Topic 9: The Myth of Outsourcing's Effect

Globalization is the international exchange of world views, ideas, languages, products, and other aspects of culture. For instance, the spread of English as a global language is a sign of globalization. Comparative advantage is when one country can make something at a lower cost than anywhere else. For example, China can make toys and clothes at a lower price than any other country. Therefore, many things are being made in China now. Outsourcing is when a company or firm uses the resources and labor in other countries. The most famous example is outsourcing in India. Many people call customer service that is supposed to be in America but is actually an Indian guy in India answering your call and helping you out. This is because the labor in India is cheaper. Globalization and comparative advantage leads to outsourcing because when it is cheaper to make something in one country, then outsourcing will occur. Outsourcing can be very efficient because it will lower the price of goods and services and will increase the demand for products. However, the opportunity cost of outsourcing is the unemployment that the home country will face since all the jobs are now moved to other countries.