One of the best known examples of outsourcing was the post-World War II New England textile industry’s move to the South in response to lower wages –as always, this raised wages in the South, and the industry eventually moved on to lower-cost sources in Asia. But textiles were replaced in New England by high-tech electronic, information and bio technologies. There were huge net gains to New England, even though it lost what had once been an important industry. In 1965, Warren Buffett gained control of one of those fading textile makers in Massachusetts, called Berkshire Hathaway, and used its large but declining cash flow as a launchpad for reinvesting that cash flow in a host of famously successful new business ventures. Forty years later, his company has a market capitalization of $113 billion. The same transition is occurring today with Kmart and Sears.
Ted Balaker is an award-winning filmmaker, journalist, and founding partner of Korchula Productions, a film and new media production company devoted to making important ideas entertaining.