Tuesday, November 19, 2013

Why I disagree with most offshoring

Every time I raise this topic, I'm usually confronted with the same old chestnut, "Don't you realize it's a Global economy".  Well in my opinion the Global economy for the most part only benefits Global companies such Apple and General Electric.  Now don't get me wrong, I'm no isolationist or protectionist, and I am 100% a capitalist, so I'm not here trying to tell companies what to do with their revenues.  My goal is just to articulate why I believe arbitrage of human labor, specifically with countries with whom the United States has a major trade deficit hurts us all, and why some companies engaged in offshoring are literally destroying their client base.

In simple terms and at a macro level the Global economy only benefits residents of a country if trade is ideally balanced, or a trade surplus in favor of the supplier exists.  When a trade deficit occurs you are quite simply shipping money overseas to grow someone elses economy at the expense of your own.  It's literally as if you are giving money to your competitor, to grow his or her business.  If the trade deficit with a given country is systemic then that money never returns.  The US has run Global trade deficits for decades, and our trade deficits with those countries that are haven for offshoring including India and China have equally long track records.  Put very simply when you offshore work to these countries you are taking money out of the US Economy and putting it into theirs.  Now if you do business in those countries or plan to expand into those countries great, otherwise you are directly impacting the amount of available money in your own market. 

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