Is offshore outsourcing one of the reasons for the financial crisis?Is offshore outsourcing one of the reasons for the financial crisis?

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catd1115 eNotes educator| Certified Educator

I don't think that outsourcing was a direct cause of the current financial crisis. As mentioned above the direct causes had to do with subprime mortgage lending and poor banking practices by the wealthiest individuals and companies.

However I think if we look at where the crisis is now, unemployment has become possibly the worst of issues. Our recovery from the crisis is dependent upon job creation and a much higher employment rate. With so many unemployed and underemployed in our country right now we have to look at outsourcing as problem, and a possible reason for our inability to rebound from this recession. In fact the worse the financial state of the United States, the more likely that companies will cut costs and try to stay solvent any way they can, including outsourcing. The recession may cause outsourcing to be even more common, and only continue to negative affect the employment rate.


Ashley Kannan eNotes educator| Certified Educator

I think that there are many related factors to the economic crisis of the last four or five years.  Yet, outsourcing might be a part of this complex equation of variables.  I do believe that there are more immediate causes.  The subprime mortgage lending issues, as well as the burst of the housing bubble might have held more direct impact on the recession state of America more than the outsourcing of jobs.  Outsourcing had been happening for some time before the recession.  Certainly, the dependence that many companies have held for outsourcing might be a part of this dynamic.  Yet, I think that the massive crush of plummeting house prices and the fact that so much of the real estate market was overvalued played a much more dominant role in dictating economic affairs of the latter half of this past decade.

kapokkid eNotes educator| Certified Educator

I too tend to think that offshoring actually had very little to do with it.  I think the combination of what akannan listed along with the way that it became easier and easier for the wealthiest and most powerful of Americans and many others around the world to profit from moving around the money and mortgages of everyone else was what caused it.  Of course, if I were one of them I don't know if I would have laid off for any moral reason, but the combination of deregulation and the willingness of the populace to accept a privatised profit and socialized risk system had a lot more to do with it than offshoring.

brettd eNotes educator| Certified Educator

Outsourcing has been around since the 1990s at least, and really for much longer.  In the 1990s, the American job market was shifting, sure, but also booming, so I don't know that you can blame outsourcing alone for the financial crisis.  Much more directly related was the repeal of the Glass-Steagall banking regulations that separated investment banks from savings banks, and that allowed the reckless lending and, essentially, gambling that large banks were able to undertake. This led, as it did before the 1930s, to speculative bubbles in the stock market and real estate that were fundamentally unwise.

litteacher8 eNotes educator| Certified Educator

Mishandling of resources is what led to the financial crisis.  We have always had certain industries, and now as we develop other countries will have those industries.  We need new industries to replace them.  The problem is that we are not able to identify these new industries, train people to work in them and manage them responsibly.  Ideally, people who lost jobs to industries that moved overseas would be trained in new jobs for new industries.  However that is easier said than done, and we do not have the infrastructure to do it.

accessteacher eNotes educator| Certified Educator

I agree with the comments of other editors. Obviously the current financial situation we are experiencing is a result of many different factors, each that have contributed towards the collapse to a greater or lesser extent. However, I don't believe that if we could somehow have removed all the other factors that outsourcing would have had a big impact. What we are all experiencing now has much more to do with the irresponsible lending of money and the abuse of the system of the rich.

pohnpei397 eNotes educator| Certified Educator

I would argue that offshoring had nothing to do with the crisis, or at least not much.  The crisis happened because of people taking out bad loans to buy houses with inflated prices and because the financial industry used those loans to build these pyramids of debt (through "credit default swaps" and derivatives and things like that).

None of this stuff was caused by offshoring.  Offshoring has caused problems, but the financial crisis was not one of the.

justaguide eNotes educator| Certified Educator

Outsourcing has in no way contributed to the financial crisis that the US and the World as a whole is going through.

It was negligence on the part of financial institutions who took unnecessary risks. Also, the government in what seems to be an unwanted zeal to lend money to anyone who came asking for it without considering their ability to repay or the fact that huge bubbles were being created was what lead to the financial crisis.