Posted by Patrick L. on August 29, 2016
Outsourcing only leads to temporary unemployment for some individuals. But new jobs are created for these individuals. These jobs are better paying and have better benefits. Then outsourcing happens again leading to better jobs. It’s a cycle that has been going on since the industrial revolution. In the 1920s agriculture made up 40% of jobs, now it makes up 3%. Yet output is WAY up. This leads to my next point. If we centered every policy around jobs we would never make progress. The value outsourcing and automation creates, far outweighs the temporary job loss. We built tractors and robots which resulted in lost jobs. But the country became richer. According to Donald Trump and Hillary Clinton this shouldn’t happen. But because of the increased production we become richer.
Free trade leads to more specialization. Specialization leads to more efficiency and cheaper products. We import coffee and bananas because we can’t grow them as well here as in South America. We import televisions from East Asia because they are good at producing them. We import T-shirts because it costs less. This debunks the “buy in America” or “buy local” movements. People will buy American made products, even though it’s more expensive, just so they can say they “buy American”. If it costs more to buy American, that means it should be outsourced because it could be produced more efficiently somewhere else.
Free trade leads to better buying power for the bottom quintiles. Since free trade leads to cheaper products, the poor can buy more products at cheaper rates. The popular myth “free trade only helps the 1%” is completely false.
And lastly foreign trade deals and trade deficits. Protectionists are just as bad with “muh trade deficits”as libertarians are with “muh roads”. The two are synonymous with each other. Trade deficits occur because one country’s imports outweigh its exports. But this isn’t necessarily a bad thing as explained by classical economist Frederic Bastiat : “I was at Bordeaux. I had a cask of wine which was worth 50 francs; I sent it to Liverpool, and the customhouse noted on its records an export of 50 francs. At Liverpool the wine was sold for 70 francs. My representative converted the 70 francs into coal, which was found to be worth 90 francs on the market at Bordeaux. The customhouse hastened to record an import of 90 francs. Balance of trade, or the excess of imports over exports: 40 francs.” As you can see, it’s simply business. If a CEO sees its beneficial for him to make a trade deal, such as the example above, why should we stop him? This would only lead to slower growth.