Spencer Coan, Priyanka Jain, Olakunle Oyewo, Chris Swanson

OUTSOURCINGIs it good or bad for the U.S. economy?

China

Mexico

Ireland

India

Our Contention

Outsourcing is GOOD for the U.S. Economy.

The Rundown

• What is Outsourcing?

• Why Outsource?

• History and Trends

• Positive and Negative Effects

• Issues to Consider

• Conclusion

What is Outsourcing?• Outsourcing is the act of moving domestic jobs (but

not the people doing them) to foreign countries.

Why Outsource?

Because of Comparative Advantage!“It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy...If a

foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have

some advantage.”

–Adam Smith, The Wealth of Nations (1776)

History of Outsourcing• Outsourcing Has Existed For A Long Time

– The British Empire and Textiles• The Textile Industry in India and the U.S.

• More Recently...U.S. Outsourcing– Manufacturing

• Clothes• Auto Parts• Computers

– Services• IT Services and Y2K• Customer Support

Outsourcing Trends

Positive Effects

• American Firms– Increased Profits through Reduced Operating Costs– More Competitive on a Global Level

• Americans– Cheaper Goods and Services

• The Nation– Better Overall Standard of Living– Peaceful Relationships with Other Countries

through Aligned Economic Goals

Negative Effects

• American Firms– Customer Backlash (Poor Service)– Employee Relations (Job Insecurity, Unions)

• Americans– Job Loss– Wage Reductions

• The Nation– Industry Standards of Foreign Countries– Human Rights Violations (i.e. child labor)– Security Concerns (Russia vs. Georgia?)

“President Bush is on an eight-day tour of Asia. He’s visiting American jobs.” –David Letterman

Issues to Consider

• Reality vs. Perception– Outsourcing Vilified?

• Short-Term vs. Long-Term– Net Effect on Jobs– How We Educate Our Workforce

• Free Trade vs. Protectionism– Politics of Outsourcing

• American Workers = American Voters

– Diplomatic/International Conflicts

Conclusion

• Outsourcing is inevitable.– How Americans Respond to Outsourcing will Determine

Whether the Overall Effect is Good or Bad for the U.S.

• America can and will capitalize on the effects of outsourcing if it:– Maintains an Economic System that Supports Innovation– Renews its Focus on Education– Commits to Retraining the Workforce

• Question (make it a good one)?