Essay on The Theory of Comparative Advantage

766 Words4 Pages
Buy American. In recent years, and especially since the recession, this has been the mantra of ‘patriots’ across the nation. The recent jobs bill that went through Congress may even have subsidies to encourage it. But what effect would buying products made in the United States really have? Would it create jobs for Americans? Would it save the flailing auto industry? Or would it ultimately hurt our economy? According to the Theory of Comparative Advantage, the latter could be true. Rather than only buying merchandise from the US, we should refocus our workforce towards industries in which we have an advantage and trade for products created abroad. This is the only way that our global economy can flourish in the long run. Why does buying…show more content…
But is it really? Economics tells a very different story. While it is imperative that we create more jobs for Americans, this is only a temporary bandage over the much larger wound in the system. According to the Theory of Comparative Advantage, self-sufficiency is never the most efficient way to survive. The United States must expand its trade with other countries. In fact, this took place in December of last year; exports from the United States grew by 3% from the month before, probably because the weak dollar made American commodities more appealing. However, Americans responded as you might expect: by spending that windfall on even more foreign goods. It is still encouraging that exports have risen at all, though. It is a sign that there is still hope. What about the failing American auto industry? Ultimately, they are in markets in which the United States does not have a comparative advantage. For decades Japan, Germany, and others have been at the forefront of the auto industry, with enormous advances in quality and fuel efficiency. During the same period, Americans developed the Hummer. Additionally, General Motors and Chrysler received billions of dollars from the federal government to try to save the jobs of the people that they employed. That represents a huge investment that the auto manufacturers are unlikely to return in full. This was a monumental waste. We should simply relinquish the auto market to other
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