If that's the reason why outsourcing doesn't work, why employment does work? I think this is the flaw in the article.
Perhaps outsourcing and employment do work, but it's always better to hand the job to somebody from local culture or to your friend/family. At a higher price, though.
I think you can generalize it like that, although maybe it more depends on type of relationship you want to have; physical proximity is only a proxy for that.
Perhaps building a more robust reputation systems is a true way to get a more efficient economy.
Perhaps outsourcing and employment do work, but it's always better to hand the job to somebody from local culture or to your friend/family. At a higher price, though.