Americans walk into a Walmart, and many just go for the cheapest deal. We are hypocritical in that sense. We want politicians to bring our jobs home, but we want to buy $30 jeans. If jeans or phones or sneakers were suddenly twice the price because they were made in the USA, average consumers would feel hesitant about their budget and their ability to afford certain products.
Mauro Guillen is a Professor of International Management at Wharton and Director of the Lauder Institute at University of Pennsylvania. When asked if we were just as much to blame for our love of cheap products he replied, "Sure. Consumers like good and cheap products. We have benefited from low Chinese wages. The point here is to let free trade do its magic, but at the same time invest in the skills, the education, and the well-being of our workers so that they are the most productive in the world. We should not engage in a race to the bottom. We want to be a rich country with a rich middle class and lots of opportunities for young people."
Often leading up to elections, politicians promise to bring jobs back home. They never specify what sort of jobs those might be. However, globalization is not a process that can be reversed without an adverse effect around the world. Economies are now too intertwined to go backward. Professor Guillen explained his view on if we will ever recover from shipping our jobs to China, "Yes we will recover if we innovate. Also, rising wages in China now mean that Vietnam and other locations are more attractive. Even Mexico is becoming competitive again with China, which means that the North American economy (though not necessarily the U.S.) is regaining jobs. Still, I would say the U.S. does not want low-wage jobs back. That is why investments in education and in infrastructure are so important." More middle-class Americans have gone to college than ever before in the hope of gaining employment in a professional field. Many of them do not want to work in an auto factory, they do not want to assemble computers, or glue sneakers together.
Kent Jones is a Professor at Babson College he specializes in trade policy and institutional issues, particularly those focusing on the World Trade Organization. He expanded on this point; "U.S. manufacturing output has actually risen over the past decade, due largely to increases in labor productivity. That means we are making more with fewer workers, using more technology and capital. Workers in all advanced economies have been migrating to services industries, which now accounts for most of our GDP. Trying to turn back the clock to our smokestack days would be disastrous."
He also discussed that taxes and bans on foreign products are not that the path to pursue. He agreed with Professor Guillen that, "Increasing U.S. productivity is the most important element of rising wages, and this means better adaptation of technology, better education, better training, and better incentives to invest in new businesses." Really what this means for the millennial generation is that it is up to them to be innovative and forward thinking.
Many people shopping in a Walmart do not understand how Chinese products are so cheap. They also may not understand why American jobs even got shipped there. Chinese currency is not officially convertible. Professor Guillen explained, "This gives the government many ways of manipulating the exchange rate if they wish to do so." That is why products made in China are so cheap, and why the United States cannot compete turning out products for the same price. Professor Jones also added, "There should be global rules about exchange rates, but just remember that every exporter outside the U.S. also screams when the U.S. dollar falls. What we need is a high-level agreement that involves the International Monetary Fund and World Trade Organization to establish rules for currency policies, with rules that apply across the board to prevent manipulation." He pointed out that others have called for this type of regulation. Establishing rules for currency policies would take significant leadership in the world economy.
While Americans wait for that leadership, many of them are living paycheck to paycheck. They are sitting and waiting for the next great American industry that will make use of the college education many of them went into debt to get. There is no time like the present for new invention and innovation, and that is our true path to recovery.