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Clothes from Grain: A Miracle or a Problem?
by Joyce Gleason (USA)
LESSON DESCRIPTION
Students read two fables about entrepreneurs who buy grain and turn the grain
into clothing or resell the grain and use the proceeds to import clothing.
Students use the information from the fables to determine why people
trade and to analyze
the costs and benefits of protectionist trade policies.
AGE LEVEL
14-19 years old
CONCEPTS
- voluntary exchange
- imports
- exports
- tariff
- quota
CONTENT STANDARDS
Voluntary exchange occurs only when all participating parties
expect to gain. This is true for trade among individuals or organizations
within a nation
and among individuals or organizations in different nations.
BENCHMARKS
A nation pays for its imports with its exports.
When imports are restricted by public policies, consumers pay higher prices,
and job opportunities and profits in exporting firms decrease.
OBJECTIVES
- Students will identify examples of voluntary exchange.
- Students will define exports, imports, protectionism, tariffs, and
quotas.
- Students will explain the costs and benefits of trade among individuals
or among organizations in different nations.
- Students will
analyze who gains and who loses with restrictive or protectionist
trade policies.
TIME REQUIRED
two class periods
MATERIALS
- copy of Activities 1, 2, 3, and 4 for each student
- Extension activity:
- world map
- tacks
- two colors of yarn or string
-
two colors of paper cut into small slips (1" X 2") with a hole
punched in each strip
- Clothes from Grain: A Miracle or a Problem?
PROCEDURE
- Explain that this lesson focuses on exchange and international
trade. Ask what voluntary exchange means. Guide students
to conclude that voluntary exchange is trade between people who agree
to exchange money,
goods,
services,
or resources they possess for money, goods, services,
or resources someone
else possesses.
- Tell students that they will read two stories about voluntary exchange.
Distribute a copy of Activities 1 and 2 to each student. Have
students read the fables and answer the questions at the end.
- After students have completed the assignment, discuss their answers to
the questions as follows.
- Who gained by Mrs. Brown’s enterprise?
(Consumers gained because
they were able to buy higher-quality clothing and shoes at lower
prices. Farmers gained because there was increased demand
for their grain. Mrs. Brown
and her
employees gained. Mrs. Brown earned more profit, and more employees
earned wages and salaries.)
- Who was harmed by Mrs. Brown’s enterprise?
(Workers from apparel and shoe manufacturing businesses located
elsewhere lost their jobs. Other
manufactures of clothing and shoes had to shut down and/or move
into other
lines of manufacturing.)
- Why did consumers buy Mrs. Brown’s clothes
and shoes rather than those made by other manufacturers?
(Consumers
decided that Mrs. Brown’s clothes
and shoes offered better quality at lower prices than other manufacturers.)
- Who benefited from Mr. D’s enterprise?
(Consumers gained because
they were able to buy higher-quality clothing and shoes at lower
prices. Farmers gained because there was increased demand
for their grain.
Mr. D and his employees
gained. Mr. D earned more profit and more employees earned wages
and salaries.)
- Who lost from Mr. D’s enterprise?
(Workers from apparel
and shoe manufacturing businesses located elsewhere lost their
jobs. Other clothing
and shoe
manufacturers had to shut down and/or move into other lines of
manufacturing.)
- Why did consumers buy Mr. D’s clothes and shoes rather
than those made by other manufacturers?
(Consumers decided
that Mr. D’s
clothes and shoes offered better quality at lower prices
than other manufacturers.)
- Where did Mr. D get the foreign money
to buy clothes produced in other countries?
(He sold
grain to foreign producers. He used
the revenue to
buy foreign-produced
clothing and shoes that he sold to retail stores in Americana.)
- Explain that in the real world the international exchange process is
more indirect.
- Mr. D would exchange his foreign currency revenue for dollars.
- Banks would
then have foreign currency available to sell to importers for
their dollars.
- Importers would use the foreign currency to buy
goods manufactured in other countries.
Point out that if a country doesn’t earn revenue from selling exports
to foreign countries, then its importers
must borrow foreign currency or exchange other assets for it to conduct
business. In other
words, a country
pays for
its imports with its exports.
- Distribute a copy of Activity 3 to each student. Tell students to add
notes to the vocabulary list as the lesson continues.
- Explain that in both fables, voluntary exchange took place. Voluntary
exchange occurs when people or organizations trade something of value
with other people
or organizations in order to benefit. People agree to trade because
they expect to benefit.
- Ask students for examples of times they engage in voluntary exchange.
(when they exchange money, goods, or services for other goods and services;
when they
work in exchange for wages)
- Explain that both sides in a trade expect to benefit, so the benefits
that result from the trade can be counted as gains from trade. For
example, farmers
may sell their harvest and use the money they receive to buy clothing,
food, entertainment, and so on. They benefit more from the items they
purchase than
they do from keeping the bushels of grain for themselves. By the
same token, the grain buyer needs the grain more than the money he
or she pays for the grain.
These gains would not have been realized if trade had not occurred.
- Explain that international trade occurs when people and organizations
within nations trade with people and organizations in other nations.
Discuss the following.
- What are imports?
(goods or services that are produced in one country
and sold in another country)
- Give some examples of goods that
the United States imports.
(cars, clothing, VCRs, camcorders,
televisions, shoes)
- What are exports?
(goods sold in
one country but produced in another country)
- Give some examples of goods that the United States exports.
(cars,
computers, soy beans, refrigeration
units)
- Explain that governments often enact policies to prevent or to limit
imports because domestic businesses are producing the same or very
similar goods and
services. These policies are designed to protect local workers
and firms that compete with the imported products. The purpose of the
policies is to raise
the price of imports or to limit the availability of imports,
so consumers will decide to buy more of the locally produced products.
These types of policies
are called protectionism.
- Explain that the two main forms of protection are tariffs and quotas.
A tariff is a tax on imports. The tax raises the price of the
import. This means that consumers will buy less of the import and probably
will buy more of the
competing domestic (local) product. The price of the domestic
good will rise because its demand increases causing the price to rise.
- Explain that a quota is a limit placed on the amount of a product that
may be imported. This reduces the supply of foreign products available.
Local producers of the product will find that the demand for their
product increases.
As a result, consumers will pay higher prices for the locally
produced product. In addition, consumers will pay higher prices for
the imported good because
the supply has decreased.
- Have students review the two fables and consider the following questions.
- Describe examples of voluntary exchange in the fable of Mrs. Brown.
(Farmers sold grain to Mrs. Brown. Both Mrs. Brown and the
farmers benefited from this exchange. Consumers bought clothes
and shoes from Mrs.
Brown. Both
Mrs. Brown
and the consumers benefited from this exchange. Workers traded
their skills with Mrs. Brown for payment. Both the workers
and Mrs. Brown benefited.)
- Describe examples of voluntary
exchange in the fable of Mr. D.
(The farmers sold grain to
Mr. D. Both Mr. D and the farmers benefited. Mr. D sold
grain
to foreign buyers. Both Mr. D and the foreign buyers benefited.
Mr. D bought clothing from foreign manufacturers. Both Mr.
D. and the foreign manufacturers
benefited. Consumers bought clothing from Mr. D. Both Mr. D. and
the consumers
benefited.)
- What were Americana’s imports and exports?
(Imports:
clothing and shoes. Exports: grain)
- What policies might be adopted
by the Americana Congress to
appease those who are hurt by clothing imports?
(The Americana
Congress could impose
a tariff
or a quota on imported clothing.)
- What would the results of
a tariff or quota be?
(There would be less variety of products
and higher consumer prices; some jobs
in the local clothing
industries may be protected; some jobs may be lost by importers;
foreign
producers would buy less Americana grain, so farmers’ incomes would
be reduced.)
- Why did everyone think Mrs. Brown was a genius
when her results were the same as Mr. D’s?
(It appeared that Mrs. Brown
had new technology that allowed her to produce the clothing and
shoes. People were
less upset about
the technology than they were by the idea of buying goods from
foreign countries. It seems easier to find fault with foreign
competition than with improved technology.
In the second fable the issue of displaced workers becomes political — an "us
versus them " issue.)
- Suppose an undercover agent discovered that Mrs.
Brown was doing the same thing as Mr. D¾ exporting grain from her warehouse
in the dark of night and unloading shipments of imported clothing
at the other end of her warehouse.
Is there really any difference between the situation when everyone
believed the clothing came from grain through a miracle technology
than having the imported
clothing purchased with the proceeds from the sale of grain?
(No,
there really isn’t a difference. In both cases, consumers were better
off, and some workers were displaced. The only difference is that
in one case it appeared that workers were displaced by technology.
In the other case,
workers
were displaced
by foreign competition.)
- Why did farmers want to sell to either
Mrs. Brown or Mr. D?
(They valued the payment they received in
exchange for the grain
more than they valued
the
grain.)
- Why did consumers want to buy clothing from Mrs. Brown
or Mr. D instead of clothing made in Americana?
(Consumers
felt that Mrs. Brown’s and Mr.
D’s clothing was as good or better than Americana clothing and the prices
were lower.)
CLOSURE
Review the main points of the lesson.
- What is voluntary exchange?
(when people or businesses agree to trade
goods, services, resources or money for other goods, services, or
resources)
- Why do businesses and individuals trade?
(They trade because they expect
to benefit. They benefit because they give up something they value
less than the item for which they trade.)
- Give an example of a voluntary exchange you made and identify how you
and the other participant gained from this trade.
(Answers will vary
but might include
something such as: I used my allowance to buy a CD at the store.
I gained from the trade because listening to the CD brings me a lot
of enjoyment. The store
gained revenue and, most likely, profits from the exchange.)
- Who gains from international trade?
(Those who gain are the ones who
voluntarily exchange goods, services, resources, or money. For example,
if you buy a shirt
made in Korea from a local department store, you gain because
you have a nice piece of clothing to wear. The department store gains
in revenue and profit;
the Korean manufacturer gains revenue and profit.)
- Who might be hurt from international trade?
(producers and workers in
industries that compete with imported goods)
- If people bought fewer imported goods, what might happen?
(Foreigners
might not earn the funds to buy our exports.)
- Describe the benefits and costs of trade.
(Trade hurts some workers and
businesses, but other workers and businesses are helped. Consumers
are helped by the increased competition that brings lower prices
and more variety.)
- What is meant by protectionism?
(Protectionism refers to policies, such
as tariffs or quotas on imported products, that "protect" local producers
and workers of these products. The protection occurs because tariffs
and quotas make imports more expensive which makes it easier for local
producers to compete.)
- What is a tariff?
(a tax on an imported good)
- What is a quota?
(a limit on the amount of a foreign product that can
be imported.)
- What is the effect of protectionism?
(The immediate effect is to raise
the price of the imported item. This reduces competition for locally
produced items, and, therefore, may protect some local jobs. At the
same time, consumers
are hurt because the price of the imported product will rise.
Exporters will eventually be hurt because foreigners won’t earn as much
revenue from selling imports to the U. S., which would pay for U.
S. exports.)
- Who gains and who loses from free trade?
(Consumers gain from lower
prices and more variety. Export industries gain as foreigners earn
dollar revenue from
selling their products to us and can import more U. S. products.
Some workers and businesses may lose revenue and/or jobs as a result
of the increased competition,
but some will gain.)
ASSESSMENT
- Distribute a copy of Activity 4 to each student. Have the students
complete the assignment for homework. Sample answers:
- buying lunch,
exchanging books with someone in class, working at a part-time
job to earn income, spending money on clothes
- Examples
of imports would be anything made in another country that
is purchased in the students’ country. Examples of exports
would be anything that originates in the students’ country and is
sold in another country. Imports and exports can be goods, services,
or resources.
- Exchange requires that people give up something
to receive something in return. The same principle applies
to international trade. To receive
imported goods or services, people must provide something
of value in exchange. Either
they must provide money to the import producer that they
earned by selling goods in the importer's country or they
must exchange
actual goods
or services
that
the import producer wants before the imports will be sent.
(The latter exchange is called barter.)
- A tariff protects
local manufacturers by raising the price of the import.
Higher-priced imports allow the local manufacturer
to compete more
successfully
because local prices are no longer as high relative
to the prices of imported goods. This may shift demand to
the local
product and away from
the
imports.
- An import quota has much the same effect as
a tariff. By limiting the number of imports allowed
into a country, the price of imports should rise (because
the supply
has decreased). This makes
demand for local
goods
rise because
their
prices are not as high relative to imports.
- Those
who gain from international trade are consumers who
benefit from lower prices, better
selection, and possibly better quality that comes from
increased competition. Producers of exports
also gain as the import
producers earn revenue that may be spent on
exports from the home country. Businesses
that compete with imported goods and workers
in these businesses would be hurt.
- Consumers
are hurt by protectionist policies because they pay
higher prices, have less
selection, and probably get lower quality.
Businesses
that compete with imported goods and
workers in those businesses benefit
from protectionist
policies.
2. Have students develop their own trade fable.
EXTENSION
- Have students check the labels on their clothes. As a class, list
the countries in which each item was manufactured. Post a world
map and have students
find these countries on the map and mark them with a tack.
Link each tack with a string or piece of yarn attaching a small piece
of paper that
lists the items.
Tell students to find out what their country exports to the
various countries they have marked. Use another color yarn or string
to make a second
connection
between the students’ country and the other countries. On these pieces
of string attach a small piece of paper listing the product
their country exports.
- Have students find the major exports and imports for various countries.
Use statistical yearbooks, encyclopedias, or Internet sources
such as the CIA Handbook of International Economic Statistics or The
World Factbook at http://www.odci.gov/cia/publications/pubs.html.
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