Another Side to Offshoring

Every trade has at least two sides. That’s a fact often forgotten in discussions of outsourcing, off-shoring, and their effects on local economies. The urge to “buy American” or “buy local” often means “pay more” or “get less value”.

Jingoistic and xenophobic claims about the importance of who we trade with steer decision-making away from the economics of finding the best for the lowest cost. Trade and commerce become untethered from the quest to increase productivity and wealth. We no longer engage in trade to make our economic lives better, but to make our emotional lives easier.

We feel good handing money to people we know. Even when it isn’t for the best product, or at the best price. Going local, it is claimed, is the morally superior choice, and righteousness offsets waste and inefficiency.

Until we look at the other side.

The foreign business (whether overseas or just headquatered in another State) wants your trade. They think they have a better product, and they want to put it into your hands at a price that must include the costs of operating at a distance. When you insist on “local” over “better”, you not only keep yourself poorer, you deprive your distant peers of their ability to earn and produce.

We do not often see the negative effects of “buying American”. Higher costs and lower efficiencies are usually small enough for consumers to overlook. The loss of work in foreign lands is of little concern to the morally-motivated local buyer. But when a foreign producer closes a US factory, we see the suffering such falsely-patriotic righteousness can lead to. Suzlon is an Indian company which had off-shored 500 jobs to Pipestone, MN:

The community of Pipestone was shaken Friday by the news that wind power company Suzlon planned to lay off half the workforce at its Pipestone turbine blade plant.

According to a letter sent to the City of Pipestone, Suzlon anticipates the elimination of 70 positions by Aug. 2 and will likely cut another 90 positions by the end of September.

“I think the community as a whole sees it as a crushing blow, so to speak,” said Laurie Ness, mayor of Pipestone.

I do not assert that this closure was a result of “Buy Indian” policies in India. Most likely, it is simply a product of the contracting US economy, even in so-called “green industries”. But an Indian “buy domestic” preference would have essentially the same outcome.

Buying local instead of buying the best is not the fastest path to a better world. It only distributes suffering in a more pleasing pattern.