THE FOLLY OF OUTSOURCING

From the Nation:

How America Could Collapse

It was in the 1990s that American multinationals, spurred by government policy, began outsourcing operations to China. At the same time, the Clinton administration steadily relaxed antitrust enforcement, leading to massive corporate consolidation and the creation of the virtual firm. By the early parts of the last decade, the ideal American multinational made its profits by using its market power to gut labor and supply prices and by using its political power to eliminate taxation. All of this turned giant American institutions against making things. This is why we rely on a British factory to make our flu vaccine, why global videotape production was knocked offline by a tsunami and why that same event slowed the gigantic auto industry. US corporate leaders now see the idea of making things as a cost of doing business, one best left to others. What has happened as a result is that much of the production for critical products and services that make our economy run is constructed by a patchwork global network of suppliers all over the world in unstable regions, over which we have very little control. An accident or political problem in any number of countries may deny us not just iPhones but food, medicine or critical machinery.

More here.

This well articulates something that has made me uneasy since the late 90s. I mean, I've never liked the fact that all the old good unionized manufacturing jobs that were once the nucleus of the American middle class have essentially been permanently sent to nations where people will work for pennies on the dollar. That's obviously bad for the economic well being of our country. But after all the blood letting of the 80s and 90s it started occurring to me that all this downsizing and outsourcing was also destroying our capacity to make things. Important things. That is, sending production to foreign nations means we no longer have a manufacturing base.

My free trade oriented acquaintances have assured me on multiple occasions that not only was it no problem, but that it was actually good for the economy overall, that it would increase trade, which would make life better and more lucrative for everybody in the long run. Nice theory. I'm still waiting to see if it pans out after all these years. But nobody's ever really offered any theory to calm my nerves about the fact that America no longer makes things. Just assurances that outsourcing production is good economics.

But how can it be good economics if, say, hostile nations decide to just take over the factories and manufacturing plants owned by American corporations? I guess that's why we have a massive military, to make the world safe for global capitalism. But it still makes me uneasy that we depend on other nations for really important things we need. Sure, it's nice to have that great capital inflow--I mean, I guess it's nice, at least for the wealthy elites who get the vast majority of such profits. But, in the end, how nice would it be to have a whole lot of money but without the ability to buy the things we used to make here in great quantities because other nations refuse to deal with us? Right, not very nice at all.

So I know it's a weak hypothesis on my part: nations hosting American industrial capacity band together and cut us out. Probably not likely. At least, not all at once. But the above linked essay outlines some scenarios that don't seem so unlikely at all, scenarios that are already coming to pass, environmental disaster, political instability, oil price spikes. Put them all together at the same time, and we have economic chaos. That is, suddenly we won't be able to put food on the table, or fix our air conditioners, or take heart medications. We'll have money, but not things.

So all these decades of outsourcing American industry may very well make good economic sense in terms of cheaper labor costs or efficiency, but they have left us wide open to catastrophic risk. I don't see how anybody can think that's good sense.

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