Out-Sourcing, In-Sourcing, and Globalization

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Out-Sourcing, In-Sourcing, and Globalization

The Trends editors have long been fans of economic globalization and free trade.  But, we’ve also been vocal opponents of globalism.  Is that inconsistent?  We don’t think so.

Economic globalization means creating a “level playing field,” on which all businesses are treated equally in all countries, when it comes to buying inputs or selling outputs.  That is, regulations that apply to local businesses apply equally to foreign businesses.  And, while multi-national institutions, like the WTO, have moved the world toward this definition of globalization, some participants, China in particular, have pursued a “mercantilist strategy” which seeks to slant the playing field to its advantage.  Over the past two years, the Trump administration has pushed back aggressively, primarily by negotiating new bi-lateral and trilateral treaties. 

Globalism is a supra-national system which seeks to treat all individuals and businesses the same, regardless of citizenship or national origin.  This value system does not recognize the importance of national borders and national identity to the well-being of the people of each nation.  The institutions of globalism, ranging from the UN to the WTO to the EU, seek to minimize national identities and differences.  In recent years, a widespread desire to limit globalism has driven the rise of Nationalism.  For more details on the nationalism vs globalism debate, please refer to the October 2016 and March 2018 issues of Trends.

Politicians and members of the general public often convolute these topics, either intentionally or by accident.

Specifically, we’ve heard a lot of criticism in recent years of U.S. firms outsourcing jobs, especially factory jobs, as well as accusations that countries like Mexico, China, and Japan are “stealing U.S. jobs.”  The primary negative effect of this outsourcing has been increased U.S. unemployment which remained stubbornly high, until this year.  According to the latest available government data from the year 2013, the 14 million outsourced jobs identified was almost double the 7.5 million unemployed Americans.   So, if all those jobs returned, it would be enough to also hire the 5.7 million who were working part-time, but would have preferred full-time positions. 

However, it’s important to realize that for competitive reasons, most of those jobs, especially in manufacturing, would have been replaced by automation if barriers to outsourcing had been implemented.  So, while the benefits would have accrued to some American workers, it might not have necessarily been the ones who lost their jobs to outsourcing...

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