Outsource It, Please!

I am taking an economics course this semester, and on the second day of class we talked about some of the basic principles of economics, including trade.  We watched a video of Milton Friedman explaining the ideas behind a famous essay titled, "I, Pencil," written by economist Leonard Read.  The purpose of the video (and originally, the essay) is to explain that free trade benefits us all by allowing us to trade some of our time (in earnings) for a minuscule bit of many other peoples' time (in labor), and that trade all over the world benefits all of us.

A woman in the row in front of me raised her hand and, and starting her sentence with, "Yeah, but," proceeded to explain how a company she had worked for had outsourced a portion of their jobs to India, causing some American workers to be laid off.  "How could this be beneficial to Americans?" she demanded.  "When big greedy corporations outsource, it only benefits their culture, and it hurts ours!"  This is a common objection Americans have when jobs are outsourced to other countries, and the misconceptions behind it also account for the belief that buying products that are "Made in America" benefits Americans more than worldwide trade.

The problem with my classmate's paradigm is that she could only see negative effects of outsourcing (which is, in essence, free trade of labor).  Or more accurately, she could see positive effects, but in her mind, they only benefited the "greedy corporations" sending jobs oversees.  I quickly shot my hand up to rebut her.  The benefit she's not seeing, I argued, is one of lower prices that the company's American customers pay for its product.  That's more money in the pocket of other Americans.  It's a short term detriment--some temporarily unemployed workers--for a long term economic benefit.

Regardless, this explanation was not sufficient.  Her next objection was more a personal frustration than an economic argument--that when she calls Dell technical support, which she claimed is outsourced to India, she feels she does not receive the level of service she would if the agent was American.  Once again, she overlooked a benefit to her based on a choice she made.  When she chose to purchase that Dell computer, surely it cost less than an Apple, for example.  On the other hand, had she chosen to spend that extra money on an Apple, she would have probably received tech support based in the good ol' US of A.  She weighed a series of costs and benefits and decided that her preference in purchasing a laptop was a lower upfront cost.

A good way to try to understand the benefit of free international trade is a thought experiment; to simplify the equation.  Say I am good at growing flowers, and you are good at growing potatoes.  You might want something pretty to put in your window, and I might have a rumble in my stomach.  Should I spend the time to also learn how to grow potatoes just because I am hungry?  And should you spend the time learning to grow flowers too, so you have something to look at?  Logically, it makes more sense for us to stick to producing what we produce best and then trade with each other.  This is what economists call specialization.  On a global scale, countries should focus on producing what they can most efficiently and then trade with each other.  And that includes tech support jobs.