Is Offshoring an Ethical Business Practice? A Critical Analysis

Introduction

The practice of offshoring jobs has been discussed at length by both critics and proponents. Proponents argue that it is an unavoidable outcome of trade agreements that are both necessary and helpful to the global economy. Critics disagree and find offshoring to be destructive to the economy. As Sir James Goldsmith has pointed out in his argument against the General Agreement on Tariffs and Trade (GATT), offshoring wrecks the domestic infrastructure by removing jobs from American cities, which negatively impacts American families. The North American Free Trade Agreement (NAFTA) serves as another example: nearly one million American jobs were lost within the first five years of that trade deal taking effect (Muhho, 2014).

From the standpoint of Buddhist Ethics, refraining from harming living things is a precept that one should follow. This same idea has been perpetuated by numerous other ethical frameworks, from the Christian to the Utilitarian. For offshoring to be viewed as an ethical business practice, it would have to be something that does not destroy or undermine the lives of families. The evidence shows, unfortunately, that offshoring does harm the domestic infrastructure, and for that reason it should be viewed as an unethical business practice. At the same time, given the fact that corporations in the U.S. are taxed at a higher rate than most of the rest of the world, it is understandable that companies would seek to offset costs by pursuing cheaper labor abroad. Still, two wrongs do not make a right. This paper will discuss this and other issues to show why offshoring is an unethical business practice.

What Does It Mean to Be Ethical?

First, it is important to define ethics. Resnick (2011) defines ethics as a set of "norms for conduct that distinguish between acceptable and unacceptable behavior." While this definition helps provide an understanding of what it means to be ethical, it is not quite sufficient. The terms acceptable and unacceptable are susceptible to relativistic interpretations. For example, what may be acceptable to some now may not be acceptable tomorrow, or what some find acceptable may not be acceptable to others. Moreover, what is determined to be acceptable by all could very well be based on false information, and were the truth to be exposed, the majority might disapprove.

A more precise definition of ethics can be obtained from classical philosophy. Aristotle, in The Nicomachean Ethics, asserts that ethics is the habit of right action (Cahn & Markie, 2011). Whether action is acceptable or unacceptable is beside the point; the nature of the action is what qualifies behavior as ethical or unethical. The nature of action is judged, according to Aristotle, by whether it is in line with its natural aim or purpose. To gauge the ethics of offshoring, therefore, it is essential to understand the purpose of business and the context in which offshoring is conducted. Doing this will help answer the question of whether offshoring is an ethical business practice.

The Situation in Context

Why do corporations offshore jobs? The primary reason is that they find more affordable tax rates in other parts of the world. Pomerleau (2016) notes that corporate tax rates in the U.S. are higher than in almost all other countries, with the exception of Puerto Rico and the United Arab Emirates. This alone offers companies an incentive to find a separate labor base. It is not, however, the only factor. In the U.S., the tax rate on foreign-source income is much lower, which means that the U.S. tax code virtually enables and supports the offshoring of jobs by corporations (Hersh & Gurwitz, 2014). The phenomenon, moreover, is not limited to the U.S. Sir James Goldsmith, a large business owner and advocate of the working class, has stated that "in France the economy has grown by 80%" as a result of trade deals like GATT (Quijones, 2012).

What Goldsmith goes on to say is that this figure of growth is misleading because it does not represent growth for all citizens of France but rather for only a small segment who benefit from it. The key metric, he asserts, is employment, because it shows how many people are actually working and earning money to support families, which in turn support the domestic infrastructure of nations. In France, Goldsmith states, "the number of unemployed has gone from 420,000 to 5.1 million," which is a catastrophic expansion, prompting him to ask, "What is the good of having an economy that grows by 80% if your unemployed — the people excluded from active economic life — goes from 420,000 to 5.1 million?" (Quijones, 2012).

Publius (2015) notes that "the economy is there to serve the fundamental needs of society, which are prosperity, stability and contentment… If you have a situation whereby the economy grows but you create poverty and unemployment and you destabilise society, you're in trouble." A modern economy that supports the top 1% while denying the bottom 99% the basic means of earning an income and supporting a community is an economy that is not living up to its name. It is an economy of greed and disaster waiting to strike. Businesses that do not support the common good of society show no social responsibility, and as Goldsmith argues, businesses have a duty to be socially responsible. The well-being of the communities for which they produce goods and services depends upon sound corporate social responsibility policies.

Conclusion

The problem of offshoring is not likely to go away anytime soon. It is an unethical business practice that undermines communities and destabilizes the backbone of nations — working-class families who depend on jobs for income. Those who benefit from offshoring are celebrated by the promoters of trade deals like NAFTA and GATT, because these deals enrich the same top 1%. The 99%, however, are left out in the cold. They already contributed their labor to help grow the businesses that now seek to expand profits overseas, looking to foreign markets to sell their products and services, knowing full well that the domestic consumer has been tapped out.

The ethical dimension underlying this phenomenon exposes a troubling underbelly of Western business: it has become inherently selfish and has lost its moral and ethical sense of the common good. Business, properly understood, is a social enterprise. It must observe the social, ethical, and moral laws that govern life. To do anything less is to invite disaster — for communities, for nations, and ultimately for business itself.