Saturday, November 5, 2011

Outsourcing and the Coercive Nature of the Market

It seems like part of the dilemma with outsourcing is that locally, at face value, it is easy to see it as a form of negative market coercion.

Let us say that thousands of local jobs are lost in a specific industry do to outsourcing (although tens of thousands of jobs may be gained overseas). Thousands of individuals who thought that they were working within their comparative advantage, are forced through market coercion to reevaluate their comparative advantage, and quite possibly to find a completely new livelihood and specialization. But changing one’s specialization isn’t exactly like flipping a switch, it requires time and sacrifice to develop new skills. For individuals who have worked within a specific industry for twenty years, I imagine that this level of change may be terrifying. They brought themselves up to a certain standard of living through prior sacrifice and specialization, and there is no guarantee that they will find a way to maintain this current quality of life. In all likelihood, their quality of life will fall in the short run. They may even be forced to do work they don't want to do while they are figuring out what their new comparative advantage is.

This isn’t meant to be a slap against outsourcing, in fact, I agree with the principles behind it. If we look at some semblance of the whole picture, we will find that the local and global economies benefit immensely from outsourcing in the short and long run. Nevertheless, I sympathize with individuals who are having trouble coping with the change it undeniably brings.

1 comment:

  1. Jon,

    Your post is correct:
    As for your sympathy I ask you, is there a "divine right of stagnation"?
    I now relate to you a story told by author Ayn Rand: Once on a plane trip, I became engaged in conversation with an executive of a labor union. He began to decry the "disaster" of automation, asserting that increasing it would lead to thousands of workers being permanently unemployed as a result of new machines and that "something ought to be done about it." I answered that this was a myth that had been exploded many times; that the introduction of new machines invariably resulted in increasing the demand for labor as well as in raising the general standard of living; that this was demonstrable theoretically and observable historically. I remarked that automation increased the demand for skilled labor relative to unskilled labor, and that doubtless may workers would need to learn new skills. "But" he asked indignantly, "what about the workers who don't want to learn new skills? Why should they have trouble?"
    This means that the ambition, the farsightedness, the drive to do better and still better, the living energy of creative men are to be throttled and suppress-for the sake of mean who have "thought enough" and "learned enough" and do not wish to be concerned with the future nor with the bothersome question of what their jobs depend on.

    In short, when someone tells you they don't want to see their job get outsourced they are saying two things:
    1. I learned my skill when I was in my early 20s.
    2. I don't want to learn anymore because I did my thinking 30 years ago and that was enough.
    What would that mean for the progress of society if we acknowledged that as a logical argument? So, no, there is no right of stagnation and the transition is a painful one but very necessary.