part of the produce of our own industry employed in a way in which we have some advantage. The general industry of the country, being always in proportion to the capital which employs it, will not thereby be diminished... but only left to find out the way in which it can be employed with the greatest advantage. Other economists have also advanced the idea of comparative advantage by pointing out that some countries have a national ability to provide certain products and services at a better and cheaper rate – something that was, indeed, quantifiable. If you can’t meet your customer demand because you’re dependent on factories halfway around the world, then you’re missing out on major revenue opportunities. In his collection of essays, The Economist Refuted and Other Early Economic Writings , Robert Torrens wrote in 1808... [I]f I wish to know the extent of the advantage, which arises to England, from her giving France a hundred pounds of broadcloth, in exchange for a hundred pounds of lace, I take the quantity of lace which she has acquired by this transaction, and compare it with the quantity which she might, at the same expense of labour and capital, have acquired by
BAD FOR BUSINESS The U.S. is beginning to realize that all this outsourcing is not only bad for politics (consider the friction we’re experiencing with China while trying to protect Taiwan, our ally and semiconductor capital of the world), but is simultaneously bad for business. It’s a potential one-two punch... The government is recognizing the challenge, knowing that U.S. taxpayers and the U.S. military are on the hook to protect Taiwan against China thanks to the importance of the industry, while U.S. businesses are asking whether the supply-chain headaches are really worth the theoretical production expenses saved. After all, if you can’t meet your customer demand because you’re dependent on factories halfway around the world, then you’re missing out on major revenue opportunities.
THE END OF COMPARATIVE ADVANTAGE?
A more inward, nationalist onshoring approach would certainly be a revolutionary (and much needed) way to think about our economy. It’s an approach that many traditional economists might disdain because they’d prefer to recognize the historic “competitive advantage” of trade. Adam Smith, writing on absolute advantage in trade in his famed 1776 Wealth of Nations, concluded that, If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it off them with some
American Consequences
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