In the promotional industry, American manufacturing has its obvious benefits. Product safety, from basic toxicity concerns to complicated cases of fraud and counterfeiting, is easier to enforce and count on since it falls under the watchful (and litigious) eye of the U.S. legal system. Stateside orders, especially custom ones, can often be filled faster since there’s no delay from shipping overseas. Similarly, inventories are more responsive to runs and massive purchases, making stock shortages less common. Practical and easy-to-understand benefits to be sure, but hardly the main reason for people’s interest in American manufacturing.
More than anything else, the core of the “Buy American” argument comes down to a kind of financial patriotism: Buy within the country to make the country stronger. More money spent equals more jobs, which equals more money, which equals even more jobs, and so on. Makes sense, right? Or does it seem too simple? It turns out the answer is, “Kind of, but not really.”
While what drives a healthy economy with a high standard of living is a complicated mess of various factors, the core argument of “buy within the country to make it stronger” is actually pretty solid reasoning. By looking at an economic concept called “GDP,” it becomes immediately clear that American manufacturing is profoundly tied to the health of the U.S. economy.
An obvious statement? Maybe, but in an industry such as ours that is so closely tied to manufacturing, it’s beneficial to understand how different manufacturing sources can affect the economy in different ways. So, whether you’re trying to nudge a client toward buying American or whether you’re on the fence yourself, below is an explanation, albeit a bit simplified, of GDP and how it justifies American manufacturing as an unquestionable good for the economy.
WHAT IS GDP?
GDP, or “Gross Domestic Product” is the total measure of everything a country has produced and sold over a given period of time (usually measured at yearly or quarterly intervals). The “Product” in GDP does not refer merely to physical goods, but also services, investments, ideas, literally anything that can be bought. And that’s the only catch—it has to be bought. If a painter paints a portrait solely for himself to look at, it doesn’t count toward GDP since he’s not trading it. If he hangs it in a gallery and lets people look at it for free, it’s still not contributing to GDP, because again, the portrait is not being sold. But, if the painter sells artwork through the gallery, and the portrait is one of the items he sells, then it counts toward GDP. Simple enough, right? Every product, every service, every saleable thing a country makes, that’s GDP.
Why people care about GDP is that, though not a direct indicator, it’s often used as a measure of economic health of a country and overall standard of living. The reasoning is fairly straightforward: Because GDP is a measure of everything a country sells, if its GDP is high, that means the country has a high amount of wealth because it’s selling a lot. And while level of wealth doesn’t necessarily correlate to a high standard of living (other factors, such as wealth distribution, employment rates and many others also play parts), it does correlate to overall economic activity, and an active economy is generally a healthy one. (If you’re selling things, you’re paying laborers, making investments, collecting taxes, etc.) Hence, why people care about and measure GDP. If it’s high, you’re doing okay, if it’s low, you’re not.
SO WHAT’S GDP HAVE TO DO WITH AMERICAN MANUFACTURING?
GDP and manufacturing connect over how GDP is measured. There are a couple ways to calculate GDP, but when trying to understand manufacturing’s role, it’s helpful to use the “consumption” model.
The consumption model of GDP is based around the idea that everything a country sells is equal to everything it consumes, i.e., a country and its people do work in exchange for an equal amount of goods and services. Because they’re equal (you can only consume what you can buy, you only buy what you can consume), you can calculate a country’s GDP if you know what it consumes. The GDP consumption equation looks like this:
GDP = Infrastructure/Business Investment from Private Citizens + Private Citizen Consumption + Government Spending/Consumption + Total Exports – Total Imports
The equation is helpful for understanding the impact of American manufacturing because it’s the simplest way to illustrate its entrenched position within our economy.
Infrastructure/Business Investments: This is private citizens’ investments in business and infrastructure. New factories, new computers for an accounting department, new trucks for a shipping fleet, are all purchases that contribute toward raising GDP and are obviously things that would be influenced significantly by the presence of American manufacturing.
Citizen Consumption: Everything private citizens consume. Food, clothing, cars, dance lessons, video games, roller coaster rides, it all goes here. Manufacturing’s impact here is obvious: To consume something, it has to exist, so provided there is enough demand, the more you can make, the more you can consume, and the more you consume, the higher GDP.
Government Spending: Like citizen investment and consumption, except from the perspective of the government. Manufacturing’s impact is here largely similar to the prior two examples, just kept separate for the sake of understanding the government’s impact on the economy.
Total Exports: Goods produced, but not consumed within the country. Separated from “consumption” since they’re technically consumed outside the GDP equation, in whatever country they’re shipped to.
Total Imports: The only negative part of the equation. Imports are subtracted since, though they are consumed, they are not produced within the country and thus can’t be counted toward a country’s product. Since the only way to reduce importing is to either consume less or make what you need stateside, American manufacturing is really the only way to improve this part of the GDP equation.
So what does this all mean? It means that, while by no means the only factor in building a healthy economy, GDP, and by extension, American manufacturing, are a vital part. It might seem obvious, but again, sometimes obvious isn’t enough. Sometimes a more detailed explanation is in order, whether for personal understanding or to assist a client in product selection and purchase.
Further reading on GDP and the economy: “Measuring the Economy: A Primer on GDP and the National Income and Product Accounts” at http://www.bea.gov/national/pdf/nipa_primer.pdf.
