Removing the Beer Goggles
InBev’s attempt to purchase Anheuser-Busch has caused a big stir in the news and politics lately. Justin and Patrick have already substantively commented on the issue.
Referring to Anheuser-Busch, the News Tribune quotes Missouri Sen. Claire McCaskill:
"[…] This is a company that’s been profitable year in and year out and has provided good middle-class jobs in America. It feels like to too many people in our country right now that these are the kinds of jobs that are going away."
This seems a bit confused. It assumes that if InBev does successfully purchase Anheuser-Busch, it will move the production facilities overseas. This isn’t necessarily the case. In fact, in the same article, InBev CEO Carlos Brito is contends:
"What we’re proposing basically is really to take an American brand, so successful as Budweiser, and unleashing that to the world via our distribution system," Brito said.
Taken at face value, this quote suggests that there is no reason to assume that InBev wants to move the production of Anheuser-Busch beer overseas. Even if this were right, the idea that the move would cause job losses to the U.S. is still misguided. A certain Frenchman is always relevant. The problem lies in focusing only on what can be easily seen the jobs lost overseas. A careful analysis will also reveal what is unseen.
If InBev were to move Anheuser-Busch’s production facilities overseas, suddenly a large amount of consumption goods in the U.S. would be imported rather than produced domestically. If this occurs, the importer (in this case, InBev) can do one of two things with the U.S. dollars it receives: invest in U.S. assets or purchase export goods. To the degree that the former occurs, domestic industries are able to expand and create new jobs with the increased investment. In the latter case, export industries see increased demand and respond by ramping up production, creating new jobs.
The net impact of the move overseas on job creation is ambiguous without empirical data, but it isn’t obviously negative (or positive, for that matter) because there are effects running in both directions. The likely long run effect would be minor, if there is one at all. This is assuming that all else is held equal, of course. Without any evidence to suggest that the net effect would be negative, inferring that it would be negative is a bit rash.
One might argue that this is all well and good for an entire country, but what is at stake in this case are the jobs of Missourians or, more accurately, St. Louisians. This argument is also misguided. The above analysis applies no matter where the border of the domestic region is defined, whether it be St. Louis or your own backyard.