Harry Reid’s Olympic-Sized Fallacy

Senate Majority leader Harry Reid thinks that the U.S. Olympic Team’s uniforms—made in China as they were—deserve to be burned. He reasons that we have an abundance of unemployed textile workers in this country—why shouldn’t we take advantage of them to manufacture the Olympics uniforms? Wouldn’t that put these Americans back to work?

There are many fallacies in Reid’s thinking—so many, it’s hard to know where to start.  We might first ask why there are so many unemployed textile workers in this country. A particular industry must begin to lay-off workers when the demand for its product shifts elsewhere in the economy. In an unhampered market economy, these workers are free to shift their labor into a line of production that is more compatible with their comparative advantageTo the extent that they are unable to participate in this dynamic shifting inherent in the market economy, they are hindered by a multitude of government interventions. These include but are not limited to: minimum wage, government unemployment benefits, bailouts, and artificially low interest rates which prevent the liquidation process. Reid himself has voiced support for some of these policies which make it more difficult for unemployed textile workers to find jobs.

Reid engages in yet another fallacy when he voices concerns about international trade. Most likely, the U.S. Olympic Committee chose a Chinese manufacturer because it was cheaper than other alternatives. Reid is outraged because he thinks the Committee should have, instead, selected a more expensive U.S. manufacturer in order to preserve U.S. jobs.  In other words, Reid thinks that higher costs of production are the key to increased wealth. When stated this way, his view is rendered nonsensical. By choosing the cheaper alternative, the Committee has more money than they would have otherwise, and who knows where they might spend this money.

Is Reid equally concerned when cities within the same country outsource production to one another? How about when households outsource much of their production to businesses within the city? Driven to its logical conclusion, everyone should produce only for himself or herself. After all, this is a surefire way to reduce unemployment—including that of the displaced textile workers. If every man, woman, and child had to individually produce all the food, shelter, and clothing that he desired, there would be plenty of work to go around. And plenty of poverty too.


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