It started with someone praising Donald Trump for saying that the first thing he would do is put a tariff on Chinese goods if he was to be elected President. And I replied…
NO, A THOUSAND TIMES NO. The problem with the items from China is not that the jobs are going there. They have a per-capita income that is 1/10 of what ours is. They have the economic advantage and should make the stuff. The problem IS…, when the stuff comes back, that it still cost what it did when it was made here. If it was sold at a price that reflected the actual cost of production, it would cost about 1/10 of what it used to cost. Our standard of living does NOT have to drop. The prices of those goods must drop. The Chinese are not the demons here, it is the CEOs who are selling you $3.00 Nike running shoes for $150. It is GE selling you a Profile gas range that was made in Mexico, for a hundred dollars max, for $1,000. THAT is what has to stop. A tariff will ONLY make everything more expensive. Trump is trying to keep you focused on China.
He was still missing the point when he replied…
“What Trump was saying tariffs would be the first thing he would do not the only thing. China has an unfair advantage when it comes to competing with them. The people we voted in make our trade laws & the CEO’s hire smarter people to work around the trade laws. Maybe these are the type of people we need running our country & economy!!!! Your [sic] right about the products from China & Mexico but U don’t have to by them, I try not but sometimes we don’t have a choice.”
So I tried again…
Sheesh. First, tariffs are just wrong. Why would anyone want to take an overpriced item and add a tax on it. It would be wrong, whether Trump did it first or last. As for “unfair advantage?” No, it is called an economic advantage because their average income is less than ours. It is normal. As I said, that is OK. It is also not in the trade laws, how goods get priced. It is in the corporate policy area, how a business sets the prices of the goods it sells. It is the CEOs that are selling goods they buy in China for pennies to us for many, many dollars. And who the crap are you to tell me I do not have to buy them. First of all, that is all there is. Second, it is just plain not right to price items 1,000% over cost. That is what is making the ever-increasing gap in our wealth and is directly responsible for the lowering of our overall standard of living.
As was predictable, I missed again
“Add a 25% tax on that $150 Nike & maybe more people would buy New Balance made in the USA. That’s only one example!!! So if U were selling your home for $200,000 & your home got into a bidding war & the bid was $400,000 U wouldn’t sell. U said it wouldn’t be right!!!!! Please forgive me but you would sign. The trade laws encourage out-sourcing, I never said it set the price of any product. You also seem a little touchy about me saying you don’t have to buy products from China, Remember you live in America you have a choice.”
At this point I felt bad for hijacking my friend’s Facebook page for a lesson in economics. I decided to put my reply here because this guy is voicing concerns that others have and they need to be answered….
Let’s change the discussion slightly, so we can better understand economic advantage. Let’s talk about two neighboring countries. Country A has great arable land but not much mineral wealth. It has some, but not nearly as much as its neighbor, Country B. Country B also has a few more people because their cities are bigger and their factories provide more jobs, so people drift there. Those people could try to grow things in gardens, but their soil is not that good.
So, as it turns out, Country A grows the vegetables because they are better suited for it. They have the economic advantage. They could build factories, but they get better usage from their land if they plant it. Country B tried growing things, but it was just too hard and there were better uses for their land. The vegetables that Country B used to grow were very expensive because of all the fertilizers and soil conditioners that were needed, not to mention the high cost of land that was cultivated. The people who were in charge of farming in Country B decided to close the farms and go to Country A and farm. They discovered that they could grow food in A and bring it home and sell it at the same cost as when they grew it in B. The only losers were the people in B who lost their jobs when Country B’s farms disappeared. They were not fit to work in the cities and they could not afford the food that was imported from A. Those poorer workers began to drag Country B down. The economy of B found fewer people spending and became more and more depressed.
Some of the folks in A who had tried manufacturing gave up because they had to import all the resourced to make anything and they had to offer really high wages to try to get kids off the farm to come and work in the factories. They could not compete with the low prices of the things that were made in Country B. So those entrepreneurs in A closed their factories and went over to B to get things made. However, when they brought the goods back, the only tacked on a 30% profit and passed on the cost savings to the consumers. Even though there were a number of people who had been laid off when the factories closed, their standard of living stayed up and even improved a bit because everything got cheaper. Those folks had the luxury of time to retrain and find farming jobs or go back to school to develop Green Energy projects. Because peoples money went further, their economy grew at a faster pace and EVERYONE gained.
THIS is why we need to restructure how corporations price the goods they bring in from those jobs that were outsourced. We need to do it now.