> Any basic macroeconomics class covers the effects of protectionism. Yes, in the short term wages may be artificially propped up, industries may be (temporarily) saved, but you do long-term damage to the economy, and the people are better off with free, open markets long term.
You're almost certainly correct in the sense that the people of the entire system will be better off, but your own domestic market could suffer at the gain of the other market where the business is now being outsourced to.
A good example of this might be tech in the EU. The EU basically has no major tech companies because we "import" all our tech services the US (Facebook, Google, Amazon, etc). It's great for us in the sense that we didn't have to pay anyone to build amazing online services like Facebook, Google, etc – it's just free stuff we get here from the US. But who benefits the most from this arrangement, is the US or the EU? I'd argue that the EU allowing the US to provide all of our major tech services has been great for US growth, but it's stagnated the EU economy in recent years as we've had no real reason to build 21st century companies here. The free stuff we get from the US actually comes at a cost for us even if overall the economy as a whole (EU + US) is better off for it.
Similarly, imagine an extreme scenario where US companies outsource all work to low-cost labour countries (I know this is impossible, but assume the US is 100% service sector jobs which could be outsourced). Would this hypothetical scenario be good for the US economy? It might be good for companies registered in the US because now they can provide their services to markets they serve for a fraction of the cost, and it would be great for those low-cost labour countries getting all this foreign work, but it would be awful for the actual US economy that's allowing this to happen in the pursuit of efficient markets.
So yeah, you might be growing the whole pie at a faster rate, but it's possible mass outsourcing doesn't help grow your share of the pie. And like with manufacturing, you also need to consider how you'll lose technical competency within your domestic market over time if you outsource too much, and this will likely lead to the country you out sourced to eventually out competing you in your own industries. We see this today in China.
If you want to cripple tech innovation in the US, outsource all your software engineers so there's no one in the US with the skills or resources to start the next Google or Facebook.
You're almost certainly correct in the sense that the people of the entire system will be better off, but your own domestic market could suffer at the gain of the other market where the business is now being outsourced to.
A good example of this might be tech in the EU. The EU basically has no major tech companies because we "import" all our tech services the US (Facebook, Google, Amazon, etc). It's great for us in the sense that we didn't have to pay anyone to build amazing online services like Facebook, Google, etc – it's just free stuff we get here from the US. But who benefits the most from this arrangement, is the US or the EU? I'd argue that the EU allowing the US to provide all of our major tech services has been great for US growth, but it's stagnated the EU economy in recent years as we've had no real reason to build 21st century companies here. The free stuff we get from the US actually comes at a cost for us even if overall the economy as a whole (EU + US) is better off for it.
Similarly, imagine an extreme scenario where US companies outsource all work to low-cost labour countries (I know this is impossible, but assume the US is 100% service sector jobs which could be outsourced). Would this hypothetical scenario be good for the US economy? It might be good for companies registered in the US because now they can provide their services to markets they serve for a fraction of the cost, and it would be great for those low-cost labour countries getting all this foreign work, but it would be awful for the actual US economy that's allowing this to happen in the pursuit of efficient markets.
So yeah, you might be growing the whole pie at a faster rate, but it's possible mass outsourcing doesn't help grow your share of the pie. And like with manufacturing, you also need to consider how you'll lose technical competency within your domestic market over time if you outsource too much, and this will likely lead to the country you out sourced to eventually out competing you in your own industries. We see this today in China.
If you want to cripple tech innovation in the US, outsource all your software engineers so there's no one in the US with the skills or resources to start the next Google or Facebook.