Offshoring. Outsourcing. National decline. These words often show up together in modern conversation, loaded with assumptions and anxiety. But are we being fair? I’d argue that outsourcing, when done well, is not only defensible—it’s essential to a functioning global economy.

For nearly two centuries, economists have leaned on David Ricardo’s theory of comparative advantage. The idea that nations should produce goods in which they have a relative advantage, rather than trying to produce everything in which they have an absolute advantage. Australia mines. China manufactures. France makes champagne. The global dispersion of labour and capital has underpinned enormous global progress.

And Yet! Outsourcing and offshoring have earned a bad reputation, and not without reason. We’ve seen them done poorly—often exploitatively—and always in the public eye. The image of sweatshops in low-income countries, workers crammed into unsafe factories producing goods for western companies, is well known. These weren’t just examples of manufacturing being relocated. They were cases where abuse was exported and hidden behind long supply chains.

The loss of manufacturing jobs in countries like the United States and Australia has gutted local economies. Whole communities have been forced to rethink their identities as stable and skilled work is outsourced elsewhere.

Importantly, the core problem isn’t outsourcing itself. The problem is how it’s done. The being, purely to extract value, with little concern for the long-term impact on workers or communities, whether domestic or foreign.

When done responsibly, outsourcing can be a powerful force for shared prosperity. Firms can access comparatively cheaper labour and economies of scale. Developing countries gain access to global markets, technology, and capital. But this only works if firms invest in the places they operate. That means treating outsourcing partners as just that - partners. It means helping build skills, infrastructure, and strengthening institutions. This allows them to build both human and physical capital—so that when the firm leaves (or pivots), the community is left better off.

There’s a growing body of evidence that this approach pays off. Workers who are respected and fairly compensated are more engaged and productive. Local governments become more stable and business-friendly when economic development is inclusive.

In return, the firm gains access to relatively cheap labour, economies of scale, and—most importantly—the freedom to focus on what it does best, where it has a true comparative advantage.