Out of Control Policy Blog

Good for India, Good for Us

With so much zero-sum thinking on the trade issue this Charles Wheelan piece offers some good points to keep in mind.

For example, point number 3: A richer India will make for a richer America.

    How can a place that "competes" with American companies and replaces American workers make us better off by growing wealthier?

    First, a growing Indian middle class will buy our products. The guy in Bangalore who answers questions about your Dell computer probably drinks Coke, uses Microsoft Word, and reads my column on Yahoo! Finance. (Okay, I can't prove that last one, but you get the point.) It doesn't matter what business you're in, having 300 million new middle class consumers in India is good for you.

    Second, Indian firms will design and sell products that make our lives better. That's what happens when you unleash new human potential. Imagine the following scenario: Your child has just been diagnosed with a rare form of leukemia. The doctor sits you down and says, "I have good news and bad news. The good news is that the disease can now be treated successfully. The bad news is that the treatment was discovered by an Indian scientist, and the drugs are produced by a leading Indian pharmaceutical company." Actually, that's not really bad news, is it?

    Third, at a minimum, Indian competition and outsourcing by American companies will lower the cost and improve the quality of all kinds of goods and services...Cheaper imports from places like India or China are just like a tax cut; there is more money left in your wallet at the end of the month. And they create American jobs, too, which is less intuitive and therefore often overlooked. If you save money on cheaper cotton towels, much of that extra cash is likely to be spent on American goods and services. A Canadian trade minister made this point to me once when he asked rhetorically, "Look, a DVD player used to cost $500. Now it costs $40. What are you doing with the other $460?"

Ted Balaker is Producer


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