In a prosperous country such as the United States, a fallacy that sounds very plausible is that American goods cannot compete with goods produced by low-wage workers in poorer countries. Both history and economics refute it. High-wage countries have been exporting to low-wage countries for centuries. The key flaw in the high-wage argument is that it confuses wage rates with labor costs—and labor costs with total costs. When workers in a prosperous country receive twice the wage rate as workers in a poorer country and produce three times the output per man-hour, then it is the high-wage country that has the lower labor costs. It is cheaper to get a given amount of work done in the more prosperous country simply because it takes less labor, even though individual workers are paid more. The higher-paid workers may be more efficiently organized and managed, or have far more or better machinery to work with. A prosperous country usually has a greater abundance of capital and, because of ...