We here in the United States, watching our jobs move overseas for the last three decades, have come to think of outsourcing as one of those evils that is taking jobs from Americans along with ever more efficient processes requiring fewer and fewer humans to produce goods and services. Since services outpaced manufacturing jobs in the 1970s, even low-paying service jobs are being eroded by technologies as futuristic as shopping by computer with delivery by drone, without any human hands involved in the process. This erosion of jobs shows no sign of letting up, in spite of political rhetoric requiring money to be spent this way or that to bring prosperity back to US soil. So far, none of this has worked, and probably won't in the future because political rhetoric is not economically efficient--except for greasing political pockets.

So, how can outsourcing help us? I read an article on entropy the other day. While the concept of entropy comes from physics and specifically, thermodynamics, it has been applied to the social sciences as well. According to the laws of entropy, flow is from the higher to the lower, eventually leveling out. For example, in Reaganomics, wealth will "trickle-down" from the wealthy to the poor and all will benefit--right? Unfortunately, that has not been the case. As many economists have written, much better than I ever could, our tax laws, our wage and hour laws, and our antitrust laws have all been eroded by wealthy lobbies funded by the rich to make sure that jobs are not created that will add generally to the wealth of ordinary people. The only way that people in the United States can be wealthy these days is through rigorous education for the higher-paying professional jobs or go into business. For small business and medium sized business, this risky prospect is very difficult to attain with over half of the population unable to buy the goods and services offered by these emerging, and very often, failing, businesses. If they don't go out of business, most small business owners and their families often struggle on and also become part of the working poor.

Back to entropy. Most enterprises are cyclical and, if they don't fail from cash flow problems in their infancy and catch on, have periods of dramatic growth, usually followed by long decline as resources are used up or the market changes. We have seen this in the ups and downs of the economies in Japan and Europe. Those countries in the greatest need will often do the work that other countries with more wealth, will not. Hence, when we got relatively wealthy from post-World War II development, United States jobs have been flowing to all parts of the world where very low wages have created goods and services that American dollars could buy. Also hence, our trade deficit.

In those countries with good education and a very large base of young, eager workers like India and China, to name only two, work flows like a river. In those countries, young people flock to the cities (like they did in the United States during the heyday of manufacturing) and endure hardships while improving the lots of their families in the countryside. The results of this migration from the country to the city is that these working young people have had fewer children and managed to gain wealth and create prosperity in their countries in a very short while, as little as a decade or so.

So United States dollars have flowed to these countries for many years until we are bankrupt as consumers with a few very wealthy multinational entrepreneurs pushing technology development in the United States that is easily picked up in the poorer countries and imitated, or even surpassed, at lower cost. Once these once poor citizens of the prospering countries get a taste of American culture they want to buy American-branded goods and services: McDonald's hamburgers and Buicks. Everything American becomes gauche and desired. Only Americans can make these desirables in American companies.

As the outsourcing source countries become more prosperous, their laborers demand higher and higher pay, until their wages are too high for multinationals to outsource to anymore and find many eager underemployed Americans willing to work for lower but better wages back home. The net effect of foreign purchases of American-made goods and services (like tourism) and jobs returning because Americans will work for lower but sustainable wages will gradually improve the US economy without any government intervention. However, government intervention rebuilding our infrastructure similar to the way that China is with massive infrastructure projects underway, would greatly improve the economy. With challenges to provide cleaner energy, reduce pollution, and provide clean food and water, there are many government projects that we should engage, including a vigorous space exploration effort to move beyond the earth and its precious resources.

The upshot of all this is that countries that were once thought to be Third World or impoverished have burst upon the scene as modern and thriving economies. Outsourcing has sped progress in this regard and the whole world is better for it even though Americans are suffering.

However, for one to be optimistic about this like I am, you have to have a worldview and not be concerned so much about the United States and "Americans." Then again, all this is likely to happen regardless of what we think or say.

Copyright 2014 © Ronald W. Hull

4/20/14