We have all heard about 3-D printing. A machine that costs around $1,000 can produce copies of some product, even a gun.
Over the next three decades, these machines will become more powerful. They will get cheaper. Tens of millions of products will be produced in millions of basement 3-D machines, or else in small local businesses that will rent them. Each year, from now on, it will get cheaper to do this... permanently.
There will be websites that offer cheap or free programs to produce millions of products.
Manufacturing will move from factories to cheap machines that almost anyone can afford.
Should the government ban these machines? After all, these machines are going to destroy millions of jobs.
You probably would not want this. After all, you believe in limited government. You prefer laissez faire. You don't like the idea that politicians can restrict free enterprise.
Maybe you will buy one of these machines. Why not? You want better deals. Think of the labor savings! You will not be paying for workers on some factory floor. The factory floor will be in your basement.
Even if you don't buy one, you know that products will get cheaper. These machines will be everywhere.
Do you really care about all those lost jobs? No, you don't. And even if you do care, at least a little, you are not going to pay 50% more for what you want to buy, just to save those people's jobs. You are going to go online and look for better deals, just as you do now.
So far, so good... but not for factory workers. For them, it's a looming disaster. And it is inevitable. It's already happening. It is the wave of the future. It is like a steamroller. Either factory workers get out of the way or else they will be crushed.
I think they will get out of the way. They have been getting out of the way ever since the end of World War II. As a percentage of the labor market, employment in American manufacturing has steadily fallen. It will continue to fall.
The consumers will buy more things. They will save money on factory manufactured goods, but that will leave them with more money to buy services. Or maybe they will invest. It doesn't matter. They will put the saved money to productive purposes, as defined by individual consumers. This is how the free market works.
Economists have been arguing this way since about 1752.
GEOGRAPHICAL LOCATION
So, let's say that ten million American households buy one of these machines. What will happen to workers in China? They will lose their jobs, obviously.
Do you care? How much do you care? I don't think you care.
In any case, what can the government of China do about this? Not much. Maybe it can provide export subsidies. But how many manufacturing jobs in China will this save? Not many. Export subsidies force one group of Chinese workers to pay taxes, so that the government can subsidize favored Chinese exporters.
Amazing fact: this same economic analysis applies to all export subsidies.
Let me alter this analysis by only one thing. Millions of these basement 3-D machines will be located outside the United States. Canadians start buying them. Mexicans do, too. What will happen to American factory exports to these countries? They will decline . . . just like exports from Chinese factories.
What will the United States government be able to do about this? Not much. Should it try? No. That would be interventionist. That would be an intrusion into private property of Americans. You want to defend the idea of private property, right?
Will these machines reduce free trade of manufactured goods across national borders? Yes. What about state borders? Yes. What about county borders? Probably. What about zip code borders? I think so.
People will be ordering the various forms of goo that the machines turn into products. Other than this, not much.
Will the world be richer? Vastly.
Will you be richer? Not if you work in a factory.
Next, what if an American in San Diego comes up with a new computerized 3-D printing program to make a product out of goo? What if this costs another 5,000 American factory jobs? Should the U.S. government prohibit this? No? You are a free market person.
Next, what if a Mexican right across the California border in Tijuana invents a new computerized 3-D printing program to make a product out of goo? He posts it free of charge on a Mexican website. He posts it in English. What can the U.S. government do about this? Nothing. What should it do? If you are a true, blue free market person, your answer should be "nothing." Right?
Now let me get to my point. (I do have a point.) What if someone in Tijuana comes up with a computerized program for 3-D printers to make a fabulous new product out of goo, but he does not share his program with the world. Instead, he buys 50 3-D printers and starts manufacturing the new items in basements in Tijuana. Back in the 1500's, this was called "farming out" production. It was called cottage industry.
Here is my question? What should the U.S. government do about this?
If you say, "impose a tariff," you will lose your status as a true, blue free market kind of guy . . . or gal.
Here is the deal. If the Mexican posts the program for free on the Web, and this puts 5,000 Americans out of work, most free market people would say, "Good for him. The public everywhere will be benefited." But if he makes the same goods in 50 local basements, or 500, or 5,000, and then he offers them for sale in the United States, over half of the pro-market Americans shout: "Tariff! Now!"
Why? Will American consumers be better off with the new products? Of course. It does not matter whether an American family buys the product from Mexico or makes it in its basement.
Furthermore, the Mexicans in Tijuana will get digital dollars for the goods they sell to Americans. These digital dollars will then be spent in the United States.
So, here's the deal. Which scenario is better for America? In each of these scenarios, 5,000 American factory workers will lose their jobs.
1. An American posts the program for free on a website inside the USA.
2. A Mexican posts the program for free on a website inside the USA.
3. A Mexican posts the program for free on a website inside Mexico.
4. A Mexican sells the program online for dollars, which he deposits in his American bank.
5. A Mexican hires Mexican families to make the items in their homes. The items are exported to America. The money is deposited in his American bank.
6. Scenario #5, but then the U.S. government imposes a sales tax (tariff).
Which scenario -- number one through five -- is best? I don't know. Let the free market sort it out.
What I do know is this. Scenario #6 -- placing a sales tax on the imported goods from Mexico -- will make the U.S. government richer and American consumers poorer.
Bottom line: the worst-case scenario for Americans is #6.
Are you with me so far? Not if you are an advocate of tariffs.
CONCLUSIONS
I have presented the traditional case for free trade. What is different is the technological framework: computer programs, 3-D machines, and goo. But the technology in no way affects the validity of the arguments for free trade.
The United States government wants our money. It uses tariffs to get it: sales taxes on imports.
The government gets voters to assent to these sales taxes. How? With slogans like these:
Save American jobs! (Especially at the IRS.)
Buy American!
Stop rewarding foreign slave labor! (Especially in Canada, America's #1 trading partner)
End cut-throat foreign competition!
Made in America!
Keep America's money in America!
Then the unions add this: "Solidarity forever!"
Here is reality: millions of factory jobs are not going to survive the competition of 3-D printing. With or without tariffs, they are doomed. The workers will not be replaced when they retire . . . if the factories stay open that long. It does not matter where these jobs are, geographically speaking. The decentralization of digital technology is accelerating. There is nothing that any government or special-interest lobbying group can do to reverse this.
The American labor union movement is dying. It has been dying since 1954. But 3-D printing is going to finish the job in the private sector.
Advocates of tariffs can sing the old songs, in the same way that retired union members can still sing "Solidarity Forever." But the handwriting is on the screen.
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