Here’s yet another letter to the Huffington Post:
Ian Fletcher asserts that “Much of our recent export growth has been hollow anyway, consisting largely in raw materials and intermediate goods destined to be manufactured into articles imported back into the U.S…. But this is obviously a losing race, as the value of a product’s inputs can never exceed the value of a finished product sold at a profit” (“Trade Solutions That Won’t Work,” Feb. 27).
Really? So it must also be true that an owner of an oil well leads a “hollow” economic existence, for he can never hope to profit from owning such a well. After all, crude oil is a mere input into the production of finished products: the oil-well owner exports crude oil from his company to refiners and other producers who transform that oil into more highly valued final products – such as gasoline, plastics, and pharmaceuticals – that the oil-well owner then buys for his firm’s continued operation, as well as for his and his family’s own consumption.
Because, as Mr. Fletcher says, “the value of a product’s inputs can never exceed the value of a finished product sold at a profit,” supplying crude oil is surely an impoverishing experience because so very many of the final products that the oil-well owner buys contains oil that is sold back to him at prices higher than he received when he first sold it as crude.
Someone should alert Jed Clampett and his banker, Mr. Drysdale.
Donald J. Boudreaux