"Buy American" Means Bye-Bye Prosperity

I'm not the paranoid sort but I must say that I am really starting to get worried. Protectionism is really making a come back.

It isn't just the smaller pie they're going to make us all eat (starve?) from that has me worried but also that every major episode of protectionism has been followed by a major war. And I'm not talking little excursions like Iraq, I'm talking the biggest, bloodiest wars man has ever waged.

This seems to be a lesson we have to re-learn over and over again. I was really hoping we were finally past that but I guess not.

BoscoH –

Sorry to break your Bob-the-Builder bubble, but no we can't. The result of what you suggest will be the same this time around as it was in the 30's. If we impose tariffs on Chinese, Japanese and Korean goods, then China, Japan and Korea will, in turn, impose tariffs on our goods. The result will be that US exports will fall, and companies which produce goods for export will start laying off employees.

You seem to assume that manufacture of all those products will move to the US. Some will, of course, and the prices of those products will certainly climb as US consumers no longer get the benefit of lower-priced overseas labor. But, others won't because it producing those goods in America will be cost-prohibitive. As a result, the tariff would increase prices of some goods and make other goods completely unavailable. A lot of Chinese, Japanese and Korean workers will be unemployed, and a smaller number of American workers would be employed by these newly repatriated industries.

That process would work in reverse once Japan, Korea and China put trade restrictions on our goods — they will gain a few jobs (but not as many as they lost due to US tariffs), and the US will lose some (more than we gained from our own tariffs).

The policy you suggest will leave both the US and China/Japan/Korea worse off. That hardly sounds like increased prosperity to me.

Your "if we can put a man on the moon" line makes no sense at all. While I applaud your "can do" attitude, there are certainly somethings that we cannot do. Why not just say "If we can put a man on the moon, can we create a car that goes faster than the speed of light?" The best attitude in the world will be insufficient to overcome the laws of either physics or economics.

To understand why putting a man on the moon is completely different than trying to engineer economic outcomes, read this article…

http://www.econlib.org/library/Columns/y2005/Robertsmarkets.html

"Can we impose tariffs on cheap Chinese, Japanese, and Korean imports, creating good hobs here in the United States and improving our own prosperity? Yes we can."

And we'll trade a bunch of good, high-paying jobs for a bunch of crappy, low-paying jobs.

And be poorer in the end.

"</sarcasm>"

Cheap foreign labor is not the downfall but salvation of American labor, not the cause but cure for its unemployment.

Foreigners could have nothing to do with it, for they couldn’t tell Americans not to work, not to better house, cloth, feed, and employ one another. Only the law could do that. When it doesn’t protect but leads the attack upon private property, there’s that much less incentive to create it, to invest in business and job formation. When it forces wages above free market, equilibrium, full employment levels, there must be unemployment, with or without foreign competition.

But while America’s own policies price its labor out of the market, cheap imports, reducing the cost of doing business in America, price it back in. So, without them, there would not be more but fewer jobs in America, and lower paying, for they boost the purchasing power of our money and real wages.

The problem with muirducks is they think economics is a zero-sum game, where China gains job and we lose them.

When at war and you want to destroy the enemies economy, it is usual to employ a blockade to stop the enemies international trade. So it follows that if one wants to destroy our economy, one would put up barriers to international trade.

Mezz,

Ad hominem arguments are not persuasive and your haphazard attacks on those that disagree with your point of view is one of the primary problems with knowledge propagation. I think that people in general do not care about other people outside close personal friends and family. For the most part, I think people care about own their ideas more than they care about other people including muirgeo AND you. This includes me as well.

Oh sure, you can go on and on about how you care about people, as can muirgeo. But, honestly, how upset were you when the tsunami hit southeast Asia killing people and destroying lives? How upset were you when Katrina destroyed New Orleans? How upset are you now about Kentucky? Did you lose any sleep? Did you send money (if so, was the amount you sent so large that you had to tighten your budget because of your gift?)?

I am interested in small government because I don't get a whole lot out of most government programs. In fact, I see MY life as being worse because my money, and other people's money, is being taken and flushed on useless programs. I argued in favor of Wal-Mart because MY life and the lives of MY friends and family are improved. If it didn't, I probably wouldn't have an opinion, as I have no opinion on almost all companies. I like the companies that make my life better and don't care about those that don't. I care even more about those companies that receive MY money from politicians bent on buying votes. The government taking large amounts of other people's money is bad for me because of opportunity cost- the fact that the money squandered could have been the money that developed a product to make my life better. I care about other people's lives in as far as it makes my life better. I can confidently say you and muirgeo are the same, as are ALL commenters and contributors on this blog.

Do not preach to me about caring. I see through you and everyone else that says they care about everyone. They don't and neither do you.

And since the internet provides a nice, anonymous forum for you and muirgeo to argue, you both end up with nasty exchanges that add absolutely nothing to any argument.

I was calling muirgeo out, asking him what's his point. But I can just as easily call you out. What does your comment add to this post? In fact, your comment detracts from the main idea of the post. muirgeo, what was your contributing point in your post? Did either one of you advance any coherent argument or provide reliable data to try to get some understanding about how economically damaging the "Buy American" slogan can be?

I've said what I had to say about the ridiculous tone you and muirgeo (and many other commenters) take on this site. Let me know if either of you want to talk about any ideas relevant to the post Don wrote.

-Ken

So Ken was Sam Walton a fool for promoting "Buy American" or was he a genius for founding the Walmart empire?

There is a reason Mr Walton promoted buying American and it likely has something to do with the same reason that Walmart was most likely to originate in AMERICA and no where else in the world.

Free trade is not a black and white issue. Multinational corporations can use it in very explotative ways to get around the desires of local citizens.

If you have a Walmart in your town you've likely paid subsidies in the form of taxes beneifts to lure them to your town. From a national perspective you are subsidizing many of Walmarts underpaid workers who get their medical care from the government rather then through their company as they make so little they qualify for medicaid.

The experts on trade agreed it was a mutually benificial endevour but had much oppurtunity for explotation if capital was allowed to cross borders, if employment was not complete or if trade was imbalanced. All conditions that commonly exist in our current trade structure.

There are good arguements to be made that our trade imbalance was a principle cause of the state of our current economy.

"I argued in favor of Wal-Mart because MY life and the lives of MY friends and family are improved. "

You sure about that?

"Multinational corporations can use it in very explotative ways to get around the desires of local citizens."

Those who take advantage of global commerce to avoid being exploited are also "citizens".

Josey,

Non sequitur. It does not follow from your premise "China kept trade unbalanced" that there would be a housing bust.

I would also ask that you provide rationale. How did China keep trade unbalanced? How would this lead low mortgage rates? For that matter, what constitutes a "low mortgage-rate"?

"Buy American" Means Bye-Bye Prosperity.

This can't be a true statement because the negation would be "Don't buy American" Means Happy Days Are Here Again. I think you need to rework your title to make it meaningful and logical.

Rich people can afford to buy whatever they like including American made goods in preference to cheaper similar foreign made products if they are so inclined. So I guess that is another strike against being well off; the affluent are not stuck buying the cheap knockoffs made in sweatshops that are sold in most every American store and outlet. I will let your logic lead you the proper conclusion of whether or not that is a good thing for enhanced prosperity. That may require you to take a business ethics class as well as a class in logic. If there is something wrong with buying American, this idea needs to be flushed out some more or flushed down the toilet.

Wow TrUmPiT! Epic. Logic. Fail.

if A –> B then ~B –> ~A. So not "Bye Bye Prosperity" implies "not Buy American". Which means "Hello Prosperity" implies "By from wherever". And that's the point were arguing here.

I would hazard a guess that TrUmPiT has never been outside the country, nor has family or friends who live outside the country and/or are citizens of other countries. Free trade is a lot like gay marriage. If you know a few gay people, you're likely more accepting of the idea. If you know a few economic actors outside your national tribe, you're likely more accepting of the concept that they have the same right to trade with you as anyone born in your national tribe.

Ignorance is bliss.

You're being disingenuous trumpit. When they put "Buy American" provisions in bills like the stimulus you know they mean buy ONLY American. Otherwise there's really not point to the provision as people would buy American if it benefit them.

Those of us who oppose such provisions do not believe you should not buy American. So you're creating some sort of strawman argument. Why? Why wouldn't you address the ACTUAL argument?

Also, last I checked it wasn't rich people who shopped at Walmart.

Our hosts have pointed out numerous times that "trade deficit" is a subjective term. All trade is balanced, in that both sides are getting what they desire. The Chinese are getting pieces of paper that Americans own, and Americans getting products that Chinese own.

Americans want Chinese products more than they want the paper they own, and the Chinese want that paper more than they want the products they own.

Where's the imbalance? What's the problem?

Here's one more instance where liberty is on one side and Mierduck is on the other: He would forbid me from buying a product at a price that the seller and I find mutually agreeable simply because the seller lives in a different country.

I have a similar proposal: I think it should be illegal for Mierduck to treat children who live more than one block away from his business.

If the idea of buying American makes sense, why not "buy from North Dakota"? Why not "buy from Atlanta"? Hell, why not just trade within our own families.

And let's not, through all of this, lose sight of the fact that cheap foreign labor saves American jobs.

See my post above, and challenge the logic, if you can.

Prediction: no one will try.

That's true, Sam, but how, why?

Maybe it is a refutation of your claim.

Saving jobs is what politicians try to do.
We want to get rid of lousy jobs and replace them with better jobs.

I couldn't come up with a genuine refutation except by suggesting you didn't go far enough.

Were you really looking for a refutation?