No Such Thing As An Opinion!

August 16, 2011

To NY Times economics reporter Catherine Rampell:  America does not profit from "Made in China"!


On Monday, The NY Times published an article by its economics reporter Catherine Rampell:

The article is titled:

"‘Made in China,’ but Still Profiting Americans."

Now, anyone who's read either this article of mine or this article of mine knows I'm unlikely to agree with the claim that America profits from products made in China.

So, as I began to read Catherine's article, I was dying to find out exactly how she believes America profits from imported Chinese goods!

Catherine writes: 

"Over the years I’ve heard many Americans fret about buying goods that are 'Made in China,' since they want their cash to go to American companies instead of Chinese ones. A new study, however, finds that a majority of the price consumers pay for goods labeled 'Made in China' actually does go to American businesses, not Chinese ones.

The study, from the Federal Reserve Bank of San Fransisco, estimates that of every dollar consumers spend on a product labeled “Made in China,” about 45 cents goes to China for the cost of the original import.

On the other hand, about 55 cents of that dollar pays for services produced in the United States, such as the transportation for the product, rent for the store where the product is sold, the salaries of the salespeople at the store, the cost of marketing the product, the profits for shareholders of the retailer selling the product and so on."


So, it seems Catherine is implying that America profits from Chinese imports when the 50% threshold is surpassed.  Right?

As in:  If greater than 50% of the total retail price of the imported good is paid to Americans, then America profits, or profits more than China does.

No!  No no no!

I can't believe what I'm reading!

So, Catherine believes it's profitable for America when Americans pay 45% of the total price to China?

Wrong!

And she believes this to be profitable because the amount
Americans pay to America (55%) is more than the 45% paid to China?

This makes no sense at all.

Since when is it profitable for America to have an American pay a Chinese manufacturer any money at all?  Would you consider your own company to earn a profit if an employee of yours bought a product from your competitor instead of buying it from your company?

When there are Americans manufacturing the same items as the Chinese...why wouldn't you want Americans to pay the entire purchase price
to an American manufacturer of the goods?

And how does America profit at all by transferring American wealth (45% of the good's market price) to another country?  It doesn't matter whether 45% or 1% of the money is transferred to China...both are unprofitable situations!

The other 55% does not offset the 45% that was transferred from America to China!  If that 55% was money being transferred from China to America, instead of America to America, then America would benefit.  But that's not the case.

The 55% paid to Americans is simply a transfer of wealth from one American to another!

America's overall wealth doesn't change at all!


Am I Misinterpreting Catherine's Claims?

Is it possible that Catherine isn't actually claiming that America overall profits, but is instead claiming that only some Americans profit? (After all, the title of her article refers to "Americans", and that doesn't necessarily refer to all Americans).

No, I don't think it's plausible that Catherine wasn't referring to America as a whole.

She writes about Americans fretting about goods made in China, and then writes that:

"
a majority of the price consumers pay for goods labeled 'Made in China' actually does go to American businesses, not Chinese ones."

So, I think it's clear that she's claiming that America overall benefits from goods made in China. 

Given that context, how could she not be referring to America overall?


Conclusion

Folks, this is the sad state of America today:  Even The NY Times' economics reporter doesn't understand how a country profits from exports and imports!

Now, I certainly believe that many intelligent people would make the same error Catherine does.  My points may seem like common sense upon reflection, that's exactly the point:  They are obvious upon reflection.  Many, if not most intelligent people don't fully understand the economics of import/export profit!

But the fact remains the same.  The NY Times economics reporter Catherine Rampell does not understand the economics of import/export profit.  And Catherine is a Princeton graduate who received the "Weidenbaum Center Award for Evidence-Based Journalism"!

Well, at least she's not alone.  Even the president of the USA doesn't understand how growth occurs.

It's a sad reflection on the state of America today.

Something really needs to be done to get America back in shape again!

Someone needs to hire me, to get America back on track.  Someone needs to hire me, to spread the word.  Someone needs to start directing people to read my articles!


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