Hoover Daily Report

Nothing New about Outsourcing

Wednesday, April 28, 2004

Outsourcing—the subject of intense controversy this election year—is blamed for the loss of jobs in the United States, but outsourcing should be nothing new to Americans. The founding and development of America is the result of English outsourcing in the seventeenth and eighteenth centuries.

James I was crowned king of England in 1603. At that time his fledgling nation of some 4.2 million people was beginning to compete with its more populous, wealthy, and powerful Spanish and French rivals. A century later, England was able to challenge France and Spain for control of the New World. By 1764, England had defeated both France and Spain in North America and controlled the Atlantic Coast inland to the Appalachian Mountains. A century later, England had become the world's dominant commercial and military power. Its rise from precarious island nation to global giant followed its outsourcing of people and production to America.

By 1682, with the founding of Pennsylvania, England controlled twelve colonies along the Atlantic Coast and others in Canada and the Caribbean. The outsourcing of free and indentured migrants who made up the first generation and subsequent waves of settlers, increased from 350 in 1610 to more than a quarter million in 1700, passing two million in 1770. The military contributions of the colonists helped England eliminate the threats from France and Spain in North America.

English outsourcing of several economic activities was productive for both the colonies and the mother country. The Crown forbade the growing of tobacco in England, granting a monopoly to Virginia planters that provided the means of livelihood in the most populous colony as well as substantial customs revenue for the English government. The colonists supplied furs, foodstuffs, and iron to English consumers and manufacturers. In the late seventeenth century, England granted bounties for white pine trees that produced masts and bowsprits for English vessels, freeing England from dependence on unreliable Baltic countries. Payments were also granted for pitch, tar, potash, rice, indigo, and silk, which generated jobs and income in many of the colonies. English capital helped underwrite the expansion of agriculture and other productive colonial activities. English insurance underwrote shipping ventures. Royal Navy protection of American shipping stimulated a large shipbuilding industry in New England, such that a third of all English-owned vessels were eventually built in the colonies.

In turn, colonial America provided a market for a steadily growing, broad range of English manufactured goods, helping to alleviate unemployment in England and contributing to England's overseas earnings. Colonial purchases of English products grew in importance throughout the eighteenth century. Upon the conclusion of the French and Indian War in 1763, England viewed the American colonies more as markets for its goods than as sources of supply for its consumers. Although the two countries ultimately split over the issue of taxation, outsourcing was clearly beneficial for both peoples.