Nailed

Allan Sloan, the Wall Street editor of Newsweek, reviews P.J. O'Rourke's latest in The New York Times Sunday Book Review. The book is a commentary on Adam Smith's The Wealth Of Nations. Though Sloan admits he's never been able to get through all of Smith, and he isn't sympatico with O'Rourke's politics, he still gives it a positive notice.

So far, so good. But halfway through you run into this:

Now, let’s reduce this theory to microeconomic reality. I can go to my local hardware store, and for $1.79 (plus sales tax), I can purchase a pound of eight-penny nails manufactured in China, thousands of miles from my home. It would take me forever and a day to manufacture my own nails. Instead, I get paid to write articles, which is my specialty, and I can buy a pound of nails for the economic equivalent of a small amount of my time. The store owner, who specializes in helping people like me who’d rather get cheerfulness and good service than go to Home Depot, can use her profit to buy a copy of The New York Times, which helps give the paper the money to pay me for writing about O’Rourke writing about Smith writing about what makes nations wealthy. See? Isn’t that simple?

This all works out fine for O’Rourke and me and whoever is running the nail-making machine in China; he or she is presumably better off doing that than being a peasant farmer or an unemployed urbanite. However, my ability to purchase cheap China-made nails is unlikely to have worked out well for the people who once made nails in the United States. This is Adam Smith’s famous hand of the market at work: it pats specialists like O’Rourke and me on the head, while it gives unemployed blue-collar workers in the Midwest the middle finger. Maybe as a society, the United States saves money by exporting manufacturing jobs and importing so many manufactured goods — but I still have trouble believing that it’s good for us in the long run.

First, let's pretend we only care about America and the rest of the world can go screw themselves. (We'll also ignore the issue of dealing with immoral countries. Really Sloan loads the question by making it about U.S. versus anyone--the economic question is the same if you're talking about a manufacturer relocating to another state). If making basic goods can be handled better elsewhere, it creates a better economy in general, not just for the nailmakers and specialists like Sloan and O'Rourke. There are lots of businesses in America that use nails, and getting them cheaper lets them either make a greater profit or sell the things they build at a lower price. Regular citizens who use them will have money freed up to spend elsewhere. I'm not saying there's never any dislocation in a free, dynamic economy. I'm just saying if you add up the ledger, it's better if goods, especially basic ones, cost less.