Dakota Beacon

"Trade" is a behavior through which two or more parties gain mutual benefit. In other words, if the participants weren't benefiting somehow, the "trade" in question would not be occurring.

With that preface, here is the sacrilegious statement for the week.

"Buy American!" is bunk.

Sacrilegious corollary: Global trade is good. "Buy American" is merely a scaled-up way of saying "buy local." As Café Hayek's Russ Roberts puts it:

…we’ve tried the “buy local” experiment, it’s called the Middle Ages. In the Middle Ages, we mainly bought local and pretty much everyone was poor.
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The logic of trade is why I reject the idea that buying local, writ large, creates prosperity. The Middle Ages thought experiment helps me see that. Maybe you disagree. Happy to hear how a small group can produce the wealth of stuff we enjoy from mint-flavored dental floss to heart pumps and antibiotics…

Roberts's short, compelling thought experiment provides the gift of logic. It requires rash judgment to declare that buying local, or buying American, would result in Americans being better off than with unrestricted global trade.

Recently, the Wall Street Journal published an article titled, "Americans Sour on Trade." The poll on which the article is based illustrates that Americans are suspicious of the benefits of consuming goods produced outside our borders. But, as I have shown HERE and HERE, the misgivings are fallacy-based.

Let's keep exploring. Why does the misplaced belief in "Buy American" persist?

Cato's David Ikenson expands on this topic.

A nation that has strong misgivings about trade is less likely to stop a conspiracy of politicians and special interests from taking away their right to do so.

Ikenson captures the narrative that Americans are relentlessly fed by a "dumb" media. It's therefore understandable that when some smarmy politician smiles and promises to "protect American jobs," brainwashed voters cheer.

But cheering is unwarranted. Ikenson cites nine discussions of examples in which the media have furthered grossly flawed balance-of-trade narratives. A, B, C, D, E, F, G, H, I.

Although it's true that the U.S. has lost nearly 5.5-million manufacturing jobs from 2000 to 2009, the trade imbalance had little to do with the drop. In fact, American manufacturing jobs reached a maximum in 1979, and then started to decline well before U.S. imports from China made up anything close to a significant proportion of total imports. As I stressed before (HERE and HERE) American ingenuity and productivity accounts for manufacturing jobs going away.

When one gets better at doing something, one needs less time and fewer resources to get it done. Heck, China lost manufacturing jobs over the same timeframe as America did, due to Chinese productivity improvements.

Such reality may be hard to accept. It's emotionally upsetting that jobs go away when we perform better. But do die-hard "Buy American" proponents seriously suggest that we stop improving in order to "protect American jobs?" That's the union mentality--the very mentality that kicked off my discussion of this topic in the first place.

Americans have been fed the "protect American jobs" line by a media parroting politicians (left and right) who use the line the get elected. There's raw energy in the jingoistic emotionalism of "Buy American." But the approach has one major flaw. It's enormously, ridiculously, absolutely, economically destructive. The most infamous example is the Smoot-Hawley Tariff Act of 1930 that helped turn a recession into the Great Depression. We could once again "protect" American jobs and watch the country from who we're being "protected" fight back with import penalties of their own. Tariff wars destroy wealth--always have, always will.

The truth is that Americans have a choice. We can look at reality, facts like those presented here and in my two previous posts and realize that jobs will always be destroyed as other jobs get created due to progress. Or we can brood and demand that politicians "protect American jobs." One approach has always led to increasing wealth and income. The other approach always shuts down the engine of prosperity.

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© 2010 Chuck Rogér