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In English yesterday, my teacher asked everyone what we did with the $900 a large fraction of the population received recently, as a gift from the government. Most people answered, “I went shopping,” or, “I bought clothes,” and these responses completely infuriated one of my classmates.

“People, you’ve all wasted your money! You bought stuff?? Did you remember to check that everything you bought was Australian-made, to make sure your money stays in Australia? NO! I bet you bought all Chinese-made products, benefiting CHINA’S economy instead of our own! Do we want to benefit CHINA’S economy, or ours? You should have been spending on services — at least then you know the money stays here!”

He wouldn’t listen to reason, and even an explanation of how economies actually work wouldn’t change his mind. He insisted that we were all acting traitorously, supporting China instead of ourselves. Which is crap.

When you spend on a product that was made in China, that doesn’t actually mean all the money you spent goes to China. For a product to make its way from China to here, sure it has to be manufactured, but it also has to be transported, packaged (usually packaging is done in the country the product is actually being sold in!), transported again, sorted, sold by the retailer, and taxed by the government, and I’m sure there are more steps than that. All the transportation companies, the packagers, the retailers, the government, and so on, take their cut of the money. Workers (and governments) in Australia and China benefit.

More importantly, Australia is an export-driven economy, and it is in our best interests economically for China to be stable and prosperous. I believe Australia’s largest industry is mining; it’s more or less what keeps the national economy afloat. Most of our minerals are bought by China. Initially it was assumed that Australia wasn’t going to suffer the effects of the crisis like everyone else — it was assumed that China and its voracious appetite for minerals would keep us going. Only, China has an export-driven economy too. When people stop buying Chinese products, China’s economy suffers. When China’s economy suffers, demand for Australian minerals goes down — if they’re not doing as much, they don’t need as many resources, after all. If they buy less of our resources, they’re obviously not going to pay us the same amount. Our economy suffers too, which is why we’re suffering right now.

We have industries that aren’t just mining, but all the profitable ones are for export (for foreigners — for instance, international students coming here to study still count as education being an export). That’s what export-driven economy means. We rely on everyone else being prosperous to keep ourselves prosperous.

That’s the fallacy behind statements like, “Stop giving foreigners Australian money!” Australia’s economy can only improve if foreigners do have money, so why not spend that way? If we only spent on products made totally within Australia, we’d be spending excessive amounts of money on inefficiently-made goods, and we’d be depriving foreigners of the money they need to buy our stuff. And do you think they’d even want to buy our stuff if we refused to buy theirs? After all, that wouldn’t be very fair.

Really I can’t help but think, if you’re going to demand that people spend money in a certain way because it’s “good for our economy” make sure you actually know how the economy works first.

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2 Comments

  1. I feel the same way that you do about that… Some Americans think that way too… especially those who don’t understand how things work. It sounds like an uneducated way to think to me. If we were still following a policy of isolationism, then we can just stimulate the economy from within to boost our own economy so we can do better than other countries. However, whether we like it or not, we run on a global economy and our economies are all interlinked… we’re not going to prosper more by cutting off others.

    • I suppose in the short term it would benefit us to protect local industry by instituting protectionist policies. It would “save” jobs in Australia, in the short term, if we taxed imported clothes such that everyone would rather buy Australian (for example). I think that’s as far as many people see. Bizarrely they also don’t seem to realise this works both ways — they’re quite capable of getting irritated when other countries buy less of our wool, for instance.

      They also don’t see that it harms us in the long run. By being protectionist, others won’t want to trade with us, depriving us of foreign investment and money that could be used to create more (better-paid, more efficient) jobs in industries we’re actually good at. If every country focuses on the industry/ies they’re good at, things become more efficient, more numerous, more affordable, etc., for everyone in the world. So the theory goes anyway. And to some extent it’s true.

      There are other problems with globalisation, but they’re not really the point. The point is, there’s absolutely nothing wrong with buying things made in China! (Unless you’re trying to create social instability there to oust the Communist regime, I guess…)


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