Monday, May 4, 2009

Flat, But Clearly Tilted Offshore: Slowing and Reversing The Rush to Export US Jobs

Different societies, nations, regions have very different economies. Duh. That's pretty obvious right? Given modern communications, many people would like to change or shape their economies to support a Western Industrialized way of life. The only way I am aware that this can be accomplished on a large scale, and not just for a city state with a relatively small population, is to industrialize. That generally means to manufacture items to sell to that culture's, or economic unit's own people. And, the possibility to export quickly surfaces. If the economic unit's population is "large," exports are not absolutely necessary, but they definitely speed up the transition process to a Western Industrialized model economy. We can discuss this at length, but let's, for the moment, assume its validity.

Problems and frictions arise when the different economies attempt to export the same manufactured goods to each other. The resulting competition can be good if the competition is only between different designs, quality, and intellectual properties. This serves to increase the overall quality of goods and services. However, as is frequently the case, the cost of production in different countries differs due to historical processes, and on the ground facts. That provides an unhealthy and unfair competition that does not take these accidental and temporary realities into account. Accidental, because they are accidents of history. Temporary, because as the industrialization continues, costs to manufacture, including labor costs, change. It makes no sense for the United States, to allow an existing manufacturer in the US, with strong and stable local ties to a community of loyal workers, to be driven out of business because of an accidental and temporary advantage held by a manufacturer in another industrializing society. It makes no sense to encourage the US manufacturer to move his production "offshore." It makes super duper no sense at all to grant him a reduction in taxes to do so. If you are a supply sider, such as Jack Kemp, you know that lowering taxes is a compelling way to encourage behaviors, just as is raising taxes. It pays to change taxes carefully and wisely with specific local consequences in mind.

I will be adding to this blog entry today and over the course of next few days.

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