Economics Lesson: Made in China is Not Necessarily a Bad Thing

edit: Okay, so apparently this isn’t 100% accurate, but I’m leaving it up anyway. I read “Economics in One Lesson” about 9-10 months ago, which is mostly what this post was based on, and currency exchange doesn’t exactly work like this, since according to multiple friends, Hazlitt was writing theoretically and something has happened regarding currency exchange since the book was published.

First off, don’t get me wrong – there are legitimate reasons to buy products made in America. The quality is typically higher, or perhaps you’d prefer some particular American product that just doesn’t have a similar enough foreign equivalent.

However, the argument that it’s better for our economy to buy American products over “Made in China” is fundamentally flawed (I’m picking on China in this post, but realistically, I mean made anywhere that isn’t America). We have to keep in mind the way that money works. When we buy things from China, we are giving them US dollars that are completely worthless in China. The only thing they can do with those dollars is to buy things back from us (or from some other country that will eventually buy something back from us with the dollars), because, simplistically, that’s how currency exchange works. Sure, when $100 of your money goes to a Chinese factory for the manufacture of the iPhone you just bought, you’re not directly creating an American job, but then that $100 in China has to eventually be used to purchase an American product, which does create an American job.

Furthermore, though quality may sometimes suffer, that isn’t always a concern. If I have $50 to buy a shirt, and my options are a $50 Made in America shirt or a $20 Made in China shirt, the American shirt may last twice as long, but at that price, you could buy two of the Chinese shirt and still have money left over to spend on something else. Eventually, the $20 or $40 you spent on the Chinese shirt will be used to purchase American products or services, and then you can use the remaining money to buy something else.

Now, here’s the important part. If you buy the $50 American shirt, that’s it, you’re done. But if you buy one or two of the cheap, Chinese shirt, you have money leftover to purchase something else, and you still have the item you originally wanted. That means you can create demand (and thus jobs) for another product that you wouldn’t have otherwise been able to buy. Even if that extra demand is for a Chinese product, the dollars will still have to come back to America to purchase something, and when they do, that creates jobs here.

2 thoughts on “Economics Lesson: Made in China is Not Necessarily a Bad Thing

  1. Phil, you are wrong :)

    The chinese can spend their $100 in China (and they do) – it does not have to be used to buy an American product. Haven’t you ever heard of currency exchange?

    If your thesis were true, there wouldn’t be a trade imbalance (aka we buy way more from other countries than they buy from us).

    Now, that doesn’t mean that buying things from China is wrong, but your argument is.

  2. They may not immediately spend it on an American product, but it’s an American dollar that is inherently
    worthless in China. If the Chinese didn’t eventually spend the American dollars for American products/services, then the dollar would have no value to them.

Leave a Reply

Your email address will not be published. Required fields are marked *