America has always considered itself somewhat isolated from the rest of the world. Two vast oceans and weak, friendly neighbors to the north and south protect our borders. Isolation has provided the opportunity for us to grow in strength while relying primarily on ourselves. A strong sense of independence and nationalism permeates our culture.
“Buy American” has been our motto. Support our businesses and workers. Buying things made in America protects our independence and strengthens our economy. Let Europe and Asia fend for themselves. America first.
What happened to all that fervor to support American manufacturers? Nowadays, Japanese companies make our cars and electronic gear, our clothes are made in China and our memos are typed in India. And everyday America has fewer and fewer manufacturing jobs and becomes more and more dependent on other countries to supply our needs.
Globalization has neutralized our commitment to support American manufacturers. We just can’t have it both ways — “buy American” and the convenience and economy of shopping at Wal-Mart where most merchandise is imported. We even deceive ourselves when we buy a good old Ford Crown Victoria automobile thinking we’re supporting the American auto industry — they’re made in Canada. Even the Buick Rendezvous and the Chrysler PT Cruiser are made in Mexico.
Will things ever go back to the way they were? No. Consumers, like me and you, choose imported over domestic products every day because the quality is good and the price is less and those two factors equal value. If there is a culprit in all this, it is us. We, the American consumer, are driving away our American manufacturing jobs.
However, buying with view to the best value is nothing new or anything to be ashamed of. In his book “An Inquiry into the Nature and Causes of the Wealth of Nations,” Adam Smith wrote in 1776 that, “It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.”
NAFTA is often blamed for the demise of American manufacturing jobs and the blame is justified. NAFTA eliminated the tariffs that artificially drove the price of imported goods up. Consumers swarmed to the money saving opportunities created by the passage of NAFTA where they could have just as easily demanded American-made products and paid the premium price to have them. Few of us did.
Is there no future for American manufacturing? Yes there is. There will always be a significant role for American manufacturing. However, we’re going to have to change our way of doing things. We’ve got to learn how to participate in the global economy and use cheaper foreign labor to our advantage. In short, we have to offer products, processes and services that can’t be obtained cost effectively elsewhere. Our technology is our strength.
Product bulk and weight are factors in our favor. For example, Nissan could manufacture automobiles in Vietnam rather than Canton, Mississippi but the transportation cost of hauling raw materials over there and bringing the finished product back here for sale would wipe out the labor cost savings. Here in the South, the weakness of organized labor has allowed automotive manufacturing plants to locate here and operate at much lower cost than locating up North and having to deal with the UAW.
Here’s an opportunity for improving Mississippi’s economy. The further you get away from just supplying raw materials and the closer you move toward making the finished product, the higher the wages and profits. We’re leaving a lot of money on the table every year when we ship our timber and chickens to other states for conversion to finished product. Developing industries in Mississippi to convert our raw materials into finished products before it leaves the state would provide a big economic boost for us.
In a hundred years, the economies of the world will likely have equalized and eliminated pockets of cheap labor. Products will be made where it makes the most sense based on technology, proximity to market and location of raw materials.
It is unlikely that anyone alive today will see global economic equalization come to pass, but ultimately it will happen. In the meantime, we are wasting our time arguing about the rightness of globalization. It’s a fact of life and we must roll with the punches if we are to stay in the game. “Buy American” is patriotic and makes for great political rhetoric. However, as an economic reality, it is dead, dead, dead.
Thought for the Moment — We have met the enemy, and he is us. — cartoonist Walt Kelly (1913-1973)
Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. Contact him at email@example.com.