Over the last year or so I’ve become increasingly interested in the decline in manufacturing in the US. You can see here for a post about it which includes links to my other posts on the topic.
My focus has been on the fallacy of declines in manufacturing. There’s really only been a decline in the need for unskilled labor. But many people, myself included still embrace the Made in America movement when it at least makes sense (see my shoes above). But thankfully some people with the time and resources actually looked into our trade relationship with China to see how damaging it is.
When you buy something for $10 that says it was made in China, how much of that money do you really think goes to China? Less than $5. 55% of “made in China” money spent in the US stays in the US. And of all money spent in the US almost 90% stays here with only 2.7% going to China. And we all know China sends a lot of that 2.7% back in investment and lending in the US. China is no enemy, they are a trade partner. We just happen to use more of their stuff than they use of ours.
So how does so much “made in China” money stay here? I’ve got a $18 watch I bought at Walmart that was made in China under the Casio brand. Casio is a Japanese company, so they got some profit for either licensing their brand or by selling the watch to Walmart for more than they paid to make in China. Then it was shipped to the US likely using oil from the middle east and a tanker from somewhere in the Pacific. They all got their cut of the $18 in some form or another. And then Walmart got the watch and spent money shipping it across the country, stocking it on a shelf and marketing it. Walmart also has a lot of employees to pay. And don’t forget about all the countries that got some cut in the form of taxes. Oh, and Walmart made a profit too. All in all, China probably made and sold this watch for $5-$10 but the entire $18 did not stay in China.
We often forget this, partially because the leaders of our country grew up in a world where countries were enemies. My generation doesn’t look at China, Russia, or even Germany as an enemy. Even if they are. They are trade partners and yes we do compete, but competitors can work together. This is a long-winded way of me blaming old politicians who demonize capitalism for embracing the globalization they themselves enabled.
Am I going to buy everything made in China now? Of course not, I still like my made in the USA products. But I might not look as critically at Chinese products anymore.
Read more: The U.S. Content of “Made in China” from San Francisco Fed via Business Insider
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
