As the Obama campaign sees it, Romney’s involvement undercuts his basic message that his private-sector experience makes him singularly qualified to create more jobs for Americans.
Romney’s retort takes various forms: that the offshore outsourcing didn’t happen on his watch; that it wasn’t Bain-owned companies that did it, just their customers; that outsourcing some jobs was the only way to preserve and create other jobs. The critique, says Romney, is just another example of Obama’s anti-business bias.
The debate over outsourcing has been morphing, and today there are growing numbers of people who think that what started as a sensible, globalized extension of sending some work outside a firm to specialized companies may in fact be creating long-term structural unemployment in the United States, hollowing out entire industries.
Rearranging where and how work is done has been going on ever since the first shepherd and farmer decided to trade milk for wheat on a regular basis. Outsourcing is merely an extension of the age-old story of specialization and exchange, whether it is done within a village or country or across national borders.
At the dawn of the industrial era, the general belief was that efficiency demanded giant companies that performed a wide variety of activities to take advantage of the economies of scale and scope. The most modern factory of the day was Henry Ford’s River Rouge plant in Dearborn, Mich., where Ford not only assembled cars but also produced its own steel, fabricated its own parts, generated its own power and created its own advertising.
Since that time, improved technology and production know-how — everything from the telephone and the jet airplane to overnight delivery and just-in-time inventory control — have lowered transportation and coordination costs, making it efficient to move more and more work to outside suppliers and contractors.
Initially, a lot of outsourcing was to other American firms; later it involved moving production to foreign countries. Many companies rushed to spin off all but their most essential “core” activities.
Today, some of the world’s largest companies and biggest employers are the product of this outsourcing trend: Sodexo in food service; IBM in information technology; Wackenhut, now known as G4S, in security services; UPS and FedEx in logistics; Foxconn and Lenovo in computer manufacturing. Instead of the Rouge plant, the new model of industrial organization has become Nike, which outsources the making of all of its shoes, clothing and sporting equipment so it can concentrate on design and marketing, and Apple, which outsources all of its hardware manufacturing.