Nothing did prevent that. And they were already outsourcing it since long before. That's not an argument for subjecting people to 4 hour commutes.

In addition, things are not as people mistakenly think - the person in low-cost living country wont work in startup-grade work load for dimes forever. And that's not true only for the low-grade talent that will do sloppy job either - this is true especially for the more capable ones. They have a career trajectory - taking India as an example - they are expected to become a manager or start their own company at one point in their career. And that's generally early to mid 30s when they just became senior engineers. He wont be laboring his life away for a random US startup outsourcing to him.

And that's the reason why talent hired from such countries ends up being low-grade in general: The talented and experienced ones will go out of the market and wont be working as the 'code monkeys' which some startups want to employ them as.

Surely, the wages will fall. But even when hiring a talented junior freelancer from Asia, you end up somewhere around $30/hour. Its much higher than what people expect. This, combined with not having to pay for the privilege of paying $3000/month to share a flat with ~2-3 people in places like SF, should make up greatly for the potential fall in pay.

And seniors - senior talent would be more expensive than that, and they would be scarce. A senior talent in India at around ages ~30something would have decent career positions with guaranteed paths available to him/her in major Indian companies. He wont be working for some American startup for dimes like a code monkey.