Here’s a letter to my friend T. Alan Russell:
Thanks for your e-mail. It’s always good to hear from you.
You’re correct that the media and blogosphere now reverberate with what you call “cries for Made-in-America-only purchases.” And you’re correct, too, that heeding such calls would be extraordinarily counterproductive – perhaps even calamitous.
First, because of the unfathomable ‘globalness’ of today’s web of economic connections, it’s practically impossible to put a dollar figure on what U.S. autarky – that is, no U.S. trade with foreigners – would cost us. But we can perhaps infer an estimate of the absolute minimum cost from research done by Dartmouth’s great trade economist Doug Irwin. He found that the near-autarky caused in the U.S. by Thomas Jefferson’s December 1807 to March 1809 trade embargo reduced U.S. GDP then by 5 percent. An identical percentage-point reduction today would slice from U.S. GDP $1.072 trillion – reducing annual average per-person GDP in the U.S. by about $3,250.
But again, this figure is almost surely a stupendous underestimate, given that Americans today are far more integrated into the global economy than were Americans in Jefferson’s day.
Second, some people will respond that they don’t want autarky; they want America to be self-sufficient only in “critical” goods. Several problems infect this demand. It’s a demand that is so easy to utter but terribly difficult to fully grasp.
One problem is that no objective criteria exist for distinguishing “critical” from “non-critical” goods. In practice, such distinctions would be made by politicians influenced by interest groups. What could go wrong?!
A second, deeper problem is that even if we identified some goods that are unquestionably “critical,” such goods – we’d discover – are produced with inputs from around the world as well as from some of our own “uncritical” goods. We would also discover that units of many kinds of imports are components in some of our “critical” goods, and in other cases imports ‘displace’ domestic production capacity that could be portrayed as being useful in producing our “critical” goods.
To create true self-sufficiency, therefore, in the production of “critical” goods would in practice require a prohibition of nearly all imports. Autarky would be the result. Not only would we Americans lose access to the low-cost imported inputs and consumer goods that we today enjoy – and not only would many American producers that rely on exports have to scale down the size of their operations, thus pushing up per-unit costs of product development and production – we Americans, who are four percent of world population, would also shut ourselves off from the creativity of 96 percent of our fellow human beings.
We Americans would suffer immediate and noticeable economic damage, and over time become ever-more-destitute not only relative to the level of prosperity that we would have enjoyed had we remained open to global commerce, but also relative to countries more open and less fearful than us. America would become, not great, but infirm and impoverished and prostrate before history.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030