Outsourcing Still Isn't Wrong

A blog about business and economics.
July 20 2012 10:37 AM

Outsourcing Still Isn't Wrong: Mitt Romney and the Asian Electronics Supply Chain Edition

Republican presidential candidate, former Massachusetts Gov. Mitt Romney
Republican presidential candidate, former Massachusetts Gov. Mitt Romney

Photograph by J.D. Pooley/Getty Images.

I wrote earlier this week that one of the main problems with the leveraged buyout industry is its tendency to earn profits through breach of trust that undermines the long-term social basis of a complicated and prosperous market economy. But with a new investigative feature designed to bolster the xenophobic case against Mitt Romney, David Corn and Nick Baumann remind us that some of Romney's fortune was legitimately assembled through savvy investments:

In March 1999, shortly after Romney left Bain to take over the troubled Winter Olympics in Salt Lake City, Brookside Capital Investors Inc., a Bain-related entity wholly owned by Romney, filed a report with the Securities and Exchange Commission that listed dozens of companies in which Brookside held a stake the previous quarter. The roster included investments in Singapore-based Flextronics International ($13 million) and Florida-headquartered Jabil Circuit Inc. ($41 million), two companies that were leaders in the fast-growing field of outsourcing electronics manufacturing and offshoring production to low-wage countries. Together, these two investments represented almost 10 percent of Brookside's $559 million portfolio.
For much of the 1990s, most overseas outsourcing involved unsophisticated products like apparel. But in the second half of that decade, US high-tech companies producing computers, telecommunications equipment, and other electronics began contracting out their manufacturing to firms that had established production facilities both in the United States and in overseas locales where labor was cheap.
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This is, I guess, supposed to be damning news about how Romney hates America or something. But in the real world the development of the Asian electronics supply chain has been a great thing. Obviously Romney didn't play his small role in it in order to help impoverished Chinese people get better jobs, but it has helped impoverished Chinese people get better jobs. And the Asian electronics supply chain has  brought Americans lots of consumer surplus in the form of affordable magic gizmos. What's more, the existence of a mass market for those gizmos has created new horizons of economic opportunity as people earn a living developing smartphone apps or doing the old-fashioned blue collar work of physically installing mobile broadband technology.

Given the political unpopularity of this kind of pro-outsourcing sentiment, it may well have been an error for the party of business to have nominated a practical businessman. But I really do think Team Rommey would be better off trying to mount a frontal defense of offshoring and trade rather than trying to argue paperwork and evade responsibility. Otherwise they're going to keep getting hit with a random drip-drip-drip of "accusations" of having been involved in sensible and moderately useful business investments.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.