More “Protectionism” Fever Swamp Dreams
I had the sad experience today of moderating an online chat during an interview with Nick Gillespie of Reason TV and yet another screed on how awful it is if people should actually ask their government to “Buy American.” (Featured earlier today on Hot Air.) Nick’s primary modus operandi was the usual distraction of saying that some products (gasp!) have a lot of foreign made parts in them, followed up with a generous dose of bashing the Obama administration for having the nerve to include a (double gasp!) Buy American clause in the stimulus package.
On the domestic front, President Obama and our Congress have done very little to give me reason for cheer thus far, but on the rare occasions when they get something right, we should certainly not pillory them.
Republicans, on many occasions, have wrongly been accused of convincing their base to promote policies which work against their own interests. But in this one case, it’s not only a fair criticism but a blinding truth. In case you’d like to know exactly how this sad state of affairs came to be, I can lay it out for you in a few simple steps.
1. Promoting “Buy American” policies and other initiatives which support American manufacturing and production creates more work here.
2. Helping American manufacturing interests, by default, creates a better environment for American labor unions.
3. Labor unions, in large part, support Democrats and their agenda in government.
4. Supporting labor unions helps Democrats, so it hurts Republicans.
5. Buying American hurts the GOP and should therefore be rejected.
That’s pretty much the beginning and the end of it. Unfortunately, this is one of the worst cases I can think of where a political party has so blatantly worked to harm American interests for the purpose of success in the political arena and gotten so many Americans to buy into it.
This didn’t originate with one party or the other. It came from a combination of Bill Clinton in the White House and the Gingrich revolution in Congress. “Free trade” has been anything but, as we watch ourselves get sucked into unfair agreements with governments around the world who consistently and openly enact protectionist policies. But don’t listen to me. Don’t listen to the politicians. Take a look at:
Our trade deficit over the last two decades.
Our trade deficit over the last two decades.
Our trade deficit over the last two decades.
Our trade deficit over the last two decades.
Perhaps… just perhaps… if I give you four shots at clicking on the link you will take a look at numbers instead of rhetoric. You might examine the trend in our trade deficit with all of these countries over the period we are discussing. Just MAYBE you will set aside the GOP talking points and ask yourself, “just how well is this so called free trade working out for us?”
You know, I actually had someone in the chat today say, (and I quote) “So America is a country that imports more than it exports. So what else is new?” So do most third world countries. If you have a pool that you are draining by one-third every day, …. Helloooooooooo? Does anyone honestly think that’s a recipe for economic success?
So many people have blindly bought into the idea that “we live in a global economy and working in it will produce more jobs.” It has not. Actually… I take that back. It’s produced lots of jobs. Countless software engineers, help desk technicians and graphic designers have been “downsized” and traded their one paltry job in those industries for two new jobs at Starbucks or strip malls. So I guess these policies DO work! Lot’s of these people have twice as many jobs as they used to! Yay!
If you have any interest in some actual data and observations which rise a few notches above Nick Gillespie’s fever swamp ramblings, I invite you to read “How Americans Can Buy American” by Roger Simmermaker.
Every item you buy will generally not be 100% American in origin, but you still help out by purchasing items which are more American in origin, and it’s not that hard to figure out how to do it. Having a government which actually wants to promote American business, employment and productivity is a good thing, even if it does happen to hurt one party or the other right now.
Are there serious problems with American unions? Absolutely. And they cause many of their own problems, drive up costs with legacy obligations and some may have even outlived their original mission. But when you hurt American business just to hurt unions, you are doing damage at home and that is, frankly, one of the most Anti-American things I can think of. Fix the unions. Change the system. But please don’t screw the rest of us in the process when we need every job we can get and every source of revenue we can scrape up.
11 Responses to “More “Protectionism” Fever Swamp Dreams”
While I don't know that it's nearly as simple as “Buy American”, I generally agree with what you're saying. I'm really not sure what the real solution to this is, though. The US just doesn't make as much as its people need. Again, that's a tough one to change, because buying something made by American workers just simply costs so much more than than something made somewhere else where labor is cheaper.
One possible solution is to just educate the heck out of everybody in the country, and make sure that even if something is physically constructed in another country, that the structure of how it's made — from concept and design to management of production to procurement of materials — is done here in the States. A lot of that is happening now, and we as country do seem to produce better management and creativity than other places to which our jobs are being outsourced. We must make sure, if we go in this direction, it means it's vitally important to keep things like art, math and science, public speaking, and group work strong in our schools. If we're going to continue to live our lifestyle without being able to afford to pay our own workers to do the low-paying, low-skilled work, we're going to have to make up for it by creating highly skilled workers, so that those jobs really _can't_ be shipped overseas.
Jazz you are an enemy of America because you are for people over patriotic rhetoric.
I must finally disagree with you, Jazz, despite being a great fan of your posts in general.
The implication of “help the American worker” is “screw the American consumer” by making him pay extra. There are a great many American workers who are having a tough time of it in a down economy, but there are at least as many consumers who are just as badly off. Laid-off workers are still consumers; making them pay more for goods and services is kicking them when they're down.
Even paying more to buy American does our workers only the same short-term favor grade inflation does our students. Our trade balance is what it is because we're not as productive as we like to think. By rights the dollar should fall to the point our trade is balanced and trips to what we consider third-world countries start to look pretty expensive. What we need to do is make ourselves more productive and more competitive, invest in our schools, support our corporate economy. Disguising the signals to the contrary helps not at all.
Yes, you may say, all well and good if those wicked Elbonians would just play fair, stop subsidizing their own industries, and compete on a level playing field. And I say that's like moaning that we lost the game only because of the ref's bad calls. Our trade has been in deficit since 1976, so maybe we've been getting bad calls for 33 years. Or maybe we need to improve our game.
Dr. J,
One of the great myths of free trade is that while workers are hurt consumer benefit. This is a foolish argument.
First let us define a consumer as someone who buys stuff. Let us define a worker as someone who gets money to buy stuff from work. How many people are in one group and not the other? Not very many. Retirees get their money to buy stuff from past work. Students, for the most part, get their money from the work of their parents and future work. Laid-off workers get their money from past and future work and will benefit more from “Buy American” than most.
Second and more important, what lower prices? If you compare the current basket of goods and services used to develop the Consumer Price Index with the one from 1973 you will find that today the average American must work 12 percent more to buy stuff today compared with 1973. I use 1973 because that is the year the Average Weekly Earnings of American workers last established a high. It has declined since.
When you buy a domestic product the economy gets what Keynes calls a multiplier effect when those who benefit from the purchase get more money to also buy something. When the purchase is of a foreign product the multiplier benefits, in part, the foreign economy. The benefit is not short term.
n6, I don't understand your numbers argument. There are more consumers than workers, even more so in a down economy when more people are living off savings and unemployment and welfare. But even if the numbers were equal, overcharging consumers for the benefit of overpaying workers is at best a zero-sum game.
What lower prices? Obviously, the lower prices of the imported goods Jazz exhorts us to resist. If you want to compare with 1973, you'll need to account for the improved quality over that time, of which CPI does a poor job. We may well be working 12% more to buy cars that are 30% safer, phones that are 40% more wireless, pocket calculators that are 10 million times more powerful.
Your multiplier effect is a wonderful thing, and you get a larger one when you trade more broadly. India used to have a strong “Buy Indian” program that kept it one of the poorest nations on earth. Since liberalizing in 1991 it has taken off and is now threatening mighty America.
Two questions. Do we want American workers and businesses to have to compete with workers overseas? Remember that 40% of the world's people live on less than $2 a day. If we want a manufacturing sector at all, we have to give up the notion that Americans should match foreign costs to compete.
Second, do we want to support slave labor, child labor, unsafe sweatshops, environmental degradation overseas? Is that what we support in order to save a buck on that pair of shades?
“Do we want American workers and businesses to have to compete with workers overseas?”
Only if we want to preserve America's global economic strength. We can have a competitive manufacturing sector, but only if we have a productivity edge that makes up for our higher wages. We used to, but we've been losing it. Unless you want to see wages fall and jobs continue to disappear, we have to increase our productivity. Competition is the only way to do it.
“Do we want to support slave labor, child labor, unsafe sweatshops, environmental degradation overseas?”
Although slave labor is fairly black and white, safety, job desirability, child welfare policies and environmental standards are all matters of degree, so this is really a “who gets to decide?” question. If people enduring grinding poverty choose a job in the sweatshop over their alternatives, I'd be very reluctant to claim I know better than they do what's best for them.
There are no productivity gains that can allow an American worker to sew a running shoe for $0.80, but on a $100 shoe, there's more than enough profit to pay a decent wage for that work. The same applies to nearly every manufacturing job left in America. If we want those industries to exist in America, we have to level the playing field. There are not enough “service sector” jobs to deal with the implosion of our manufacturing base, hence high unemployment and fewer customers for running shoes. The globalization-at-all-costs approach is a dead end, which we are seeing already.
In China, a gem worker gets fatal silicosis in a few years. I don't agree that we should let an uneducated worker there be crippled for life because you think he knows better than us what's best for him. Labor and environmental standards are a legitimate thing to insist on in trade relations, because it IS our right to decide if there's a social or environmental cost we are not willing to support in our search for cheaper goods. It's not always about the almighty profit motive.
If globalization is a dead end, it is one that has lifted and is continuing to lift billions out of poverty, while providing a better standard of living for millions of American consumers.
So what are you saying, we should be overpaying paying $99.20 per shoe? Talk about dead-end plans.
No question there are health hazards and negligent governments in many parts of the world. But at the end of the day, we don't run those places and have limited leverage to change them. And I further believe there's no problem so bad we can't make it worse, and withholding investment to force them to bend to our standards will often do just that.
Their best hope is economic development, which is exactly what allowed us to retire our own sweatshops, afford higher air and water quality standards, and embrace the other virtues on your list. It's not a short-term fix. But denying them jobs until they clean up their act will not bring it about any sooner.
The number of people who are consumers but not workers is small. Those people living off savings and unemployment derive their money from work, past work. Welfare also comes from work. Taxpayer work. Trust fund babies are consumers who do not depend on work to buy stuff.
If you compare the 1973 basket of goods and services used to develop the Consumer Price Index with the one from 1947 you will find that average American worked 37 percent LESS man hours to buy the same goods. All problems with the CPI exist in both time periods. That was before free trade started destroying us.
India has done very well exploiting their cheap labor to produce a $8 billion trade surplus with the US. That trade surplus puts Americans out of work and causes lower wages.
The number of people who are consumers but not workers is small. Those people living off savings and unemployment derive their money from work, past work. Welfare also comes from work. Taxpayer work. Trust fund babies are consumers who do not depend on work to buy stuff.
If you compare the 1973 basket of goods and services used to develop the Consumer Price Index with the one from 1947 you will find that average American worked 37 percent LESS man hours to buy the same goods. All problems with the CPI exist in both time periods. That was before free trade started destroying us.
India has done very well exploiting their cheap labor to produce a $8 billion trade surplus with the US. That trade surplus puts Americans out of work and causes lower wages.