Paul Krugman hates on Romney,

For another, it’s simply not true, as the Romney people would have you believe, that domestic outsourcing is entirely innocuous. On the contrary, it’s often a way to replace well-paid employees who receive decent health and retirement benefits with low-wage, low-benefit employees at subcontracting firms. That is, it’s still about redistribution from middle-class Americans to a small minority at the top.

Krugman is trying to explain a very real issue, but by looking at the wrong factor.

It is true that “domestic outsourcing” is a means of cutting costs, which superficially rightly suggests an increase in business profits (or net income). What occurs is just what Krugman writes: higher cost employees are substituted with lower wage employees. If you look at it the way Krugman is, then the consequences are clear: business owners are retaining more income, and their workers are making less. (As an aside, something Krugman does not mention is that this raises the incomes of those who make the least, which is a good thing.)

But, if there is an inequality problem, I don’t think this is the cause (or even one of the causes). Businesses should not be chastised for trying to compete on the market and stay alive. If there is a problem then its one of productive stagnation — stagnating growth of the entrepreneurial class. I would garner a guess that the problem is with rent-seeking, and not “heartless” business measures to avoid losses and remain competitive.

With this in mind, one might still be wary of Romney — I would be. Romney is probably a great example of an entrepreneur who has taken advantage of the State’s monopoly on force (rent seeking), and I haven’t read anything that has shown him to be ideologically in favor of freer markets or greater productive competition. For that kind of man, the Republicans already passed up their chance with Ron Paul.