GroundSwell, March 2012]
How do we stop American companies from sending our jobs to China?
Theyve been laying off workers, closing down factories, and
sending jobs to other countries at an increasing rate for the last 50
years. And right now we need all the jobs we can get. How do we stop
American companies from hiring people in other countries to make the
products that are consumed in the United States that is,
without having Americans work for the same subsistence slave wages
that other people are working for in impoverished countries all over
Weve tried tariffs and quotas, and weve tried trade
agreements, which simply say: if you let your people buy from us we
will let our people buy from you. None of these have solved the
problem of unemployment. We could try whats been called Fair
Trade, where we only let into our country, products equal in
value to the products that were bought from us by people in other
countries. It seems like reasonable approach, until we are reminded
that unemployment is high even in some of the countries where the
value of exports far exceeds that of imports.
There are several activities that account for the imbalance of
international trade. Money is sent to people in other countries as a
gift, like the Mexican workers who send hundreds of millions of
dollars home to their families. Those dollars eventually come back to
the U.S. and purchase American goods, which add to the value of our
exports. Inheritance and Foreign aid given to other governments has
the same effect. Dollars spent by tourists and soldiers for hotel
rooms, dinners, entertainment, and souvenirs in other countries
eventually come back to the U.S. and buys products, which further adds
to our exports.
The primary activity that increases imports over exports is foreign
investment. In the past, Japanese auto makers sold cars in the United
States and spent some of the money building auto factories here in the
U.S. No products were exported in exchange for the money spent in the
United States, but the trades were complete. Foreigners invest in the
United States so in the future they can take American products out of
the country without giving an equal value of products in exchange.
In recent years the Chinese government has taken money from the sale
of Chinese products in the United States and invested it in U.S.
government bonds. Only when the bonds are cashed in and American
products are purchased and exported is it counted as an export in the
balance of trade. Every dollar of our national debt that is bought
with foreign products each year adds an equal amount to the annual
trade deficit. Some of the money that was paid for imported goods is
put in U.S. banks. It can be used to buy things all over the world,
but only if it buys an American product and that product leaves the
United States does it count as an export in the balance of trade.
In addition to foreign investment into the United States each year
there are income streams from previous American investments in other
countries. Lets say in past years I bought stock in a Chinese
cell phone manufacturer. They sell phones in the U.S. and put some of
the money in a U.S. bank. At the end of the year they pay me a
dividend out of the profits that are sitting in the bank. The money
paid to me offsets the value of products leaving the country and
reduces our exports by the same amount. Even though I got the money
that represented cell phones without giving anything of equal value in
exchange (because of my previous investment) when I spend the money in
a NY restaurant I am, in effect, exchanging cell phones for dinners.
The product of Chinese labor is exchanged for that of American labor.
An exchange of value for value is always the case when you buy or sell
even if some of the products remain in the country, and therefore, are
not counted in the balance of international trade.
When foreigners sell products and invest the money within the United
States, as long as the money is spent on buildings, machinery,
inventories, or promoting sales, it results in a demand for products
or services, which are produced by American labor. When foreigners buy
government bonds and the money is spent on the military,
infrastructure, healthcare, or food and housing for the poor there is
no less a demand for labor than if they had bought American products
instead. That is not to say that government borrowing should be
allowed in a democratic society, but it has not diminished the demand
for labor and added to unemployment.
Some foreign investments are win win relationships like the Japanese
auto plants, which increases productivity by more than the value of
the cars they take out of the country. Other foreign investments are
primarily exploitive: by owning the land, the natural opportunity,
foreigners are able to take products out of the country without giving
anything in exchange. However, even in the case of foreign landlords
who exploit our labor, there are not necessarily any fewer jobs.
What causes unemployment is idle land. When companies close a factory
and refuse to sell the land to the highest bidder it adds to the
number of people who are unemployed. Non use and under use of land is
the cause of unemployment. To create jobs we need only shift all taxes
to the rental value of land. If we eliminate all taxes on income and
sales it will make it more profitable to hire people and produce goods
and services. If we levy a tax on the rental value of land (all
natural resources) it will make it prohibitively expensive to hold it
idle or grossly under used which is the root cause of
For more information, read Protection or Free Trade by Henry George,
or take a course with the Henry George Institute: henrygeorge.org.