ProtectionismWith outsourcing a hot political topic during the current run-up to the US elections in November, it’s worth considering why the practice has taken center stage, and what the reality is versus the spin placed on the issue by the country’s mainstream media.

In the current demonstration against outsourcing in the state of Illinois, workers at Sensata Technologies are currently calling on Republican presidential hopeful Mitt Romney to help save their jobs.

Romney is a former CEO of Bain, the owner of Sensata, and still earns profits from the company. Protesting the company’s plans to outsource the entire location’s workforce to China, the employees of Sensata are at the center of a political storm that may cost Romney the election, that threatens to further damage the image of outsourcing, and one that could ultimately have a chilling effect on the US economy. That, however, is unlikely. The simple fact is, outsourcing makes good business sense. In fact it could even help the US beat the recession once and for all.

While controversy rages about giving away jobs which could employ local college graduates at home, it is perhaps more useful to focus on how the practice could help the economy stay afloat. When faced with a choice between seeing companies declare bankruptcy or moving some of their operations offshore to reduce costs and stave off the banks, outsourcing begins to look like the only sensible option in the long-term.

Here a distinction needs to be drawn between what is outsourced and which jobs remain inside the country; something the US media and the differing political camps tend to ignore. The fact is, very few companies actually outsource their entire operation. Instead they tend to outsource non-core business processes, research and software development. By doing so they are able to create international networks that provide 24-hour manufacturing and customer service around the globe. They are also able to reduce costs on those operations which generate the least amount of revenue for the company while retaining top talent in key positions at home.

While new protectionist measures and legislation to keep jobs in their countries of origin are being proposed and enacted every day, the unintended result is that firms restricted by such anti free-trade measures are unable to go where labor is cheapest, and are therefore incapable of remaining competitive. In the end this slows the economy even further with entire workforces being let go when a company folds rather than simply seeing the loss of a portion of its employees when jobs are sent abroad.

Because of the election year, outsourcing has become one of many weapons being used to attack politicians from different parties. It is an effective weapon because the issue strikes at the core of most Americans’ fear about the future – job security.

The average American finds it difficult to understand the reasons why a job is being outsourced. This is in large part because of the way the subject is portrayed in a media that makes no time for the subtleties of the issue, but rather relies on easily repeated sound bites that supply the masses with pre-formed opinions. Thus it is up to the government to help people understand the nuances of the issue, especially the fact that while a certain amount of jobs may be lost to outsourcing now, new jobs will be created as a result of the practice.

Sadly, in an election year, the powers that be are too busy trying to protect their own jobs to dutifully inform their constituents of the facts. Certainly it is much easier for them to pander to voter prejudice and play up the fear of a foreign takeover of their jobs than it is to explain the benefits and necessities of outsourcing. For that we will probably have to wait until after the elections in November.

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