Purchasing National Products - Assignment Example

Why Purchasing National Products is Important for Our Country’s Economy Over the last few decades many economists have championed free trade. They claim that only by removing restrictions on trade (such as tariffs) goods and money can flow freely around the world and global markets develop without inhibition. But it is widely known that when the money flows from the country it loses its wealth and job places. That’s why it is crucial to buy goods produced by your own country to support its economy and increase the level of prosperity. In order to make people buy national products it is important to explain the economical origins that lead to the conclusion that purchasing domestic goods is the best way to develop national economy. Ever since economy has started its increasing development, countries face the problem of flowing money caused by active product importing. The issue of how to stop the destructive economic tendency became totally problematic, so economists came to the conclusion that there must be some trade restrictions that would stop the process of money flow. These theorists are the adherers of mercantilism and protectionism economical theories. Mercantilists claimed that with the growth of import foreign goods start filling out a state’s market, pushing out national products. This obviously leads to the decrease of national prosperity; the reason is that people start spending money on purchasing foreign products, so national treasure flows to foreign companies. The only way to save economical balance that theorists saw was making national production stronger to be good enough to become competitive (Ehrlich 378). As far as we consider The United States, what we can see is a developed free market with diversity of qualitative products and economic capability to form new firms and companies. The main target is to make people buy domestic producers’ goods. From mercantilists’ position this aim can be reached through limitation of import and increase of national product’s quality. The researches show that the origins of big corporations are mercantilists’. The main point is that corporations were supposed to increase national wealth exporting their goods abroad, which would drain capital into their countries (Ekelund and Tollison 716). But mercantilists’ expectations failed, because the growth of corporations didn’t lead to economical balance, but created economic misbalancing monopolies which worked for themselves and not for national economy. That’s why mercantilists’ position is rather contradictory, because their approach of balancing economy is rather dated for modern free market economy. As far as modern free market economy apparently leads to the growth of private corporations, money flows almost uncontrollably from one country to another. In case when country’s corporations aren’t competitive they are pushed out by foreign companies from a national market. In this situation protectionists’ point of view on the solution of the issue is definitely more progressive. Protectionists suggest government making import restrictions to protect national economy from foreign production. In perspective it must lead to the growth of national product and keeping national treasure within the scopes of a country. In the article “Protectionism – why not?” Susan Strange statistically proves that protectionists’ measures can lead to the rise of currency rate, which impacts on general economic prosperity of the country (Strange 148). But the main point is that having such restrictions accepted by government is not enough for making national economy stronger. As economical theorists noticed, even though protectionist measures must motivate national companies to make their products better in order to develop competition within national market, still such approach can vice versa reduce this competition (Ethier and Fischer 2). This obviously will happen if national companies prefer their market to be protected from probably better foreign product, so they can unloose a grip and start being less competitive. In fact full protectionism is impossible and unprofitable in modern free market economy. But still some elements of it can be used to protect partially national economy, but only in case national companies keep market competition in good economical level by producing qualitative products. The best solution of the problem of increasing national wealth is following. By competitiveness national companies should make national market strong enough to make foreign product worse to push it out from the market. Simultaneously citizens of this country should support national product by choosing it when making a purchase. This perfect economical matching circle will obviously lead to national wellness and prosperity. Even though it is rather hard to reach such national economical strength nowadays, still it is possible. In the modern economical situation of intensive growth of foreign production it is hard for people to start choosing national products if they are worse than the foreign ones. In addition, we face the problem of scares resources, which forces consumers to buy foreign product because of lack of the national one. But considering USA it becomes obvious that the country has more than enough resources to meet the market and fit people’s needs. The only thing needed is to persuade people to buy national products. As it was explained above, the growth of national economy directly depends on a country’s citizens’ purchasing choice. Buying national product will lead to economical prosperity of the citizens’ country. First of all, purchasing national product maintains national producers by concentration of a bigger part of capital within the US. This leads to development of national producers, new firms appear and fill the market, slowly pushing out foreign product. Researches show that in the market where national product predominates and market competitiveness keeps being on high level, the prices are much lower. In case when foreign producers prevail on the national market prices are higher (Stegemann 718). The point is that national products can be released with cheaper prices, because there is no need for national producers to add transportation and special taxes costs. Consequently, purchasing national products motivates new companies to appear, which intensifies market competition. It is obvious that the only way for company to survive in competitive market is to start reducing prices on their products. As far as we live in modern free market economy it is unavoidable for national markets to let foreign companies in. This, in fact plays into hands for national economy. Considering the situation when citizens actively support a national economy purchasing mostly national product, that’s what happens next. Foreign companies feel that the market is strong and competitive, and they don’t want to lose their place in it, they also start reducing their prices. The process filters out the weakest companies leading to the market’s strengthening, because companies start producing more qualitative goods and reducing prices in order to survive in such a competitive market. In the United States this scheme is definitely possible to reach. The first reason is that market economy is open for the appearance of new business. The second point is that American companies make definitely qualitative products, but still many of them use foreign territories to locate their manufactures somewhere outside the US. For example, many American technologic producing companies locate their manufactures in China, assembling supplies there and transporting their output around the world. It turns out that US citizens overpay the cost of their domestic producers because the additionally have to pay for transportation of their own country produced goods. This happens because manufacturing products abroad, for example, in China is much cheaper than doing the same in the United States, obviously because assembling these products within the country means building factories and hiring people for higher price, which evidently needs huge investments. The issue of investments also crucially depends on support of national product by the country’s citizens. Economical theorists’ researches showed that with the development of free market economy national product started suffering from imported goods. That’s why the only way to save national economy was to attract foreign investments into a country. With the growth of globalization it was impossible for national producers to lobby the protection of their products from foreign products in government and ask for special tariffs on import (Crystal 516). So the only way was to start attracting foreign capital into national manufacturing or paying money to other countries to manufacture their products in order to survive in the worldwide market. American producers started taking on lease other countries’ manufactures to produce their goods, like the example of Chinese manufactures above. But obviously this means not attracting investments, but investing in other countries’ economies. In order to prevent such ruinous economical tendency it is very important to support national producers to show that American economy is strong and reliable, and worth being invested into. The algorithm is very simple: people start preferring national product before the foreign one, national and foreign investors conclude that American market is strong and profitable; they invest money into American economy to get more profit. This attracts more and more new companies, which stimulates the market competitiveness and, like it was mentioned above, forces companies to reduce prices. In addition, foreign investments into American economy will lead to industrial development and creating of new work places, which is supposed to solve the problem of unemployment in some regions of the country. The main privilege of national production is its quality and availability of products. It is hard to imagine such products which are not produced in the US at all. So why do people choose foreign products? Why not purchase your own country’s products? People often don’t understand that purchasing products of domestic production will lead to country’s economical growth. Besides, by purchasing people make domestic producers popular not only in their country but also in the entire world. Popularity of production within the country where it was produced attracts other countries to open their markets for this production. We’ve considered protectionists’ and mercantilists’ points of view on import and how purchasing national products will make economy stronger, but the second important economical aspect, which strengthens country’s economy, is export. The processes within a country described above inevitably lead to reinforcement of a country on international level. If goods are successfully exported, than other countries’ treasure flows into the country that sold them. Economical processes are connected to each other, but it is consumers who are the center of economy and its main moving force. That’s why it is crucial for conscious citizens to be aware of the importance of purchasing national products. The main reasons of the argument are closely related to each other. First of all, the support of national producers will lead to the development of national market by attracting new business. Obviously this can lead to a big competition of ideas. Firms are supposed to make new goods, cheaper and qualitative, more functional and improved to survive within such strong market competition. This improvement of national market will attract huge investments into national industry. Companies will not take other countries’ manufactures to make their products; all they will have to do is to buy those basic stores which are deficient in their country. When country is attractive for investors it evidently increases its economical level and general prosperity. With foreign and investors’ capital mew manufactures and companies will appear and need more people to work for them. This can definitely solve the problem of unemployment. Furthermore, when national product is of high quality and popular within its country, it opens the opportunities to be popular outside the country and gain confidence at all markets worldwide. Eventually, it is hard not to notice that such economical processes lead to general prosperity of a country. If it happens in the US, the country’s entrepreneurs will have to pay more taxes with development of their business and the increase of their gain and capital. This means that national treasury will become richer and dollar will become more expensive on international exchange market. Also, government will be capable of investing more money for development of the country and increasing social payments and funding for the public needs. But from the elementary point of view there is no need to buy foreign goods if your country’s ones are cheaper, more available, and qualitative enough. People aren’t aware of the importance of supporting domestic producers. They don’t even imagine what big economical changes can be caused by their simple preferment of national products before the foreign ones. We often think that our decision doesn’t actually matter on a global level, but the only thing we need is to start doing what is right by ourselves. So that eventually in will lead to big changes, if all the people understand the significance of their simple choice: to buy either national or foreign products. And definitely all the arguments lead to the conclusion that national product is the best choice to increase general economical prosperity. Works Cited Crystal, Jonathan. “A New Kind of Competition: How American Producers Respond to Incoming Foreign Direct Investment”. International Studies Quarterly. 42(1998): 513-543. Ehrlich, Harold. B. “British Mercantilist Theories of Profit”. The American Journal of Economics and Sociology. 14(1955): 377-386. Ekelund, Robert B., Tollison, Robert D. “Mercantilist Origins of the Corporation”. The Bell Journal of Economics. 11(1980): 715-720. Ethier, Wilfred J., and Fischer, Ronald D. “The New Protectionism”. Journal of International Economic Integration. 2(1987): 1-11. Stegemann, Claus. “The Social Costs of Monopoly in an Open Economy”. The Canadian Journal of Economics / Revue canadienne dEconomique. 17(1984): 718-730. Strange, Susan. “Protectionism – why not?” The World Today. 41(1985): 148-150. Read More