What If Offshoring Never Became Common?

The Actual History

The practice of offshoring—relocating business processes from one country to another to take advantage of lower costs—emerged as a dominant economic force in the latter half of the 20th century and accelerated dramatically in the 1990s and 2000s. While companies had engaged in international production for centuries, the mass movement of manufacturing jobs from developed economies to developing nations represented a fundamental shift in the global economic order.

The preconditions for modern offshoring were established in the post-World War II era. The General Agreement on Tariffs and Trade (GATT), founded in 1947, began dismantling trade barriers that had previously protected domestic industries. The subsequent creation of the World Trade Organization (WTO) in 1995 further institutionalized free trade principles. Meanwhile, technological advancements in telecommunications, containerized shipping, and eventually the internet dramatically reduced the costs of coordinating global production networks.

Manufacturing offshoring gained significant momentum in the 1970s and 1980s. American, European, and Japanese companies began moving labor-intensive production to developing countries, particularly in East Asia. Initially, industries like textiles, footwear, and basic electronics led the way. By the 1980s, Japan had established extensive manufacturing operations across Southeast Asia, while American companies increasingly turned to Mexico following the 1965 establishment of the maquiladora program, which allowed duty-free imports of materials for manufacturing in border regions.

The fall of the Berlin Wall in 1989 and the subsequent opening of formerly Communist countries provided new low-cost manufacturing destinations in Eastern Europe. However, the most transformative development was China's economic liberalization. Following Deng Xiaoping's market reforms beginning in 1978 and China's entry into the WTO in 2001, the country rapidly became "the world's factory." Between 1990 and 2015, the United States lost approximately 5 million manufacturing jobs, many to offshoring.

The 1990s also saw the emergence of service offshoring, facilitated by digital technologies and the internet. Companies began relocating call centers, IT support, software development, and back-office functions to countries like India, the Philippines, and Costa Rica. India's software industry emerged as a global powerhouse, with revenues growing from approximately $150 million in 1990 to over $190 billion by 2020.

By the early 21st century, complex global value chains had become the norm. The iPhone, first released in 2007, exemplified this phenomenon—designed in California but with components sourced from dozens of countries and final assembly in China. These interconnected supply chains delivered unprecedented consumer benefits in developed nations through lower prices and greater product variety.

However, offshoring also generated significant economic and social disruption. Manufacturing communities in countries like the United States, United Kingdom, and France experienced declining employment, stagnant wages, and associated social problems. Economic insecurity contributed to political polarization and the rise of populist movements skeptical of globalization, culminating in events like Brexit and the election of Donald Trump in 2016.

The COVID-19 pandemic in 2020-2022 exposed vulnerabilities in global supply chains, prompting a reconsideration of extensive offshoring. Companies and governments began exploring "reshoring" or "nearshoring" strategies to increase supply chain resilience. By 2025, while offshoring remains a fundamental feature of the global economy, rising wages in developing countries, automation technologies, and growing concerns about supply chain security have begun to modify, though not reverse, the decades-long offshoring trend.

The Point of Divergence

What if offshoring never became common? In this alternate timeline, we explore a scenario where the mass movement of manufacturing and service jobs from developed to developing economies never materialized as a dominant economic pattern, fundamentally altering the path of global economic development.

Several plausible divergences could have created this alternate reality. First, the post-World War II international economic order might have developed differently. If the United States had pursued a different approach during the Bretton Woods Conference of 1944, the resulting system could have prioritized stable domestic employment over free trade ideals. Instead of promoting global economic integration through the GATT and later the WTO, the international system might have preserved greater national autonomy in trade policy, allowing countries to maintain higher tariffs protecting domestic industries.

Alternatively, key technological developments that facilitated offshoring might have been delayed or taken different forms. Without the standardized shipping container, revolutionized by Malcolm McLean in the 1950s, the cost of transoceanic shipping might have remained prohibitively high for many goods. Similarly, different trajectories in telecommunications technologies or digital networks could have made coordinating global supply chains more challenging and expensive.

Political changes in potential manufacturing destinations offer another potential divergence point. If China had not embarked on market reforms under Deng Xiaoping after 1978, or if these reforms had taken a different character that limited foreign investment, the country might never have emerged as the manufacturing powerhouse it became. Similarly, if India had not liberalized its economy in 1991, its transformation into a global services hub might have been forestalled.

Perhaps most plausibly, the divergence could have stemmed from different corporate strategies and governance models. If major Western corporations had remained committed to stakeholder capitalism rather than embracing shareholder primacy in the 1970s and 1980s, short-term cost-cutting through offshoring might have been balanced against commitments to workers and communities. Labor movements might have retained greater influence, successfully resisting the transfer of jobs overseas. Businesses might have focused on automation and productivity improvements within domestic facilities rather than relocating production abroad.

In this alternate timeline, we'll explore a world where a combination of these factors—different international trade regimes, alternative technological developments, varied political choices in key countries, and different corporate governance models—created an economic environment where manufacturing and service provision remained predominantly local affairs.

Immediate Aftermath

Persistent Manufacturing Strength in Developed Economies

Without the mass exodus of manufacturing jobs to low-wage countries beginning in the 1970s and accelerating in the 1990s, industrialized nations would have maintained their manufacturing bases, albeit with significant internal transformations.

The United States' "Rust Belt" would have experienced a different trajectory. Cities like Detroit, Cleveland, and Pittsburgh would have avoided the severe deindustrialization that hollowed out their economies. American manufacturing employment, which peaked at 19.5 million jobs in 1979 before declining to about 12 million by 2015 in our timeline, would have remained more stable, perhaps fluctuating between 18-20 million jobs as automation increased productivity but overall production volumes grew.

However, domestic manufacturing would have faced pressure to modernize. Without the easy option of relocating production to low-wage regions, companies would have invested more heavily in automation and advanced manufacturing techniques. Labor unions would have maintained greater influence, potentially slowing workplace changes but also ensuring that productivity gains translated into higher wages for workers.

Similar patterns would have emerged in Western Europe and Japan. Germany's manufacturing strength, already notable in our timeline, would be less exceptional in a world where other developed nations retained their industrial bases. Japanese automakers like Toyota and Honda, instead of building extensive production networks in Southeast Asia, might have concentrated more production domestically while still expanding into North American and European markets with local factories.

Different Growth Paths for Developing Economies

Without export-oriented manufacturing as their primary development strategy, countries like China, Vietnam, and Mexico would have followed significantly different economic paths.

China's dramatic economic transformation would have been considerably slower and more internally focused. Without becoming the world's predominant manufacturing exporter, Chinese GDP growth might have averaged 4-5% annually rather than the 9-10% it achieved during its peak growth years. The Chinese Communist Party would have faced greater challenges maintaining legitimacy without the impressive economic growth that lifted hundreds of millions out of poverty in our timeline.

Other East Asian economies would have continued the development strategies they pursued before the offshoring boom. Countries like South Korea and Taiwan might have emphasized building domestic industries serving local markets while gradually developing selected export sectors based on unique capabilities rather than low wages. Southeast Asian nations like Thailand and Malaysia might have remained more focused on resource extraction and agriculture rather than becoming manufacturing hubs.

India's emergence as a services powerhouse would have been delayed or diminished. Without widespread offshoring of IT services, software development, and business processes, India's technology sector would have grown more gradually, primarily serving domestic markets. The dramatic growth of cities like Bangalore and Hyderabad as global technology centers would have been more modest.

Trade and Economic Relations

International trade patterns would have developed quite differently. Without the extensive global value chains that characterize our world, trade would have consisted more of finished goods rather than intermediate components. Trade volumes as a percentage of global GDP would have been significantly lower.

The nature of multinational corporations would also differ. Rather than coordinating complex global production networks, multinational firms would operate more as collections of relatively self-contained national subsidiaries. Companies might still have global brands and products, but production would be more localized to serve regional markets.

Regional trade blocs might have gained greater importance in this alternate world. With less economic integration across continents, regional agreements like the European Union, North American free trade zone, and Asian economic partnerships would have become more significant for coordinating economic relations between neighboring countries.

Technological Development

The lack of offshoring would have affected technological development in complex ways. Without the significant cost savings from offshore production, consumer electronics would have remained more expensive. The rapid price declines for personal computers, smartphones, and other devices that characterized the 1990s and 2000s would have been more modest.

This would have potentially slowed the adoption of digital technologies. The smartphone revolution might have been delayed by several years, with devices remaining luxury items for longer rather than becoming nearly universal as they did in our timeline.

However, necessity drives innovation. Higher labor costs in developed nations would have created stronger incentives for automation and productivity-enhancing technologies. Robotics and advanced manufacturing techniques might have developed more rapidly as companies sought alternatives to offshoring for maintaining competitiveness.

Political and Social Consequences

The most immediate political consequence would have been greater stability in industrial regions of developed countries. The economic dislocation that contributed to political polarization and populist movements in our timeline would have been less severe. Communities built around manufacturing might have experienced more gradual, manageable transitions rather than abrupt decline.

In developing nations, particularly China, different political trajectories might have emerged. Without the dramatic economic growth fueled by export manufacturing, the Chinese Communist Party might have faced greater internal pressures for political liberalization or alternatively might have maintained a more closed, controlled society with slower economic development.

Labor movements in developed countries would have retained greater influence. Union membership, which declined dramatically in countries like the United States (from about 35% of workers in the 1950s to less than 11% by 2020), would have remained higher, perhaps stabilizing around 20-25% of the workforce.

Long-term Impact

Economic Structures and Income Distribution

By 2025, this alternate world would feature dramatically different economic structures and patterns of inequality compared to our timeline.

Developed Economies

In the United States and similar developed nations, maintaining a robust manufacturing sector would have preserved a larger middle class. In our timeline, the hollowing out of middle-skill jobs contributed significantly to income polarization. In this alternate world, manufacturing would have continued providing well-paying jobs for workers without college degrees.

Income inequality, which grew dramatically in countries like the United States and United Kingdom from the 1980s onward, would have increased more modestly. The Gini coefficient for the United States, which rose from approximately 0.35 in 1979 to 0.49 by 2020 in our timeline, might have stabilized around 0.40-0.42 in this alternate world.

Regional economic disparities would also be less pronounced. The extreme concentration of economic opportunity in a handful of superstar cities—New York, San Francisco, London—that characterized our timeline would be moderated. Manufacturing centers in the American Midwest, northern England, and similar regions would have maintained greater economic vitality.

However, these economies would also face significant challenges. Without access to low-cost imports, consumers would pay higher prices for many goods. The remarkable abundance of inexpensive consumer products that characterized the globalization era would be less evident. Inflation would likely have been higher, averaging perhaps 3-4% annually rather than the 2-3% targeted by most central banks in our timeline.

Economic growth might have been somewhat slower in developed nations, as companies faced higher costs and consumers had less purchasing power. However, this growth would have been more equitably distributed, potentially creating broader-based prosperity.

Developing Economies

The landscape of global economic development would be starkly different. Without export-oriented manufacturing as a development strategy, the rapid convergence between developed and developing economies that marked the late 20th and early 21st centuries would not have occurred.

China would remain a significant power due to its size and resources, but its economic might would be substantially reduced. Instead of becoming the world's second-largest economy with GDP approaching that of the United States, China's economy might be closer to Japan's in size—substantial but not dominant. Chinese per capita income, which grew from about 2% of U.S. levels in 1980 to nearly 30% by 2020 in our timeline, might have reached only 10-15% of U.S. levels by 2025 in this alternate world.

Other emerging economies would have followed more varied development paths, likely with slower growth overall. Rather than the relatively uniform pattern of export-oriented industrialization followed by many successful developing countries in our timeline, nations would have pursued more diverse strategies based on their particular resources and capabilities.

Poverty reduction would have been less dramatic. The remarkable decline in global extreme poverty—from nearly 2 billion people in 1990 to about 700 million by 2015 in our timeline—would have been more modest, perhaps reaching 1.2-1.3 billion by 2025 in this alternate world.

Technological Innovation and Adoption

The technological landscape by 2025 would differ substantially from our timeline, shaped by different incentives and economic structures.

Without offshoring as a cost-saving strategy, businesses in developed countries would have invested more heavily in automation and productivity-enhancing technologies. Robotics, artificial intelligence, and advanced manufacturing techniques might be more advanced than in our timeline as companies sought to remain competitive despite higher labor costs.

Industrial policy in developed nations would likely have prioritized manufacturing innovation. Government programs similar to Germany's Industrie 4.0 initiative would be more common and better funded, accelerating the development of smart factories and advanced production techniques.

Consumer technology adoption would likely be different. Without the dramatic cost reductions made possible by global supply chains, smartphones, personal computers, and other electronic devices would have remained more expensive and less ubiquitous. The smartphone revolution might still have occurred, but adoption rates would be lower, particularly in developing countries.

Technology transfer to developing nations would have proceeded more slowly and through different channels. Without the direct knowledge transfer that accompanied manufacturing offshoring, developing countries would have needed to build indigenous technological capabilities more gradually, potentially slowing their advancement in key sectors.

Geopolitical Realignment

The geopolitical order in 2025 would reflect the different economic trajectories of key nations.

The United States would likely maintain clearer economic and technological primacy without the rapid rise of China as a peer competitor. However, it might face greater competition from traditional allies like Japan and Western Europe, which would have maintained stronger industrial bases in this alternate timeline.

China's geopolitical influence would be significantly reduced without the economic leverage it gained through manufacturing dominance. Its Belt and Road Initiative, which extended Chinese influence globally through infrastructure investments, would either not exist or would be much more limited in scope.

Regional power balances would be different. In Asia, Japan might remain the dominant economic power, with South Korea, Taiwan, and the ASEAN nations occupying different positions in the regional hierarchy. India's rise would be more gradual, based more on its domestic market size than its emergence as a global services provider.

Military power balances would also differ. Without the massive economic growth that funded China's military modernization, the United States would maintain a clearer military advantage in the Western Pacific. However, with potentially slower overall economic growth, U.S. military spending might be more constrained than in periods of our timeline.

International institutions would likely focus more on coordinating separate national economies rather than managing an integrated global economy. Organizations like the World Trade Organization might be weaker or structured differently, while regional economic blocs could be more significant.

Environmental and Climate Impacts

The environmental consequences of this alternate development path present a complex picture.

On one hand, without the massive industrial development in countries like China, global carbon emissions would likely be lower. The rapid growth in emissions from developing economies that characterized the early 21st century would be moderated. China's carbon emissions, which grew from about 10% of global emissions in 1990 to nearly 30% by 2020 in our timeline, might be closer to 15-18% of a somewhat smaller global total.

However, without the efficiency gains from global supply chains, production might be less resource-efficient overall. Manufacturing in multiple locations for local markets could increase overall resource use compared to centralized production, potentially offsetting some emissions advantages.

Consumer behavior would differ as well. Without access to ever-cheaper consumer goods, populations in developed countries might focus more on durability and quality rather than frequent replacement of products. The "fast fashion" phenomenon might never have emerged, reducing textile waste and associated environmental impacts.

Policies addressing climate change might have evolved differently. With stronger manufacturing sectors and labor movements in developed nations, there might be greater emphasis on "just transition" policies that protect workers while shifting toward greener production methods.

Cultural and Social Dimensions

By 2025, distinct cultural and social patterns would have emerged in this alternate world.

Consumer culture would be noticeably different. Without the abundance of inexpensive imported goods, consumption patterns in developed countries might emphasize quality over quantity, with greater focus on local production and craftsmanship. The "throwaway culture" that characterized much of the early 21st century in our timeline might be less pronounced.

Work identities and community structures in industrial regions would have evolved more gradually. The sudden collapse of manufacturing communities that occurred in places like the American Midwest or northern England in our timeline would have been avoided, allowing for more organic cultural evolution rather than disruption.

In developing countries, particularly in Asia, different cultural patterns would have emerged without the dramatic urbanization and economic transformation that accompanied export-oriented industrialization. Traditional cultural forms and social structures might show greater continuity with the past.

Global cultural exchange would still occur through media, tourism, and digital communications, but the personal connections formed through business relationships might be less extensive. Cultural globalization would proceed, but perhaps with more distinct regional variations rather than the convergence often observed in our timeline.

Expert Opinions

Dr. Rajiv Patel, Professor of International Political Economy at the London School of Economics, offers this perspective: "An economy without offshoring would have preserved manufacturing capabilities in developed nations but at the cost of slower global poverty reduction. The dramatic economic convergence we've witnessed between East Asia and the West would not have occurred. Instead, we might have seen a more gradual, balanced form of development with less acute disruption in industrial communities of advanced economies. The political populism that emerged partly in response to job losses might have been tempered, potentially preserving greater consensus around liberal democratic institutions in Western nations."

Dr. Emily Chen, Director of the Global Supply Chain Research Institute, suggests: "Without the offshoring phenomenon, we would likely see more technologically advanced but smaller-scale manufacturing distributed across developed nations. The efficiency gains from global supply chains would be sacrificed, resulting in higher consumer prices but potentially more innovative production techniques. Companies would have focused intensively on automation and digitalization to remain competitive without access to low-cost labor markets. By 2025, manufacturing might be more advanced in terms of technology but less extensive in terms of output volume and variety. Consumer electronics would be significantly more expensive, likely changing adoption patterns for technologies we now take for granted."

Professor Thomas Weber, Economic Historian at the University of Munich, contends: "We should recognize that offshoring was not inevitable but resulted from specific policy choices and corporate governance models. If stakeholder capitalism had remained dominant over shareholder primacy, if labor movements had retained greater influence, or if trade agreements had been structured differently, we might have seen a world where production remained more localized. The social consequences would have been profound—likely less inequality within developed nations but potentially slower growth globally. China's extraordinary rise might have been replaced by more modest but sustainable growth across a wider range of developing countries, creating a more balanced global economy with less concentrated power."