Does Peggy Noonan Understand Comparative Advantage?
By David Henderson
In the controversy surrounding the uniforms of the 2012 U.S. Olympic team, the problem isn’t China. That the uniforms were made there is merely a deep embarrassment and a missed opportunity. Our textile and manufacturing companies deserved that work. You wonder how it could be that no one in the American Olympic Committee or in Ralph Lauren’s company asked, “By the way, we’re making the outfits in America, right?”
And–here’s part of the missed opportunity–on being told yes, someone might have thought: “Hey, we could do a nice commercial to run during the games, with American women and men making the uniforms, looking up from their sewing machines as the camera goes by and saying, ‘Good luck America.’ The last shot is of a seamstress at the end of the day on a floor in the New York Garment District. As she goes to turn off the lights, she walks by a mannequin wearing the full uniform, gives the shoulder a little pat and says, ‘Good luck, kid.'” As if we’re all in this together, and what we’re all in is actually bigger than the games.
This is from Peggy Noonan’s weekend column in the Wall Street Journal today. It’s titled “A Remedial Communication Class.”
To her credit, she points out that a more-important problem is the uniforms themselves. Great line: “They look like some European bureaucrat’s idea of a secret militia, like Brussels’s idea of a chic new army.”
But back to the economics. What’s wrong with buying uniforms made in China? I’m guessing Ms. Noonan doesn’t object to buying coffee made in Colombia. We could make coffee here too, using greenhouses, but it would be more expensive. We could make those icky uniforms here too, but it would be more expensive. The labor and capital used to produce those could be used to produce something else instead. What else? I don’t know. But the market knows. Ms. Noonan is ignoring comparative advantage. (See the excellent article on this by Paul Krugman also.)
“Ah,” Ms. Noonan might answer, “but you’re ignoring the fact that we have 8.2 percent unemployment. There are plenty of people out there who would be willing to produce those icky uniforms.”
Sure, but not at a competitive price. I’ll bet dollars to doughnuts that if the American Olympic Committee had put it out to bid, it wouldn’t have found any U.S. producer willing to meet the price charged by the Chinese producer. So what’s that saying? That given their alternatives–working in other jobs, looking for work, being on unemployment insurance, or not looking for work but “enjoying” leisure–U.S. workers would not have been willing to work at a wage low enough to be competitive with the Chinese producer. Which means that the most efficient way to get this done was with the Chinese producer.
I have left out one alternative: maybe U.S. workers would have been competitive had they been legally able to work for less than the minimum wage. I doubt it. But in the unlikely event that that’s so, then let’s not blame the American Olympic Committee. Let’s put the blame where it properly belongs: on the U.S. government, which means on George W. Bush, who signed the law increasing the minimum and on Barack Obama, who refused to push for repeal.