World Trade & Competitive Advantage

QUESTION:

Hi Marty,

I was surprised to see this post. While I can understand from a dollars and cents perspective you may be for global trade and globalism itself, the American worker and American domestic businesses have suffered greatly in the last twenty years since jobs and companies moved to China and then sell us cheap stuff with zero tariffs.

Case and point, wages have stagnated. You don’t feel that because you are wealthy. Any job attached to a computer has fled to China and also India in search of cheap labor – leaving us unemployed. I have been laid off 6 times, and no there was nothing wrong with my performance. I am an overachiever and my performance reviews have always been glowing.

I don’t think it is worth the sacrifice of Americans lives and our economy, the sacrifice of the middle class, the throwing of millions more into poverty so China can have some of our jobs. Let them figure themselves out how to grow their own economy. They will have to discover the rule of law and individual freedoms more if that is to happen because from what I have read the people in China cannot afford to buy the products they make in their own factories their wages are so low. They have to enable their own people to afford to purchase things to drive their own economy vs stealing from us.

I support Trump in the trade war. The war has been going on a long long time Marty, you failed to acknowledge that. China has been taking us to the cleaners for a long long time. Why didn’t you state this fact?
I was surprised by how you did not even mention that in this post.

Perhaps you need more coffee to wake up? ūüėČ

Thanks for the blog
A

ANSWER: I understand what you are saying but at the same time you are looking at only one side on the coin. Keeping products artificially higher means that the consumer is asked to subsidize that extra cost and that lowers their standard of living. If we really care about jobs, address the fact that we are overtaxing labor. Address the healthcare costs, not with something stupid like Obamacare which was a Ponzi scheme to force the youth to buy insurance they did not need or want. You can easily lower healthcare costs by addressing tort reform. Even Bernie’s ideas sound nice, but they will blow up in everyone’s face. He compares the US to systems overseas but neglects to point out that the doctors are public employees and there are no crazy lawsuits. If we want an even playing field, then address the over-taxation of labor and the cost of healthcare.

Even the Post Office hires part-time workers, for if they work less than 40 hours a week, they are not entitled to benefits. If you try to grow lettuce in the desert and it costs $10 per head, do you prevent the people from importing that for 50 cents?

It is called comparative advantage (see David Ricardo). We should import what China can produce more efficiently and we should encourage people to seek education and employment in a field in which we have a competitive advantage. Shipping out computer development overseas works in some areas, but others it results in far more development time, granted at a lower per hour cost. But most of that takes place because there is a shortage of talent in the United States in these areas.

It is important to look at this also from the consumer’s viewpoint – not just union labor.