Will the Migration of United States Factories Abroad Hurt Us
THE MAJORITY OF ECONOMISTS undoubtedly favor free trade in spite of the adverse balance of payments in recent years and the outflow of gold. Apparently we have not been altogether successful in winning the public, or even successive generations of students, to our views. Now a new aspect of the foreign competition problem has become important: United States corporations are opening factories abroad, partly for supplying goods to our home market. While this has been going on for a long time, it is being eyed by many with increasing uneasiness. The malevolent corporation seems somehow to be betraying American interests when it expands abroad. Demands are heard for higher tariffs, lower wages, and reduced social legislation and fringe benefits. Does the defense of free trade also justify the migration of capital in the form of "runaway" factories? We shall examine this aspect of the international trade problem and its impact on our level of employment, assuming three conditions: (1) Exchange rates are deliberately kept stable as much as possible. (2) We are concerned with the nation's interests rather than with local or international