Race to the bottom?

Industrial naysayers - friends and other idiots you know - sometimes we believe you - I - our domestic family - if you leave countries you can buy cheap electronics. Sell ​​us cheaply. But because these countries have low wages , they make these things cheap, and if we let these countries sell everything to us, they will eventually lose everything . : We all, say, will be in a "down" race where everyone will lose.

I encourage these restless idiots to let go of their fears because this is not going to happen. And not because of capital.

What does she mean?

Don Bodrew (in the American context) explains it as part of an ongoing correspondence with the suspects.

Z. V__:

Instead of explaining why high-paid American workers have nothing to do with low-wage countries in the US free trade policy, he writes, "But under free trade, companies are shifting their investments to low-wage countries." American workers are becoming more productive and earning lower wages. "So the combination of free trade and capital movement is bad for workers in rich countries."

Not right.

Or are you right in saying that with the significant increase in private sector investment in the United States, capital goods and services, the productivity of American workers in the United States has increased significantly? For various reasons, American workers mistakenly believe that they suffer in free trade. Here are two of them.

First, investing in capital goods and services alone is not enough to maintain high productivity in the United States. In addition, increasing the productivity of American workers depends on the size and quality of our transportation and communications infrastructure, the integrity and relative efficiency of our legal system, and our business culture, which Deder Makloski calls " citizenship ." Work hard and be confident. Cheap trade does not make America worse on these fronts. In fact, I believe the performance will improve.

Second, the amount of capital in the world is not fixed. As the global investment situation improves or worsens, it will increase or decrease.

There is a reason why low-wage countries have less capital per capita than the United States, and investing in these countries is less attractive than the United States and less likely to invest in those countries. The US is making significant progress in easing trade barriers. But if the investment situation in low-wage countries improves, those countries will have to invest heavily. It does not fall into the United States. Instead, when new capital is created for low-wage countries, global capital reserves increase. Thus, jobs in low-wage countries will be more productive without reducing the productivity of American workers.

Remember this fact! A large part of the high productivity of American workers is directly related to international trade. In addition to providing many American workers with cheap, high-quality raw materials, equipment, and investments, this business provides a wide range of overseas markets for many American companies, enabling them to work more productively. .

But in the end, it will be very complicated. Here is the simple fact. People are not rich when their government restricts cheap goods and services. They are poor. Epok

your sincerely
Donald J. Boudreau:
Professor of Economics
as well as:
Martha and Nelson Gethelcher hold the chairmanship of the free market capitalism center.
George Mason University
Fairfax, Virginia 22030:

Another reading .

• " Investment: American Prosperity " (1952) - Ludwig von Mies

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