Don't Blame China (Or Corporations), Politicians Pushed Jobs Out of the U.S.

While listening to the major-party presidential candidates come within an inch of declaring war on China during last night's debate, my first thought was that Beijing displayed admirable restraint by not sinking a U.S. aircraft carrier about two-thirds of the way through the posture-fest. My second thought, though, was of the inflation-fueled sticker shock my father displayed a year ago over the price of desert boots. Yeah, that sounds weird. But those two political candidates, and power-grubbers just like them, have helped create conditions in which it's very attractive for manufacturers to do everything they can to keep costs down, including moving factories to such terrible destinations as China.

First, to be clear, I'm not arguing that all of the incentive to move manufacturing overseas comes from inflation. There are good reasons to move manufacturing that have nothing to do with the eroding purchasing power of the dollar (although many of those reasons can also be blamed on politicians). But my father is a guy who spent much of my youth stomping around in Clark's desert boots. He's also an economically savvy guy who writes financial newsletters. And he balked at the price I'd paid for my own pair of desert boots even though that price was comparable to what he paid back in the day, adjusted for inflation.

My father, like many people, was blind-sided by inflation. The purchasing power of the dollar erodes, and even if manufacturers do nothing more than adjust for inflation, people complain about price-creep and insist they're being gouged. Clark's desert boots cost $12.95 in 1959. By standard measures, according to the American Institute for Economic Research's handy cost of living calculator, they should cost $100.87 today. They list for just about exactly that now, though you can usually find them on sale. But labor costs in in Britain have dramatically risen in that time, so the shoes are no longer made there — they're made in Vietnam.

Likewise, Levis 501 blue jeans have been a staple clothing item over the decades. They listed in the 1986 Sears catalog for $30.99 each. Sears currently lists them for $64.00 (which would exactly compensate for inflation), but has them on semipermanent sale for $47.99 — J.C. Penney just lists them at $45.00. That means 501s are actually cheaper than they were in 1986, once you adjust for inflation. U.S. labor costs have also risen in that time, so it's no surprise that Levis has moved production to Asia.

Incidentally, the AIER warns, "Most Americans in 2011 experienced a day-to-day inflation rate of 7.2 percent—more than two times the official estimate released by the Bureau of Labor Statistics ... If the inflation rate of big-ticket items such as cars matched that of everyday items, consumers would be appalled." The organization explicitly links price rises to "monetary expansion policies" — policies implemented by our fearless leaders in Washington, D.C.

Historically, such a large expansion of the money supply has always resulted in higher inflation. For now, most of the additional money created by the Fed is accumulating in the excess reserves held by banks. But recently banks have started lending again. Reserves have started flowing out of the banks and into the wider economy through a somewhat increased volume of consumer loans and a more dramatic increase in the volume of commercial and industrial loans. There are also some early signs of life in the housing market and therefore in mortgage-loan origination.

All forms of lending convert bank reserves into money, available to be spent by consumers on goods and services. If the money enters the economy without a corresponding increase in output, higher inflation will follow. With money supply increases in the 14 percent range and output increases forecast in the 2 to 2.5 percent range, it seems likely that the money supply will outpace output.

So, when Mitt Romney and Barack Obama rail against China's nefarious practice of offering Americans good they want at prices they like, and attack corporations for shipping "American jobs" overseas, they're mugging shock and horror over a situation they and their buddies created. They screwed with the value of the dollar, consumers were horrified by resulting price rises, and manufacturers raced to lower production costs to avoid alienating customers. And it's everybody's fault but the that of the government officials who started it all.

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  • sarcasmic||

    I can guarantee you that those desert boots and 501s are not made with the same quality anymore.

  • jdtuccille||

    That's true, too, and another way of keeping prices down within consumer expectations. It's also why I buy J.Crew desert boots (made in Italy) and not Clark's.

  • sarcasmic||

    Very recently there was something in the local paper about maintaining a tariff tax on Americans who buy shoes made in Vietnam so New Balance can continue to employ people in the states.
    The article claimed that ending the tariff would only result in higher profits for retailers, because there was absolutely no way that the savings would be passed to consumers.
    I almost wrote a letter to the editor in rebuttal, but after some thought I realized there was no point.

  • BarryD||

    For about the same money, I got two-layer deerskin chukkas made to order in Minnesota. They are top quality, and a hell of a lot more comfortable than suede leather. Mine have a flat natural crepe sole, too. Can't say enough good about them.

    http://www.footwearbyfootskins.com/

    For off-road use, I order boots from Russell in Wisconsin, custom fit. Never a blister, comfortable as sneakers and durable as the best backpacking boots.

    http://www.russellmoccasin.com/

    In both cases, I can call and talk to the people who make them.

    Why in hell anyone would order J Crew shoes is beyond me.

  • Sudden||

    The BLS does something called "hedonic regression analysis" to conceal inflation. They identify "product improvements" (often highly subjective) and then control for these and factor them into price increases, thereby removing the appearance of price increases. Predictably, they don't do this the other way around.

  • The Late P Brooks||

    Levis 501 blue jeans have been a staple clothing item over the decades. They listed in the 1986 Sears catalog for $30.99 each. Sears currently lists them for $64.00 (which would exactly compensate for inflation), but has them on semipermanent sale for $47.99 — J.C. Penney just lists them at $45.00. That means 501s are actually cheaper than they were in 1986, once you adjust for inflation.

    I just experienced 501 sticker shock a week or so ago. Kohls' price was 63 0r 64 bucks (with a buy one get one half off deal) I staggered out of the store, aghast.

    Thanks, Bennay and Timmay!

  • txgypsy||

    the internet is your friend. last month i bought 501s for $36 each from a russian company......buy 5 pairs,shipping is free.........wish i could still buy cigerettes like that.........

  • sarcasmic||

    Slightly OT: why is it that politicians lament the loss of manufacturing jobs out of one side of their mouth, while from the other side they talk of how everyone deserves to go to college since lowly manufacturing jobs are beneath Americans?

  • Rich||

    I think it's because they believe *American* manufacturing jobs are "high-tech".

  • The Craig||

    Well all those liberal arts degrees need to do something with their lives.

  • sarcasmic||

    That's what middle management jobs are for.

  • Doctor Whom||

    Good luck getting an answer. I once pointed out to a Team Blue bot that his party espoused two directly contradictory policies with regard to economic development. He glibly responded that that just proved how wonderful the Jackass Party was, since it covered all bases. I should have spent my time administering medicine to the dead instead.

  • VG Zaytsev||

    The also punish American employers over fairness, safety and enviro worship.

  • A. Freeman||

    Low prices always, is that not the mass merchandising motto? Actions Beget Consequences. Shop at WalMart.

    Oh,yea, they used to advertise that they sold US made products? Wonder what happened to that?

  • ||

    Oh,yea, they used to advertise that they sold US made products? Wonder what happened to that?

    A lot of retailers still do. Or they'll go with the fair trade line that's all the rage with liberasl and hipsters.

  • Lord Humungus||

    the last pair of 501s I bought were thin. They only lasted 4-5 months before they had to be replaced. Back in the olden days, I could get 2 years out of a pair of jeans.

    Now I'm buying LL Bean which - so far - seem to hold out better.

  • R C Dean||

    Carhartt for me.

  • Ptah-Hotep||

    Deluth Trading.

  • ||

    I've had good luck with jeans from Duluth Trading Company.

  • BakedPenguin||

    Some of us don't want to go to Duluth to get our jeans, dicknose.

  • ||

    Someone has never experienced the joy of ballroom jeans.

  • BakedPenguin||

    Just googled it. As much as I hate to admit it, jeans in which you can crouch without testicular torsion are a pretty good idea.

  • SugarFree||

    And there you go talking about your balls again. Sheesh. Maybe you and your balls should get a room.

  • ||

    PRECISELY

  • SugarFree||

    BakedPenguin is totally gay for his own balls.

  • BakedPenguin||

    Huh, what a hypocrite. Like you've never been mesmerized by your pendulous moobs.

  • SugarFree||

    But I'm not totally gay for them. Like you are. For your balls.

    Are you and your balls going to get gay married? Please don't post pics of the wedding.

  • Pound. Head. On. Desk.||

    Back in the olden days, I could get 2 years out of a pair of jeans.

    Missing that old red selvage denim, huh?

  • John||

    I had a similar experience a few years ago. When I grew up Levis were the gold standard. They lasted forever. People who actually worked for a living wore them, especially farmers and ranchers. No one wore Wranglers like they do now. Made me sad to see how cheap they were now.

  • Ice Nine||

    I see what you did there.

    Levis were originally made for the 49ers (the real ones) and they were popular and wildly successful precisely because they were made to be indestructible, and found to be exactly that by those rough and tumble dudes.

  • Ice Nine||

    Substitutes for Levis?? Heretics! Oh yeah, those Duluth numbers have some serious dorkosity going on.

  • NeonCat||

    For those who want to buy American, I recommend Pointer Brand jeans, still made in Bristol, TN.

  • Hugh Akston||

    Barack Obama signed an executive order prohibiting US government personnel from torturing prisoners in custody. But the practice of extraordinary rendition to countries who are more than willing to torture prisoners on our behalf continues unabated.

    Somebody really needs to press Obama on his administration's policy of shipping America's torture jobs overseas.

  • The Late P Brooks||

    I still have pretty good luck with 501s; I haven't actually had to buy a pair for a few years. Unfortunately, they seem to all be falling apart at once. Shrink to fits are *only* 40 bucks at Murdoch's ranch supply store.

    But remember, kids, deflation is bad; inflation makes you feel rich!

  • Fist of Etiquette||

    ...J.C. Penney just lists them at $45.00.

    HOW MUCH IS PENNEY'S PAYING YOU, TUCCILLE? I don't know about any quality erosion over time as I don't wear denim since I'm not a farmer or a teenage girl from a Bruce Springsteen video.

  • Hugh Akston||

    Seriously, jeans are for gay cowboys. Maybe gay bikers.

  • Archduke Pantsfan||

    Why do you hate the Canadian Tuxedo?

  • Paul.||

    What am I supposed to paint my house in? One of those speed suits with the Italian ankle boots that you favor?

  • Hugh Akston||

    Hey, Larry Dallas never seemed to be lonely. Coincidence?

  • croaker||

    Right. Real men wear Dickies.

  • John||

    You don't wear jeans?

    I always suspected you were a no good unAmerican commie Fist. Now I know.

  • Fist of Etiquette||

    The Communists coveted America's Levi's, I assume because they all wanted to dance onstage with Bruce Springsteen. I, however, don't believe in conformity therefore I'm always either wearing a shirt and tie or woodland pattern camouflage cargo shorts. Or both.

  • Paul.||

    The last time someone got a hand job while wearing cargo shorts was 'Nam.

  • Hugh Akston||

    And it wasn't from a woman.

  • Fist of Etiquette||

    Is this going to be one of those jokes that ends with "and I don't see no horns on you"?

  • MWG||

    Tuccille is back by big clothing retail... that and the Koch brothers.

  • sarcasmic||

    I buy my pants at thrift shops. I see no point in shelling out fifty or more dollars for freaking pants.

    Did I mention that my closet is full of LLBean and Carhartt?

  • Tim||

    How do you get the corpse smell out?

  • sarcasmic||

    There is this magical thing in the basement called a "washing machine", and next to it is this other magical device called a "dryer". My sorceress wife uses them to turn dirty clothes into clean ones.

  • Lord Humungus||

    as long as she does the dirty work, it's okay.

  • Tim||

    Wow, could she teach these strange techniques to my wife?

  • sarcasmic||

    Depends on what strange techniques your wife has to teach ;-)

  • MWG||

    Ha! In Brazil, us libertarians pay child maids to do our dirty work.

  • DJF||

    """'during last night's debate, my first thought was that Beijing displayed admirable restraint by not sinking a U.S. aircraft carrier about two-thirds of the way through the posture-fest. """

    So you think that speech should be punished by war?

    Besides which, its not the US Navy anymore, its the "Global Force for Good" and who could be against that?

    http://www.navy.com/navy/about/gffg/

  • jdtuccille||

    Yes, because I never, ever, use hyperbole.

  • DJF||

    Hyperbole is why the Pentagon is going to rename itself the "Department of Global Good".

  • DJF||

    Their motto will be "We give it to you Good and Hard".

  • The Late P Brooks||

    Seriously, jeans are for gay cowboys. Maybe gay bikers.

    We can't all wear parachute pants.

  • CampingInYourPark||

    "Judge Charged With Theft For Plugging In Chevy Volt Electric Car"

    http://baltimore.cbslocal.com/.....ctric-car/

    How can that be? Electricity is free isn't it?

  • Sudden||

    And magically produced in large amounts through means not related to million year old dead fauna and flora... right guys?

  • Paul.||

    As I understand it, we're still paying low prices for gas adjusted for inflation. But why am I so annoyed for paying $4+ dollar a gallon gas?

  • Hugh Akston||

    Because you're just not looking at the big picture. Sure you're paying 3x for gas what you were 15 years ago, and making 8% less, but, um, unemployment is down to 7.8%?

  • Paul.||

    You always swoop in with the wisdom, like a Seal Team here to execute my confusion. Well played, sir, well played.

  • ||

    I give you: death metal clarinet.

  • Hugh Akston||

    I feel bad for the roommate in the background. I imagine its really difficult to browse doujinshi porn with that racket going on.

  • Archduke Pantsfan||

    Just because you can doesn't mean you should.

  • Paul.||

    If someone had said those words to me before I got married...

  • Juice||

    The Necrophagist one was better:

    http://www.youtube.com/watch?v=uGgcAhBbLsU

  • Killazontherun||

    I can understand the nostalgia factor but handmade caligae are so much more comfortable than anything you'll find at a sporting goods shop. One free range hide can net you about a dozen pairs, then it is all time and labor.

  • sarcasmic||

    Do you wear them with woolen socks in the winter?

  • Killazontherun||

    Only when it drops below twenty, and that is pretty rare here. You tend to move around more when you have them on, so you don't get so cold.

  • Killazontherun||

    Mine were made in a specialty shop just north of Raleigh and not so killed it myself that I kidded about above. But they are awesome. Look more dignified than sandals, and also more comfortable.

  • Invisible Finger||

    I'd argue that ZERO jobs moved to China because of "inflation".

    Almost all jobs that moved overseas moved because of anti-business legislation - lots of states without "right to work" laws, other onerous labor laws, business taxation, and especially environmental regulation. The prices of the raw materials are rather fungible.

    The one thing China IS doing that makes it an attractive mfg point is subsidizing the transportation costs.

  • NeonCat||

    My father is always going on about the US shipping manufacturing overseas. Unfortunately, he's a populist so he just thinks the govt should make it against the law.

  • Juice||

    So isn't this backwards?

    Doesn't a weak currency promote exports and a strong currency leads to more imports?

    So you should blame a "strong" dollar for the propensity to import, not a weak dollar.

  • Juice||

    Yeah, re-reading it, this whole post is wrong. It's simply a matter of American labor being more expensive than oversees labor coupled with more liberal trade policies, which are both good things.

    The first paragraph gets the relationship between the strength of a currency and imports/exports exactly backwards. The last paragraph seems to imply that inflation causes prices to rise so people couldn't afford to buy domestic products anymore. That would only be true if wages didn't keep up with prices, which didn't happen. People can afford domestic products just like they could before. Everyone is using the same currency and wages are largely keeping up with prices. The fact is that there are cheaper alternatives because of liberal trade policies. What results is an increase in standard of living. The standard of living today is much better than it was in the 1970s when most products people bought were made in the USA. That shit was expensive. Go look at catalogs from then and adjust for inflation. Appliances and electronics were ridiculous.

    Anyway, trade with China et al. has led to a rise in standard of living for all involved, even for us spoiled brats in the US.

  • The Derider||

    "They screwed with the value of the dollar, consumers were horrified by resulting price rises, and manufacturers raced to lower production costs to avoid alienating customer"

    Producers in a free market should be racing to lower production costs at every moment regardless. Offshoring is inevitable as long as there are differential labor costs and low trade barriers-- and that's a good thing!

    Think about it like this, if monetary manipulation and price shocks were the only way to promote efficiency gains through trade, wouldn't that prove that monetary manipulation was a good and necessary policy?

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