Why is it possible that Americans are able to buy so many foreign products? Let's look at world trade history. Once upon a time, way back in Europe, during the age of kingdoms and Oligarchies, the volume of trade increased immensely. The European nations dominated back in the 1500s. They developed a concept or economic philosophy defined as mercantism. This was the ideal they came up with. The concept was precious metals determined a nation's wealth. Then they started thinking of ways to increase what ever wealth they had. Kings looked at other nations to get wealth from. Besides stealing and creating war, the civil contention was to export more goods than imports. Kingdoms and Oligarchies became focused upon finding new natural resources for processing and manufacturing goods. Their focus was to sell the goods abroad and not to import much other than precious metals. Yes, they wanted to export as much as possible, for the purpose of acquiring precious metal. Their main import was precious metals. That was the measurement of national wealth.
Then in 1776 a man by the name of Adams Smith published something that contradicted the common belief of wealth. Adam Smith's belief was this: "A nation's wealth is determined by it's holdings of assets." Assets like house hold items and things families could utilize. Smith presented the argument nations should export what they where best at making, to purchase what they where less good at making. This was his philosophy displaying what he thought of as the only way to truly increase wealth of a nation. The early 19th century was when Smith's ideas on trade became refined. David Flicardo, a wealthy bond trader explained the concept known as "comparative advantage." Flicardo's contention was "absolute wealth didn't matter, but comparative advantage was more important. The idea entertained a comparison like this: Imagine if it took one hour to create a tea kettle in the United States and four hours to create the same tea kettle in Whateverland. The United States would have the advantage on making tea kettles. Now imagine if it took the United States four hours to make a bar of soap, however one hour to create that bar of soap in Whateverland. Whateverland would have the advantage on making soap. Compare the two advantages.
Now the philosophy arises if all nation's exploit their comparative advantages, everyone can prosper. Please understand that this is merely a story based on history and I personally feel like one of the Brothers Grims. If all nations can exploit their comparative advantages, it is said idealistically, all will be better off and the standard of living in each nation will rise. It is projected by some that gross domestic product (GDP), the value of goods and services produced in a country will increase and new jobs will be created in industries that have a comparative advantage. I personally find Some of this highly idealistic, when considering world corruptions as it is. However, I can't resist writing "and they lived happily ever after."
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