Ford Motor Company's new restructuring plan, calling for layoffs of 30,000 workers, once again reminds us of America's economic conundrum. Put simply, the United States confronts the 'one-price law.' Whenever identical items sell for different prices, the one-price law tells us that people will buy in the low-priced market and sell in the high-priced one until prices converge at a single point for the two markets. Since our workers receive relatively high wages compared with much of the rest of the world, this rule implies that America can preserve its wages only if it has better goods and better workers, or protects itself with market barriers such as tariffs. If, in our zeal to maintain competitiveness, we rely primarily upon market forces, we will surely hasten economic decline for the two-thirds of our workers who have become the visible manifestation of the one-price rule in global labor markets. (more...)

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