Buy American?

We hear the slogan in all times, but when the economy is weak we hear "buy American" more often. This can mean either that we choose as individuals to buy things made in our country or that governments should encourage this with regulations and laws. At first glance it seems like a good idea to many people. If we buy more of what we produce we will preserve jobs here. That's the theory.

The reality is that this thinking is based on cultural biases against "outsiders" and economic ignorance. If you take it to the extreme the economic flaws in the theory become evident. In fact, some states do take this to the state level, with campaigns encouraging residents to buy products made in the state. Now imagine the most extreme application of this idea. What if you were living in a Charlevoix, Michigan, and you decided to only buy locally made products?

Of course you cannot live on cherries, apples and golf courses alone. Immediately you would notice that life is much poorer without toilet paper, orange juice, cars and all the other things that are not locally produced. Most people would make an exception for things that could not be obtained from the area. In other words they would buy locally if they could. But is this really any different in the end?

For example, suppose you can buy a kitchen table that a local craftsman makes. But instead of the $200 you might have spent for a table made in Malaysia, you have to pay $700. Naturally, the most common reasons people would buy anything from another country is because those things are either better, cheaper or both, so buying locally will often mean buying lower quality or paying more or both. But it will help save jobs, right?

Not necessarily. Clearly it can help save specific jobs. After all, a government could simply make it a law that we all have to buy a new car every three years and that would make auto workers pretty secure, right? But will it help preserve the total number of jobs out there? No.

You just spent $500 extra for a table. That means you have $500 less to spend eating out, buying new carpet, or getting the kids teeth cleaned. Multiply that by the others who pay extra for kitchen tables and there are fewer jobs restaurant workers, carpet salesmen and dental hygienists. In fact, multiply the effect by all the things you will pay extra for and you can see that this policy can cost jobs as much as it saves them. More, in fact.

One of the big reasons the Great Depression was so bad was that the countries around the world (including the United States) enacted protectionist laws to make it more difficult to buy foreign products. That hurt everyone in the end. If you stop buying from those who do things most efficiently (oranges from Florida, electronics from Japan, clothes from India, and financial products from the U.S.), the productivity of the whole world declines. It is difficult to imagine how that makes us better off.

The Moral Argument

In addition to the proven harm caused by isolationist economic policies, there is another issue here. People assume that they have some special obligation to protect jobs here, but why? Workers in other countries are not less valuable as humans than we are.

If I decide to pay more for a blanket made here instead of one made in India, for example, and enough of us do the same, we may save a textile worker's job. Meanwhile, a textile worker in India loses his job, and might face true hunger since wages are low there and there are few programs to help the unemployed. If I bought that blanket from India and so textile workers here lose their jobs, they'll get unemployment compensation - enough to live far better than most Indian workers live even when working. Then they'll find new jobs - an easier prospect here than there. What won't happen is true hunger. There are too many ways to make a living or get help here compared to there.

Any moral argument for protecting "our" workers then, don't make sense unless you consider a higher standard of living for workers in a specific industry here to be more important than the actual survival of others elsewhere. Now, I tend to care for the people closest to me, and maybe feel more inclined to help them, but I don't know auto workers in Detroit, nor textile workers in the Northeast, so why should I actually favor them over foreign workers? Are they somehow more valuable humans just because they live in the same political boundaries as myself? I don't think so.

And don't forget that even though a textile worker's job is lost here, the money saved by all who bought those cheap blankets is available to be spent or invested, creating more jobs in other areas. There is no net job loss from free trade among the peoples of the world - just the opposite. So there is really no reason to buy American or have laws encouraging this.