Charge us higher prices, China!


The title of this post is a simple rephrasing of a popular refrain in politics these days: China should stop devaluing their currency to boost their exports.  Politicians do not ask for higher prices, since they would sound like idiots, Americans detest price inflation, and they wish to be reelected someday.  Rather, they pander to domestic manufacturers by suggesting that we have been victimized by China’s weak currency.  It is no secret that the United States is not the center of the manufacturing world any longer.  What little is not made in China is made in another southeast Asian country, Mexico, or elsewhere in Latin America, where the cost of labor is much lower than it is stateside.  This is not a case of victimization.  Rather, it is the law of comparative advantage at work–the U.S. is better off buying mass-produced, cheap stuff from low-wage countries than trying to make everything ourselves.  We ought to be careful what we ask for when we beat up China for keeping their prices low.  We should be thanking them for allowing us to maintain a standard of living beyond what we could enjoy by purchasing similar goods made in America.

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