Consider This: Are Factories Moving Overseas Always A Bad Thing? Maybe Not...

One of the common objections to free trade is that manufacturing jobs will often be moved overseas to places where maintaining factories and the facilities is less expensive. We see the job layoffs and reductions in those industries as a result, but is the net effect of such economic change always bad?

Maybe not. It's easy to see the laid-off workers, but it's more difficult to see how those workers then reintegrate into the economy in other industries and add value there.

"If a company decides to relocate a factory overseas it is because its task can be accomplished cheaper or more efficiently elsewhere. Realizing such efficiencies and doing more with less is the sine qua non of economic growth that frees up additional resources. While the job losses that result from such dislocations are apparent, invariably less appreciated and less noticed is that the resulting cost savings will allow for either new investments by the firm, cost savings to consumers in the form of lower prices—both of which contribute to new job creation—or some combination thereof. Trade and outsourcing destroy jobs, but also create new ones."

One way of describing this phenomenon is "creative destruction." When the pieces of something are used to build elsewhere, the net result ends up being good. There may be some pain involved, but in the process an economy grows.

The article has some more data specifically showing how this works. The point being that just because manufacturing sometimes goes to other countries, it does not mean that we need to panic.

Comments


mic15
mic15
New Comment
3
TPOH
TPOH
New Comment
2
TPOH
TPOH
New Comment
2
TPOH
EditorTPOH
New Comment
1
TPOH
EditorTPOH
New Comment
1