Outsourcing: A Perspective Piece


I’m sitting down at a desk in a university library. It’s 2:00am, I’ve just finished a paper for class, and I’m still hyped up on the coffee I drank to work my way through the assignment. There’s no way I’m getting to sleep for another few hours, so I check Facebook. A buddy of mine has sent me a message saying he noticed some of my recent posts about libertarianism and he likes the idea of a free market, but he has an issue: outsourcing.

He asks me, one of the few vocal libertarians he knows, “In a small-government society with a truly free market, how do you prevent jobs from being massively outsourced since there are no regulations keeping people from doing so? And what impact would you see on wages in small government societies when large multinational corporations have much stronger leverage in negotiating wages?”

He follows up with another question, “How would you ensure that governments like China don’t keep the price of labor artificially low by preventing factory workers from forming labor unions or severely limiting their ability to take advantage of the legal system in case of abuse of power by the employers?”

I’m smiling to myself. Talking about liberty – and politics in general – is my thing. Well, it’s one of my things anyway. And his questions are awesome! Here are some of my thoughts:

For me personally, I love private labor unions! I think they’re fantastic – people using freedom of assembly to create coordinated market pressures directed at their employer for a better living. There’s balance in labor unions as much as there’s balance in the free market.

But, outsourcing isn’t necessarily bad. In a lot of instances, companies that outsource are looking for a labor market that offers their labor more cheaply than the domestic market. So, when they go somewhere with cheaper labor, they employ people who would’ve otherwise been unemployed, or offer them a better job than whatever they would’ve done otherwise. I’ll address that more in a moment.

Business regulation is a big concept. I wouldn’t be too hasty about assuming that a free market can’t have those. I’m more of a minarchist than an anarchist myself, so I believe in minimizing government. There should still be laws establishing safety regulations (you can’t sell a toy if it has a 50% chance of blowing up in a kid’s face) and there should still be laws ensuring that employers don’t take advantage of their employees (you can’t force people to work in asbestos-filled rooms because it could kill them; you can’t force people to solder things without goggles because it could blind them – poor working conditions are basically assault).

But, for a lot of people, their concern is about companies simply taking advantage of people because they’re willing to work for less. Consider this:

sweatshoYou’re a 14-year-old kid working in a sweatshop for sixteen hours a day. The hours are tough, the work is strenuous, and you’re not paid very much. But, when you get off work, you look at the other kids who didn’t get that job from your street. You used to play with them when they were young. Now several are prostitutes or sex workers, several steal, and most slowly starve. You’re probably thankful, even if you’re exhausted, that you’re not in that situation.

People rationally choose the best situation for their well-being, but in places where outsourcing really takes advantage of people, the alternatives are usually much worse, and the job being offered is usually much better. Think about it: these companies don’t go into countries and force people to work for them – that’s slavery. They post an ad and people clamor for the job opportunity because it’s the best one they’re being offered.

Preventing outsourcing takes away those opportunities and ultimately hurts them.

Now, consider this: You’re still the kid working at the sweatshop. It’s been a few years now. Suddenly the overseas government of the company that owns your sweatshop has lifted restrictions on outsourcing labor. Five new factories are built in a week. Fifty new factories are built in a month. Five thousand new factories are built in a year. Each additional factory has to compete for your labor, so some of them start offering higher wages to convince you to work for them instead of the others.

Eventually, people in your economic bracket are lifted up by the economic prosperity of that overseas country and your national GDP increases, allowing you to build up savings, invest, and ultimate jump-start your own economy.


  1. Outsourcing labor isn’t inherently bad.
  2. Outsourcing restrictions hurt wages.
  3. Workers take the best option offered.
  4. The market will find equilibrium.

As for the domestic economy, it would probably be smart to lift outsourcing restrictions gradually, but borders create artificial bubbles of economic growth that always pop. A nation never remains stable, and throughout history, the moment a highly-regulatory government collapses, the people fall on their faces. If you allow the market to equalize, currency to adjust relatively, and living standards to more accurately match the demand for labor, it ensures that political stability isn’t the only thread by which people are hanging.

But there’s more to it than this. Let’s go back to what my friend was saying about countries that pass restrictions on the formation of labor unions or creation of artificial wage suppression.

It’s definitely a good point and the left-libertarian vs. moderate junction sometimes pops up here in terms of preferred approach. Without taking sides on that junction, I think the most nuanced way of looking at things is to keep in mind a couple of points:

  1. In a lot of cases where child labor is occurring, the children who are working are already victimized by systematic obstruction of access to socioeconomic ladders and their reality – the true nature of their conditions, if you will – is a dichotomy of “evils.” On one hand, they could suffer the exploitation and denigration of state-enforced social roles through class striation or caste and walk away with starvation and terrible opportunities. On the other hand, they could opt to suffer double the exploitative measure and walk away with an income that allows them to barely avoid starvation as well as slightly less [but still] terrible opportunities. It definitely sucks.
  2. Our options as citizens in a hypothetical, economically high-functioning, minarchal society are really limited. We could:

a. Invade the country, liberate the proletariat, re-structure the state apparatus, and use militaristic enforcement of electoral systems with long-term oversight to ensure that their rights have a chance to be normalized until at least one generation has passed through a “first world standard” education system,

b. Use market pressures to boycott company owners in our domestic market who exploit workers that suffer from another government’s oppressive institutions,

c. Use market pressures (sanctions) to boycott products produced by workers who are exploited by oppressive government-enforced institutions in other countries and, by extension, attempt to drain their domestic resource base until the people are so crippled that their government has no choice but to change the policies,

d. Overwhelm their black markets with liberty propaganda in the hopes that they fight for their own rights, or

e. Ignore the situation entirely and look the other way

  1. Our moral actions are always violative if they’re enforced before a people are indoctrinated into our understanding [or expectations] of entitlement. In this case, minarchally speaking, I mean entitlement to interpersonal autonomy or, better said, entitlement to the expectation of a wider range of social contracts that require consent. Until a people are “caught up” to our take on the matter, they can usually only acquiesce – as opposed to embrace – the changes. We can’t reasonably expect them to understand what we’re doing if they haven’t experienced our system before. That requires us, the party responsible for forcing change upon them, to be educators – through demonstrating that our market system is the better option – as well as liberators.
  2. In a world mixed with both free societies and oppressive societies, there will still be coercion.

Speaking of coercion, let’s talk about what that means in terms of outsourcing. Pardon the following barter-system example, but it serves to illustrate my point a little more eloquently.

Now, let’s say that I live in the free society and you don’t. I know that you only have ten sacks of flour. I also know that you’re sick and desperately need antibiotics or you will die. You know that, under ordinary circumstances, MY market equilibrium has demonstrated that antibiotics usually go for five sacks of flour. However, because we’re in your society which isn’t free, things aren’t ordinary because, due to the oppression of your society, I’m the only one who can give you antibiotics – maybe because there aren’t enough in yours, maybe because they’re more expensive in yours, et cetera.

If I’m a terrible, absolutist, egoist person without any empathy, I can and will leverage all ten sacks from you because I know that you don’t have a choice. The value you assign to the ten sacks of flour is technically less than the antibiotics. We’re talking about your life here! Assuming you can’t reason with me or break into my home and rob me, you will cave and give me all ten sacks.

It’s fair and square, because you opted for your best option voluntarily, but… it’s not really that fair, is it? I’m supposed to be from a free society right? I mean… what’s the point of living in a society where my freedom is defended with principles if I still create power dynamics that coerce and exploit you?

When people talk about outsourcing and taking advantage of others who live in oppressive or “under-developed” countries, it’s usually within the context of people [business owners] acting outside the optimal or, at least, the socially acceptable range of moral interchange found in their domestic market.

Here in our “first world” society, we enjoy benefits of an economy that is so capitalistically productive and competitive, there are drug stores on every other street corner. Our system is structured in such a way that, even if I wanted to, I couldn’t coerce people in my own society to pay ridiculous prices; they’d just go to another store.

I simply can’t get away with it because any smart business in my free society would offer their antibiotics at competitively cheap prices to meet demand flexibly and optimize their revenue levels. However, I CAN get away with it in your society.

My society, being free, doesn’t force businesses to artificially raise drug prices like yours might, forcing demand curves to the left (reducing demand). It also doesn’t force businesses to artificially lower them like yours might, either forcing supply curves to the left (reducing supply) or disincentivizing productivity through unsustainable net losses.

You can summarize those four points as follows:

  1. Child workers are forced to choose between the lesser of two evils: oppression and starvation or double oppression and scraping by.
  2. We have a limited number of options to liberate oppressed peoples in other countries.
  3. Liberation isn’t always consensual. Sometimes, you have to force it on people. I know. It’s ironic!
  4. Business owners are incentivized to coerce foreign people who can’t leverage the working standards of domestic people.

With those points in mind, the libertarian perspective boils down to a few premises. Namely, nothing will change overnight and, in fact, it’ll take years to “liberate” everyone. Also, promoting a free society requires taking the risk that both businesses and governments will coerce people unfairly from both sides.

Our ideology, among other these other things, rests on the assumption that we can somehow foster socially normative moral behaviors for any given interpersonal exchange, resting on the maintenance of high living standards which citizens in our free societies will come to expect as a continually improving baseline. And further, that this is somehow better than ideologies like socialism or communism because we value the benefits of disenfranchising coercive behavior with competitive productivity – those benefits being more exchange autonomy, greater control of consenting to contracts with the “leviathan” that is government, et cetera.

If those premises mean a few more kids don’t starve, I think they’re justified. Even if it’s at the expense of exploitive labor conditions that corner them between the lack of socio-economic ladders and the lack of high standards in the workplace, their options are just a little better. And someday, when the world gets its act together and realizes what the free market can offer, there won’t be anywhere to put a sweatshop – everyone will enjoy the competitive labor market that comes with deregulation.

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Mike Avi

Mike Avi is a student at Florida State University studying Economics and Portuguese. He is president of the university's College Libertarians RSO and a Campus Coordinator for Students for Liberty.