Weekend Links
- Prepare for a national debate over devoting more federal aid to Yemen.
- Reason Magazine: Why is Washington spending so much on the military?
- An update on the ongoing tension between mainland China and Taiwan.
- Top experts will meet at Cato next week to discuss the Obama administration’s counterrorism record after one year in office.
- Podcast: “Indefinitely Confining the ‘Sexually Dangerous‘” featuring Ilya Shapiro.
Is Buying an iPod Un-American?
We own three iPods at my house, including a recently purchased iPod Touch. Since many of the iPod parts are made abroad, is my family guilty of allowing our consumer spending to “leak” abroad, depriving the American economy of the consumer stimulus we are told it so desperately needs? If you believe the “Buy American” lectures and legislation coming out of Washington, the answer must be yes.
Our friends at ReasonTV have just posted a brilliant video short, “Is Your iPod Unpatriotic?” With government requiring its contractors to buy American-made steel, iron, and manufactured products, is it only a matter of time before the iPod—“Assembled in China,” of all places—comes under scrutiny? You can view the video here:
In my upcoming Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, I talk about how American companies are moving to the upper regions of the “smiley curve.” The smiley curve is a way of thinking about global supply chains where Americans reap the most value at the beginning and the end of the production process while China and other low-wage countries perform the low-value assembly in the middle. In the book, I hold up our family’s iPods as an example of the unappreciated benefits of a more globalized American economy:
The lesson of the smiley curve was brought home to me after a recent Christmas when I was admiring my two teen-age sons’ new iPod Nanos. Inscribed on the back was the telling label, “Designed by Apple in California. Assembled in China.” To the skeptics of trade, an imported Nano only adds to our disturbingly large bilateral trade deficit with China in “advanced technology products,” but here in the palm of a teenager’s hand was a perfect symbol of the win-win nature of our trade with China.
Assembling iPods obviously creates jobs for Chinese workers, jobs that probably pay higher-than-average wages in that country even though they labor in the lowest regions of the smiley curve. But Americans benefit even more from the deal. A team of economists from the Paul Merage School of Business at the University of California-Irvine applied the smiley curve to a typical $299 iPod and found just what you might suspect: Americans reap most of the value from its production. Although assembled in China, an American company supplies the processing chips, a Korean company the memory chip, and Japanese companies the hard drive and display screen. According to the authors, “The value added to the product through assembly in China is probably a few dollars at most.”
The biggest winner? Apple and its distributors. Standing atop the value chain, Apple reaps $80 in profit for each unit sold—an amount higher than the cost of any single component. Its distributors, on the opposite high end of the smiley curve, make another $75. And of course, American owners of the more than 100 million iPods sold since 2001—my teen-age sons included—pocket far more enjoyment from the devices than the Chinese workers who assembled them.
To learn a whole lot more about how American middle-class families benefit from trade and globalization, you can now pre-order the book at Amazon.com.
Time to End the War on Drugs
Gov. Arnold Schwarzenegger is calling for a large-scale study on the question of whether to legalize marijuana. Arnold wants the study to include international comparisons to show the possible impact of such a change. Cato just released such a study concerning Portugal.
Our friends at NORML are running ads like this in some markets.
Over at Reason, Jacob Sullum takes a look at national Zogby poll numbers, which shows that a majority of voters support marijuana legalization.
Stop Spending Our Future
That’s the title of an alarming, but informative, video over at Reason TV. The video contains lots of eye-popping comparisons between amounts being spent on bailouts/”stimulus” and previous big-ticket government expenditures like the World War II and the New Deal.
And if you haven’t done so already, check out my colleague Dan Mitchell’s videos on the fallacies of Keynesian economics and the folly of so-called fiscal “stimulus” packages.
Cato on Facebook
Cato on Twitter
Cato on YouTube
Cato Tweets