Why Americans should embrace global competition
Coming of age in the business world, one thing that has always confused me is the apprehension that some of us, as Americans, feel towards globalization.
Whether it’s through tariffs, “Buy American” bumper stickers, or negative reactions towards offshore outsourcing, manifestations of our fearful protectionism are everywhere. We shy away from global competition all too often.
Growing up in a blue-collar area, everywhere I went I seemed to encounter this notion that global trade harms Americans and we’re better off doing business within our borders. I didn’t understand. I wondered how buying a Ford, instead of its less expensive and more durable Honda counterpart, makes you a good American. Sure, your consumption allows American producers to make a nice profit, but why should it be necessary? Why aren’t our prices competitive?
As I learned more about the economy – in those days, this happened during random living room talks with my father – I understood that buying overpriced American goods is in fact not good for our citizens; it harms them.
When American companies sell goods at disproportionately high prices – which is what buyers of those goods allow them to do – they become content with the status quo. We eliminate their need to be competitive. We let them think that even though a worker’s labor might be worth 15 dollars an hour, they can demand 20, drive prices up to cover it and we’ll still buy from them despite the existence of cheap foreign alternatives.
Perhaps worst of all, is that this phenomenon self-perpetuates. As companies become accustomed to preferential treatment and continue to demand even greater entitlements, the price disparity between them and foreign rivals becomes larger, increasing their lack of competitiveness and ability to sell goods without favoritism.
The sad truth is that eventually consumer’s pocket books win out over their patriotism. They do what was previously unthinkable: Buy Chinese (or Korean, Dominican, Sri Lankan, or whoever else wants to sell for a good price). Meanwhile, American companies, now unable to pay the exorbitant wages demanded by their workers, go bankrupt.
So what alternative does this leave us? The workers have needs too. They may have demanded higher wages because their families need it.
The answer is to embrace competition, not stymie it. On face value, it may seem overly simplistic: pay people what they’re worth, buy the cheapest goods available. To some it may seem that the workers will starve. However, history shows that they won’t.
Creating a system where income reflects the true value of labor given creates a powerful incentive for workers to increase their performance. Whether they do so by simply more efficient and harder work, or through innovation and education is up to them, but history shows that they will find a way. Furthermore, when they do we’ll all benefit.
Take the rust belt cities of Cleveland and Buffalo. Once among the hardest hit cities by the recession in the whole U.S., they’re now experiencing an economic boom. What happened? As factory workers have confronted the reality that companies can’t afford to pay inflated wages anymore and that wages based on real-value won’t pay the bills, they’ve gone back to school and many now fill higher paying technical jobs.
However the benefit is not limited to the citizens of Cleveland and Buffalo. Many of the factory jobs previously occupied by rust belt workers have been outsourced to foreigners, who receive them enthusiastically knowing that American companies often provide better salaries and benefits than those in their native country can.
While older workers may still oppose the competition that would in fact stimulate them toward economic well-being, we can do better. Ours should be the generation that jumps head on into a competitive global economy. After all, it will both happen and help you, whether you want it to or not.