Adam Smith Has Issues With Trade

This just in: Adam Smith does not actually support trade for the sake of trade from the perspective of the economy’s overall well being.  “But a capital employed in the home-trade, it has already been shown, necessarily puts into motion a greater quantity of domestic industry, and gives revenue and employment to a greater number of the inhabitants of the country, than an equal capital employed in the foreign trade of consumption: and one employed in the foreign trade of consumption has the same advantage over an equal capital employed in the carrying trade.” -Adam Smith, “The Wealth of Nations”

If we are going to get our economy back on track, we need to be investing in domestic production of goods.  The profits of the global companies may be greater if they produced their goods overseas.  However, Adam Smith discounts business profits of being a useful measurement of positive economic production in an economy and then also shuts down the idea that trade for the sake of trade, especially with goods that can be produced in the homeland.  Better to trade for things that we cannot get here, rather than have things sent for that we can make here.  It is economically, socially and politically backwards to put foreign trade ahead of domestic productivity.  It shows in the decline and/or stagnation of American real wages and the loss of productivity from manufacturing here, in the US, to overseas “partners”.  If you’re going to invest in Chinese productivity, it would be better to send them the profits that we make as investments into developing their productivity and infrastructure, such that they do not produce in a way that is damaging to their national as well as to the global environment.

Think about it.


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