I've seen a couple of blogs where people were questioning the proposed economic stimulus package, and would it be better for the money to be spent on stuff in the US instead of given to people where they might spend it on foreign stuff. The point I want to make is buying stuff that isn't made in the US isn't necessarily a bad thing. I'm not gonna say whether or not it's the best way to stimulate this economy, but here's a point that many people don't take into consideration.
The best example came out of one of the books I was reading, I think it was Armchair Economics or Naked Economics. It talked about why trade is good, no matter who gets more or less of something. His example is he has a really bad trade deficit with his auto mechanic. He's given him thousands of dollars for servicing his car, but his mechanic has never bought any of his books. So he decides that he's not going to allow trade with his mechanic anymore and service his car himself. If he were to do that, it'd take forever and he wouldn't be as good at it as his mechanic. Not only that, he wouldn't have time to write his books, and therefore wouldn't make any money. The mechanic then also doesn't make any money. So this is a lose lose situation.
Let's say you take your $600 tax rebate and buy something made in China. The product is probably made in China because it's cheaper to be made there vs. a product made in the US (or it wouldn't be made there). Kinda like going to the mechanic instead of fixing your own car. So the Chinese company makes a bigger profit on it than a US company would (let's say $300 profit vs $200 profit). The owner of the Chinese company now has an extra $100 in his pocket vs. what the US company would have.
So what does the Chinese company owner do with the extra $100? Well, the dollar is pretty weak right now. What's to say he doesn't buy his son Yao and Yi jerseys for Chinese New Year? Now the Rockets and the Bucks benefit by this $100, which then goes to their owners or employees. Herb Kohl (the Bucks owner) then decides to toast his extra profit with a Miller beer... and my dad benefits from that with higher profit sharing, which increases my inheritance. None of that would've happened if people were forced to buy American products.
Basically the point is the economies are all connected... the money should go to the company that provides the most value for you, that way it'll propagate and everyone will be better off. Now is this the best way to stimulate a lagging economy? Who knows, I'm not an economist. But just because money is spent on foreign products doesn't mean it doesn't come back and help us all as a whole.
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7 comments:
I believe in a global market myself, and that certain countries are more efficient producing some items/services than others, and then trading for the rest (ideally in a free market setting too).
It does however affect the environment and that should not be ignored. These transportation costs as of yet, do not generally consider implications to the environment. Many economists justify leaving that out, as an externality, but I bet it will get renewed interest to include in costs...especially once regulations/pressures internatize it by forcing people to become responsible for it!
Yeah, that's a concern... ideally you make people who cause it pay for it. The book also mentioned another argument that a poor country cannot afford clean air... bad air and food on the table is better than clean air and no food on the table. Not a great situation, but something to think about.
you're comment about poor countries not affording clean air reminded me that there's a logical argument supporting the US decision not to enter the Kyoto protocol agreement...briefly because it would cost us soo much more to make the changes that these other countries could adopt so much cheaper, that perhaps we do need to find a different way, or more gradual system to go about it (but i still think we need to address the issue...not adopting kyoto wasn't an excuse to do nothing!) I'm really interested in carbon credits and turning pollution into a market.
Development and world food needs are really intresting areas of economics....and it crosses into other areas, such as environmental issues (bushmeat, pollution, water rights, etc), women/human rights, microfinance, international aid, agricultural practices (how our subsidies affect the developing countries) etc.
p.s. go giants.
I've got a better idea. How about we convince China to give each U.S. resident $600 so that we buy more Chinese products? =)
hahaha. I love that you tied international economies directly to your inheritance. That's great!
My issue with the economic stimulus package is their reference to "tax rebate" yet it's really "tax funded". The people who are primarily FUNDING it won't receive a dime, and many people who don't pay taxes (kids? come on!) get a significant chunk.
Maybe you know the answer to my question:
Is this chunk of money going to be taxable? If so, that is pure brilliance on the government's part.
The comment from "anonymous" had me laughing...
ha! Jim, I thought you may have been "anonymous"!
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