PRESIDENT OBAMA and his Republican challenger, Mitt Romney, are squabbling over precisely when the latter gave up all of his duties at the private equity firm he founded, Bain Capital. Was it 1999, as Mr. Romney insists, or 2002, as per Mr. Obama’s campaign? According to the Obama campaign, Mr. Romney’s claim of non-involvement in the fateful three years can’t be squared with some sworn documents he signed that describe him as Bain’s chief after 1999. And that might make him a felon!
If this were a serious charge, as opposed to a political one, Mr. Obama’s minions would report Mr. Romney to the Justice Department. But the charge is not only hyperbolic, it’s derivative — of a previous accusation to the effect that, after 1999, Bain backed some companies that invested, and hired, overseas. This makes Mr. Romney guilty of “outsourcing,” and outsourcing, Mr. Obama insinuates, is bad.
That’s certainly what a lot of American voters seem to believe. In a March 2011 Gallup survey, respondents’ top suggestion for creating jobs in the U.S. was to stop sending them abroad. But if economists are agreed on anything, it is the net benefits to society, both in the U.S. and abroad, of free trade. The same goes for free movement of investment capital, and the jobs it creates.
Recent empirical studies support the theory. In a May 2012 paper, researchers at the London School of Economics Center for Economic Performance examined 58 U.S. manufacturing industries from 2000 to 2007, and found that the cost savings and productivity increases from shifting some work overseas enabled enough new domestic hiring to offset the jobs lost abroad. Similarly, Mihair A. Desai and his colleagues at Harvard Business School found that foreign investment by U.S. firms does not detract from their investment in the U.S., but rather complements it; a 10 percent increase in the former leads to a 2.6 percent increase in the latter.
Summarizing the literature, the nonpartisan Congressional Research Service has noted that U.S. investment abroad may lead to job creation at home, which “makes it difficult to identify any broad trend regarding outsourcing.”
Of course, such studies are cold comfort to people who lose jobs, even temporarily. American workers’ anxiety is understandable, and an inclination to seek scapegoats in the executive suite, or overseas, is not surprising. It is unsettling to realize that we are vulnerable to the same vicissitudes of international commerce with which other peoples have been coping for decades.
But Mr. Obama’s effort to portray Mr. Romney as an evil outsourcer exploits, rather than addresses, those insecurities. The president knows that the globalization of markets, including the market for labor, is irreversible, which is why he hasn’t proposed policies even remotely commensurate with his campaign’s alarmism. Rather, he’s for boosting education and infrastructure and tweaking the taxation of multinational firms’ foreign profits. If anyone has sounded protectionist, it’s Mr. Romney, who has promised to risk a trade conflict with China by labeling that country a currency manipulator.
This polarized quarrel — we wouldn’t dignify it with the word debate — is beneath both of these intelligent, capable candidates. In an ideal world, the president and his challenger would acknowledge that “creative destruction” is part of what helps an economy grow, while discussing the most cost-effective means of limiting and healing workers’ short-run pain. Alas, we don’t live in that world.