July 12 (Bloomberg) -- “Outsourcing” has become such a dirty word that it’s hard to believe there could actually be something called the International Association of Outsourcing Professionals. What next? The Society of Professional Child Molesters?
The IAOP’s modest claim is that it is “the leading professional association for organizations and individuals involved in transforming the world of business through outsourcing, offshoring, and shared services.” The group promotes a list of the 100 best outsourcing companies, and even has an annual Miss Outsourcing beauty pageant. (That last item’s a joke. The rest is all true.)
In the campaign for the White House, President Barack Obama is trying to paint Mitt Romney as an incorrigible outsourcer, as if it were obvious why this is so terrible. Maybe it seems obvious: People lose their jobs when companies transfer parts of their operations overseas. But most economists believe in the theory of free trade, which holds that a nation cannot prosper by denying its citizens the benefit of cheap foreign labor.
It’s a hard sell because the victims are concentrated and easy to identify, and the benefit is diffused through the whole economy. That’s why so many politicians pay obeisance to free trade in the abstract, but oppose it in the particular.
This seems to be Obama’s approach, unfortunately. He accuses Romney of outsourcing both as governor of Massachusetts (letting a state contractor move its calling center operation to India) and as a businessman (as part of Romney’s “buy, fillet and throw away the guts” method of corporate acquisition at Bain Capital). Romney replies that nothing he did was illegal (true, as far as we know) and that the Obama campaign misrepresents some of the facts (also true).
Obama apparently intends to skewer Romney as a businessman. His campaign carefully confounds being a businessman with being a crooked businessman, and many other variations on the theme: being a ruthless businessman, a businessman who engages in outsourcing, a businessman who doesn’t pay enough taxes, and so on.
One of Obama’s flaws is that he can’t seem to criticize any given situation without vilifying the people involved, whether they are responsible for it or not. Refusing to insure people with pre-existing conditions, for example, does not make insurance companies evil. Under current arrangements, they’d be crazy to take on a customer they know will cost them far more than he or she will pay in premiums.
It’s not necessarily evil or even wrong for Romney to have taken advantage of every opportunity to minimize his tax bill. There is a point at which twisting yourself and the regulations into knots in order to avoid taxes does start to seem unpatriotic, and some of Romney’s tax shelter arrangements may approach that point. His refusal to reveal more than a tiny part of his financial records is suspicious. The mere fact that he does what he can to pay as little as he can is not. Democrats argue that he should be ashamed of Swiss bank accounts and other foreign currency investments that amount to “betting against the dollar.” If Romney is sincere in his belief that Obama is wrecking the economy, then he ought to bet against the dollar.
Romney, meanwhile, is also sticking to business. He plays down his governorship these days, for fear someone will whisper “health-care reform” (his biggest achievement, now cleverly turned by his own party into his biggest problem), and so he is running almost exclusively on the non sequitur that he is someone who knows how to run a business and therefore knows how to run a nation.
Romney was not just a businessman. He was a management consultant and later a venture capitalist: in other words, one of the high priests of business who never had to soil their suits by running one. He surely knows and (one suspects) believes that free trade and outsourcing are good things for an economy.
But instead of a full-throated defense of these principles and his practice of them as advantages he would bring, as a businessman, to the presidency, he merely says that nothing he did was illegal. Even in 2012, we don’t elect people president on the grounds that they did nothing illegal. I hope.
Obama decries Romney’s practice of outsourcing as if he thinks that all outsourcing is wrong, even if it can’t or shouldn’t be made illegal. Obama proposes a heavy dinner of grants, subsidies and tax credits to discourage outsourcing and encourage “insourcing” -- bringing jobs from abroad back to the U.S. -- all of which are bad ideas. Among other reasons, one nation’s insourcing is another nation’s outsourcing, and retaliation can quickly lead to a trade war in which everybody loses.
Romney or Obama? “I don’t want the next generation of manufacturing jobs taking root in countries like China or Germany.” Early in the Republican primary campaign, China was the one subject Romney seemed genuinely agitated about. Imposing tariffs on Chinese goods was on the long list of things Romney said he was going to do on Day One of his presidency. Maybe he still is, but he doesn’t play it up the way he used to.
Meanwhile, if Romney is a free trader at heart, faking a bit of protectionism, Obama seems to be a protectionist at heart, faking a belief in free trade. That quote in the previous paragraph is from Obama, and shows a fundamental misunderstanding of how markets work. Trade is not a zero-sum game. There isn’t a certain number of manufacturing jobs that will either go to China or Germany, or come to us. We want China and Germany to have lots of manufacturing jobs. The more they have, the richer they are, the better off we will be as well. Beggar-thy-neighbor policies don’t work.
It’s probably all just talk. Obama campaigns like a crusading populist, and then governs like a consensus-seeking moderate. This works well with an electorate that wants radical change as long as everything important -- e.g., monthly checks from the government -- stays the same. And Romney clearly cannot be counted on by proponents of any side of any question.
(Michael Kinsley is a Bloomberg View columnist. The opinions expressed are his own.)
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Today’s highlights: the editors on why China should think small to spur growth and why outsourcing is (mostly) good; Caroline Baum on the presidential outsourcing debate; Edward Glaeser on why Australia’s mineral wealth does little to create jobs; Ezra Klein on Obama’s tax gamble; Laurence Kotlikoff on Social Security’s solvency.
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