All Commentary
Tuesday, September 1, 1964

Made in U.S.A.

Automation is indeed a coat of many colors, depending upon who happens to be wearing it and how much someone else would like to get his hands on it. Automation, to some, means the use of capital and tools for the more efficient and less costly production of goods and services. To others, it means the loss of job opportunities that existed when more laborious and costly hand methods of production prevailed. And some even think they see in American automation a reason why more and more for­eign-produced items are coming to compete in “our” market.

Let us focus, for illustrative purpose, on the camera market, the proposition being that more and more foreign-made cameras are cutting into sales of cameras in the U.S.A. Presumably, Ameri­can camera factories are highly automated and have better access to capital and tools than do the factories of any other country. Yet, foreign producers frequently are able to beat us on quality, or price, or both. And so, some con­clude, our automation is pricing American manufacturers out of the American market.

Well, there’s more to an Ameri­can-made camera than the auto­mated procedures that helped pro­duce it; and it appears that cus­tomers in great numbers either are unaware of some of these hid­den features of the American product or else they place little value on such features in a cam­era. For instance, in the Ameri­can-made camera may be found a fraction of the Tennessee Valley Authority — the part of TVA’s cost charged in taxes against the camera manufacturer. And some­where in the camera will be a por­tion of the Soil Bank and the wheat and cotton and other sub­sidized agricultural commodity programs. Also built into all American cameras is a union label with an old-age and disabil­ity program, unemployment com­pensation, and a host of other fringe benefits. There’s a bit of urban renewal and transportation subsidy, plus a part of a moon shot in the American product. At least 10 per cent of each Ameri­can camera consists of national defense. And from what other country can one purchase a cam­era fully equipped with foreign aid and Peace Corps attachments?

How much of the value of the American-made camera lies in these hidden features? That de­pends on what the camera cus­tomer is willing to pay. But it is reasonably certain that taxes of one kind or another make up at least a third of the costs of American-made products, includ­ing cameras. If a customer isn’t particularly interested in these tax features in a camera, it’s quite possible he might find a foreign make that better suits his require­ments, and at a lower price than American manufacturers need to stay in business.

Naturally, many American manufacturers would like to see tariffs (taxes levied against for­eign suppliers) at least high enough to offset the high taxes levied against domestic manu­facturers. But inducing pneumo­nia is no way to overcome a cold, and a high tariff is no way for American consumers to get bet­ter cameras at lower prices.

True, further automation in some cases may help the American businessman pay his high taxes and still meet foreign competi­tion. If so, automation is good business practice. But it is not the fact that we are more highly automated here than in other countries that raises our costs of production above theirs; the high costs of government that are built into our products are a far more likely source of the problem.

If we want government to let us compete, we must first stop asking government to guarantee so many kinds of security and protection against competition.

Automation is just another word for the efficient production that comes from the use of more tools and capital per worker. These come from savings by individuals when private property is pro­tected and competitive private enterprise is encouraged. Com­petition is the life of trade — all the voluntary exchanges on which our own lives so largely depend.

  • Paul L. Poirot was a long-time member of the staff of the Foundation for Economic Education and editor of its journal, The Freeman, from 1956 to 1987.