Limiting Outsourcing is Wrong and Harmful

Tibor R. Machan

Former Republican presidential candidate Pat Buchanan is still at it—he wants to do something about the global competition that is making it tough for America’s Big Three automakers to keep up. When the Big Three were flying high, the rest of the world hadn’t yet discovered free markets, especially in labor. But now they have and millions of people abroad are trading their labor for much less money than are people used to trading it in America. Ergo, cars made abroad—and, incidentally, in American regions that aren’t controlled by unions—cost less than those made at the plants of the Big Three. So Big Three and all those working for them need to make painful adjustments. Mr. Buchanan and other foes of global capitalism are calling for ways to combat these developments.

But what is to be done? If my kid has been mowing your lawn for $5 an hour and he has gotten used to this, when some other kid offers to mow it for $3 an hour, my kid will be upset. He will have been outbid! The alternative of putting the competitor and the customer in chains isn’t acceptable. It’s flat out morally wrong. The only thing my own kid can do is either find some other job where he can make his $5 an hour or lower his price and keep the job at $3 an hour or less.

Now if I had given the mowing job to my child and got a better offer and took it, I could be faulted for my insensitivity as a parent. But most of us aren’t related to those who work at the Big Three, so we do not owe them special considerations that trump commerce. Indeed, we would be quite unjust in turning down the better offer since that would mean we no longer play by the rules of free trade, of going by economic factors rather than something else unrelated to economics. This would be like changing the rules in some sport because the referee is a personal buddy of some players.

But that’s not all. As far as helping American workers and firms is concerned, introducing special measures such as protectionism, high tariffs or duties, or anything else that restrains free trade cannot really work in their favor. Yes, for a little while, perhaps, a tariff on imported cars or steel may reduce their sale and increase the sale of domestic ones, although these days, when cars and their parts are made all over the globe, even this isn’t likely. In time, however, because the Big Three will be charging more than what the market would require customers to pay, customers will be using more of their income for cars and less for other merchandise. This, in turn, will reduce the income of those making all that other merchandise being bought in smaller amounts, making it difficult for them to buy cars and whatever else they would want. That, in turn, will reduce the demand for the cars made by the Big Three and the benefits coming to their employees will still dry up.

In fact, ultimately to try to circumvent market forces would require a police state—watching everyone’s buying and selling practices, controlling it all, sending in the cops wherever someone is dodging the officials who now run the show instead of market agents. And that is just what happens in a planned economy, leading, in the end, to drops in production, sales, employment, and economic growth.

The way that Mr. Buchanan and his pals want to help American workers ultimately results in far greater harm to them than anything that the global economy would produce. Indeed, global capitalism rarely produces long term harms. Sure, one needs to adjust to new technologies and new competitors but this comes about relatively gradually and people can make the adjustment much easier than what would be necessary if the entirely system was to experience the impact of the inevitable bad judgments of planners, namely, economic collapse.

The measures urged by Mr. Buchanan, namely, protectionism and restraint of trade, are like so many efforts to take shortcuts by means of violating the principles of the free market. They create hardships unheard of in free economies wherein changes are expected and people can prepare for them.