William Thien

Setting The Record Straight on Why Companies Outsource

Posted on: August 7, 2014

Recently the gubernatorial election where I reside has entered into a debate on the subject of outsourcing. One of the candidates is a family member of a large corporation that outsources most of its labor to China. One candidate accused the other of undermining the economy by outsourcing while the other candidate accused their opponent of not creating enough jobs. The debate began when one candidate made an increase in the minimum wage to $10 per hour part of her platform while the other accused her of being hypocritical because the company to which she is affiliated outsources most of it labor to China and pays those workers less than $2 per hour.

As you know, my position is that politicians don’t create private sector jobs in the first place; they create an environment which stimulates private sector job growth. But even that is limited.

Politicians promise jobs because they know how desperate Americans are for good jobs because, well in this case, one of the candidates is directly associated with a corporation that outsources a lot of potentially good American jobs. It’s a valid issue for any campaign, if you ask me.

Let’s examine this matter further.

The debate has centered or perhaps has been steered towards the belief that companies have outsourced generally because labor costs are too high here in The United States and that environmental regulations and other regulatory matters make it impossible to manufacture here in The United States.

All of that of course is false. Americans are considered the best industrial employees having higher education levels and greater reliability and are considered more productive in many cases.

The real reason companies outsource is that after the fall of the Berlin Wall, and communism in general around the globe, suddenly there were six billion people ready to work for pennies on the dollar, whereas before companies were prohibited from using such labor due to restrictions related to political matters. When the Berlin Wall came down suddenly companies had a chance to make obscene profits by utilizing the sudden supply of cheap labor whereas prior they were merely just doing well. Clinton then gave China Most-Favored-Nation Trading Status. That coupled with the North American Free Trade Agreement, also ratified during The Clinton Administration, pretty much shut the American assembly line down. As I’ve said before, it was almost as if President Clinton himself went to the end of the assembly line and threw the switch, bringing it to a halt.

Industrialists then blamed the so-called high cost of union labor in order to justify the outsourcing. Manufacturers blamed restrictive over-regulation. The media bought it like a cheap Chinese suit and now that’s almost all you can find anywhere.

The real reason companies in The US, and much of the western world for that matter, have outsourced much if not most of their industrial production is due to the chance for a massive increase in profits, the chance to make obscene profits in many cases. Let’s face it, the real reason many companies have outsourced is because of greed.

Now that the American worker can’t afford to buy such products anymore, many companies are reconsidering their short-sighted production strategies and they are bringing their production facilities back to The United States or no longer outsourcing to other producers. Many believe those jobs are never coming back. Though most experts agree that it is, let’s hope it’s not too late.

Copyright © William Thien 2014

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