by Keth Kinsey

Created on: September 09, 2007

I think some of my fellow writers have - intentionally or otherwise - narrowed the focus of this question. Yes, I suppose outsourcing does create redundancies in certain manufacturing industries and, given how disproportionately powerful the car sector lobby in America is, I can see how some people might react negatively to this recent trend.

However, and I believe this to be a big however, I think that outsourcing is inherently a benign, even positive aspect that will not cause us any harm in the long term and will even, given time, assist us in our ability to prosper. "Why?" you say, "Why are you babbling all of this foolish talk?"

One simple reason. Three easy words. Nineteen straightforward letters: Basic economic theory.

As I mentioned, some of my fellow commentators have taken to the concept of outsourcing rather negatively. Presumably, they fear the inevitable lay-offs that occur when a company decides to relocate a proportion (or even the entirety) of its workforce from one country to another. That is understandable, as protecting one's livelihood is a basic human reaction. However, as I will demonstrate, it is actually unhelpful in the long run to assume such a stance.

In general, production flows to wherever inputs - labour, capital and resources - are the least expensive. To take a contemporary example, part of the reason Japanese car manufacturers flourished during the 80s was due to a high level of mechanisation and automation within their plants, and on the other side a major cause of the stagnation of American manufacturers within this period was a managerial structure stagnated with labour disputes and slow responsiveness to consumer demand. So, in other words, the Japanese could produce what people wanted quickly and cheaply, whilst the 'old' American establishment could only really produce expensively what people only marginally demanded. Now, apart from some disgruntled union people in Detroit and elsewhere, I can't imagine people are still railing against imports of Japanese cars. These products are now an accepted and established part of the American car market.

To take an example from antiquity - and to paraphrase Adam Smith's example - would it be better to support a pin workshop in which each worker was involved from start to finish in the design and construction of each pin, or a workshop where each worker was assigned a specific task, thereby greatly increasing productivity and reducing cost? Our modern economies would simply not exist if we had remained stubbornly with the latter concept.

In conclusion, then, we can draw a broad analysis that outsourcing is very similar to an economic concept that we take for granted today - mass production. Of course, at the start of the Industrial Revolution, I accept there were probably quite a few unemployed, unhappy pin-making specialists. However, their sacrifice was in order to create many, many new livelihoods. In this, I think outsourcing can only be beneficial for all of our economies over time, as it reduces costs and therefore increases profits (in turn, enriching the national and global economy).

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