in America? Okay, now think beyond resources like crops, oil, or minerals. To name a few, we’ve got ingenuity, we’ve got an entrepreneurial spirit, and most importantly we’ve got a highly educated workforce (as far as the world is concerned). The primary resource that developing nations have is cheap labor. They all don’t have oil, they all don’t have gold, platinum, or copper. They have a lot of people and a comparatively low cost of living. So one of the few things they can effectively offer the marketplace is cheap unskilled labor.

As I say this, I know it sounds cold and detached but hopefully you can see the economic sense involved. Given this idea of outsourcing and specialization, what should we as Americans be specializing in? Well, much to the chagrin of the UAW (United Auto Workers) and the portions of the Midwest that rely heavily on the auto industry for their livelihood, we should not be specializing in unskilled manual labor and production. I’m not saying those job opportunities should be banished completely from the country, or that they have no place in our country’s economy. What I’m saying is that we shouldn’t be spending billions of dollars trying to prop up companies rooted in the past, or save jobs that actually should be given to some other country.

We should be focusing instead on educating our population. As you’ve heard me quote West Wing and say many times before, education is the silver bullet. With an increased attention to education we will be spending our money on the things that we have specialized in. Over the years we’ve grown adept at generating new ideas and cultivating them. Our culture is one that accepts failure as a natural part of the growth process, which leads to an environment conducive to entrepreneurs and inventors. We have gone from toilers and farmers to thinkers and dreamers. This is what we excel at. We excel at innovation.

So when I hear the Obama campaign continuously attacking Romney for shipping jobs overseas all I can think is that one of two things is going on. Either they’re assuming the vast majority of people will believe that this is a terrible practice because they don’t know enough or they themselves don’t understand economics and business well enough to know that this is the natural progression of a developed country. Which brings us back to education for them and for us. We desperately need to clearly identify our goals as a nation and spend the time and money necessary to accomplish them. We need to realize that we excel at innovation. We need to realize that we have become the music makers and the dreamers of dreams and that there’s nothing wrong with that.

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3 comments

  1. Office Goddess

    “If it sounds fishy, it probably is. If it’s extreme, it’s probably false. If it’s something worth really changing your opinion over, it’s worth verifying.” Well said.

    On the other hand, my mixture of agreement and then COMPLETE horror at the thought process in various parts of this post is making me go cross-eyed.

  2. VJ

    America became an inspiration to the world, because its leaders and the people had the foresight to make quality education accessible and then provide the enlightened population with an infrastructure that fostered creativeness; allowed innovation to blossom. Innovation, albeit sometimes accidental, is the engine for growth (if we have to keep growing to consume) and primarily happens through creative destruction – businesses/people try something fail, learn from it and improve, repeat.

    It seems to that these days though, priorities are misplaced and it is all about how do we find the easy way out.

    People complain about jobs being outsourced – well lets go ahead and create trade barriers, easy choice, ain’t it? Hard choice, figure out a way on how do we compete, stress on educating the people in the skills that are needed to do the jobs that are being taken away – more efficiently than the folks who are taking it.

    For every 1 dollar spent on educating the youth in America, we spend 4 dollars on on Social Security and, I don’t remember but god knows how much on defense. There doesn’t even seem to be a balance. Hard choice to make – Reallocate some focus to things that matter? Hard question, why are we spending so low on the youth of our country when they are the nation’s future?

    ~75% of 15 Trillion US economy is driven by consumption – Consumption that is simply not sustainable considering there is after all limited resources. Hard Question to ask, How is it that 5% of the world’s population consumes so much of the world’s resources and is that even feasible? Hard choice to make, do we need an economy based on consumerism or sustainability? Not just talk about going “Green”

    The other day I was reading an article

    http://www.nytimes.com/2012/07/29/opinion/sunday/is-algebra-necessary.html?

    Apparently if Algebra is too hard we should drop Algebra altogether. And that is supposed to make our kids competitive how? Thankfully, it was just an article.

    In the past, America made decisive choices – hard choices! Taken by strong Leaders but backed up by people with harder work Ethics willing to make sacrifices. Our generation has a long way to go before we can say that.

  3. Sisyphus

    You made many interesting points there VJ. Thank you for the insights as well as the link. I heard something about the Algebra issue on NPR last week. I was trying to remember when I learned algebra and I can only assume it was around 8th or 9th grade.

    But our generation does have a long way to go before we can say that, and unfortunately I think we’re dealing with a different government now than they were a generation ago. More bloated, lethargic and bureaucratic.

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