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11-05-2011, 08:30 AM   #1
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The Stupidity of “Buy American”

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One sign of economic ignorance is the faith that “Buy American” is the path to prosperity. My former employer, ABC News, did a week’s worth of stories claiming that “buying American” would put Americans back to work.

I’m glad I don’t work there anymore.

“Buy American” is a dumb idea. It would not only not create prosperity, it would cost jobs and make us all poorer. David R. Henderson, an economist at the Hoover Institution, explained why. “Almost all economists say it’s nonsense,” he said. “And the reason is: We should buy things where they’re cheapest. That frees up more of our resources to buy other things, and other Americans get jobs producing those things.”

This is what people always forget. Anytime we can use fewer resources and less labor to produce one thing, that leaves more for other things we can’t afford. If we save money buying abroad, we can make and buy other products.

The nonsense of “Buy American” can be seen if you trace out the logic.

“If it’s good to Buy American,” Henderson said, “why isn’t it good to have Buy Alabaman? And if it’s good to have Buy Alabaman, why isn’t it good to have Buy Montgomery, Ala.? And if it’s good to have Buy Montgomery, Ala. …”

You get the idea. You wouldn’t get very good stuff if everything you bought came Montgomery, Ala.

“A huge part of the history of mankind is an increase in the division of labor. And that division of labor goes across national boundaries.”

Which creates wealth — and jobs. In a similar vein, consider “fair trade” coffee. It costs much more money, but we’re told that if we buy it, we should have a warm feeling inside because somebody in a poor country will supposedly get paid more.

“But a huge part of that premium is taken by the bureaucracy that organizes this. Most of it doesn’t go to the farmer. And a better way to help those farmers is just buy what you would have bought anyway, take the premium you would have spent and give it to those people.”

And here’s something else: If you pay more for coffee, you’ll have to buy less, or less of something else. That hurts other workers. We all should heed Henry Hazlitt’s famous economics lesson: Look beyond the immediate effects and beneficiaries. You may be accomplishing the opposite of what you intend.

The same applies to so-called sweatshop-free products. I’m for free trade, but trade means you get the lowest price, and that might mean you buy something from what some people call a sweatshop. The name itself conveys abuse.

Henderson says that’s wrong. The workers aren’t abused.

“In fact, they’re better off taking those jobs. … The mistake Americans make is they think they would never work in a sweatshop and therefore they say these people shouldn’t. Well, no one’s offering those people green cards. Those people are stuck in those countries. They’re choosing their best of a bunch of bad options. And when you take away someone’s best of a bad option, they’re worse off.”

That happened after Sen. Tom Harkin of Iowa complained about sweatshops in Bangladesh. Some shops closed. Then Oxfam discovered that kids who were laid off often turned to prostitution to support themselves.

“The person who tries to get you fired is not your friend,” Henderson said.

The conglomerates that hire people in poor countries usually pay more than local employers do. In Honduras, many sweatshops pay $3.10 per hour. That’s low to us, but most Hondurans earn less than two dollars an hour.

Since Third World countries do not pursue free-market policies, worker opportunities are often foreclosed by self-serving politicians. So multinational sweatshops are usually people’s best alternative. Humanitarians should target the politicians, not the factories that provide some hope.

Interfering with peaceful exchange is never a good idea. The great 19th-century liberal Richard Cobden was right when he praised free trade for “drawing men together, thrusting aside the antagonism of race, and creed, and language, and uniting us in the bonds of eternal peace.”
The Stupidity of “Buy American” | Right Wing News

Wow that is bad news for right wing (AKA Republican & Conservatives) people since they are the people who are mostly saying "Buy American".

11-05-2011, 08:56 AM   #2
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Ain't libertarian fact twisting grand!

Stomp on a third Worlder today for fun and profit!
11-05-2011, 09:03 AM   #3
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QuoteOriginally posted by jogiba Quote
The Stupidity of “Buy American” | Right Wing News

Wow that is bad news for right wing (AKA Republican & Conservatives) people since they are the people who are mostly saying "Buy American".

This is a typical Libertarian argument--you can find it in most books of Austrian Economics. (Nicely stated in this one: Economics in One Lesson - Wikipedia, the free encyclopedia) Which might mean there are things to learn from the Austrians, too.
11-05-2011, 09:26 AM   #4
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QuoteOriginally posted by jogiba Quote
The Stupidity of “Buy American” | Right Wing News

Wow that is bad news for right wing (AKA Republican & Conservatives) people since they are the people who are mostly saying "Buy American".

Well, the logic's pretty flawed, there, anyway. For starters, there's always the question of cheapest price vs most value, ....and it presumes someone *will* buy something else from the local economy if they buy cheaper and cheaper foreign goods... seems to me the real situation is that we end up losing our local manufacturing and business to cheap imports, which then have no competition and... Get more cheaply-made for the money, anyway. Then you have things like the energy and insurance companies deciding 'the market can bear more of our taking money out of the local economy on these bills and bank fees and inflated real estate prices, etc... Essentially if you don't have economic diversity in your communities, and things being produced, you end up just becoming a resource-exporter.

One of the problems with the corporations and the ultra rich having the lion's share of the money and stuff is, they stop seeing the workers as also their customers and in a way employers, and instead just a money-resource to push around. Becomes more about the profit than the actual goods and value for work and all. People buying the same cheap foreign goods over and over isn't really very good for anyone in the long run.

Basically, trade's good, but if you're too *dependent* on trade, (ie, can't say, 'No, we'll make our own' or something) then someone else is setting the prices ...twice. And that's not really a 'free market:' it's controlled ...by who has the market locked up.

It's not one of those 'all or nothing' issues, nor is it just about prices: and especially about it all being about profit growth at the top: cause for a lot of things, you can really only just sell so many, so in order to 'compete for more profits' they end up reducing quality, cutting corners, and then raising the prices on the cheaper and cheaper stuff when the local economies stagnate or worse, ...and it seems anecdotally a lot of prices are back where they were, on, say, clothing, only you're paying that money for stuff that'll barely last a year. Not really a bargain, just thinking on price and profit growth: you've got to consider where the money's *going.*


Kind of why I'm big on the local currencies and barter networks, too: it can keep some of that value *in* a community, and counteract some of the drain on it that goes into all that over-dependence on commerce through distant profit-makers. Basically, 'buying American' or local can be very good, we're just up against a lot of 'race to the bottom' terms on things like prices and competing with big volume and whatever. The consumer end of the economy needs *purchasing *power* * to really benefit from all the trade, and in many areas, that's exactly what we've been losing: it's not really a 'free market' if you're always pretty much paying what's demanded for whatever they see fit to offer: For instance, with cheap goods, you need the *ability* to say, "Well, I'm not buying that junk, I'm going to spend the extra five bucks on brand Y, or, spend twice as much and get the thing I won't have to buy again for a longer time." but you need to have that option, instead of being, 'The rent and bills and my flat wages only allow me to get the cheapest thing.'

11-05-2011, 10:34 AM - 1 Like   #5
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As to the entire article:

Last edited by Parallax; 04-10-2013 at 08:31 AM.
11-05-2011, 10:50 AM   #6
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Any chance of some sound effects with that, parallax......?
11-05-2011, 10:51 AM   #7
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QuoteOriginally posted by stevewig Quote
Any chance of some sound affects with that, parallax......?

Foxnews.com?
11-05-2011, 10:58 AM   #8
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QuoteOriginally posted by stevewig Quote
Any chance of some sound effects with that, parallax......?
Moo

11-05-2011, 01:15 PM   #9
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Fox News: Why 'Buy American' Is a Dumb Idea

Why 'Buy American' Is A Dumb Idea | Fox News
11-05-2011, 02:14 PM   #10
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A nice diary that does an excellent job of explaining demand side economics.

Daily Kos: The Myth of Job Creation

Maybe the Republicans would vote for the infrastructure bill if an amendment adding "In God We Trust" must be engraved on everything that gets built was added to it.

Obama Admin Opposes Prayer at WWII Memorial | FOX News & Commentary: Todd Starnes

Gotta make sure God is on everything.

Last edited by boriscleto; 11-05-2011 at 02:21 PM.
11-05-2011, 02:24 PM   #11
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FWIW, I just bought a dSLR video shooting rig and follow-focus. I shopped around and ended up choosing well-built, competitively-priced products made in America. And I'm glad that I did.
11-05-2011, 03:57 PM - 1 Like   #12
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QuoteOriginally posted by Parallax Quote
As to the entire article:
What that article describes is what has been happening in the USA.
The results are pretty stunning, with the economy leaping ahead as we speak.
11-05-2011, 04:13 PM   #13
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QuoteOriginally posted by Wheatfield Quote
What that article describes is what has been happening in the USA.
The results are pretty stunning, with the economy leaping ahead as we speak.
Yep. It would be amusing if it were satire.
11-05-2011, 05:22 PM - 1 Like   #14
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QuoteOriginally posted by Wheatfield Quote
What that article describes is what has been happening in the USA.
The results are pretty stunning, with the economy leaping ahead as we speak.

I think the problem here is it's 'leaping ahead' of the people.
11-06-2011, 12:10 AM   #15
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Something that economists and politicians NEVER mention- at the end of the day, you can only consume what you produce. You can borrow produce, ie spend more than you earn, as most of the western world seems to be doing, but eventually it has to be paid back, and usually on unfavorable terms. Given that workers laid off often tend not to find new employment easily, there is the economic burden of maintaining these workers when the goods or services are imported. This factor is never costed in to the considerations when buying stuff from foreign sources. Perhaps a tariff needs to be levied on foreign goods to factor in the unemployment benefits .I would make the rough estimate of 30-40% to take this burden off the state supporting the displaced workers. Some foreign nations deliberately under- value their currencies to make themselves appear to be more efficient. In a normal, undistorted market, things would even out, but most cheap foreign suppliers operate with labour that is either at or near slave labour rates. Working conditions and environmental controls are not up to western standards. They are appalling.We are not comparing apples with apples. Eventually, to be competitive, western nations will have to stoop to the same or lower levels to be competitive.How do you compete against slave labour and no environmental controls? There is also the issue of quality. A lot of foreign stuff is rubbish. Overall, although say electrical appliances are cheap, they break down so quickly that in the long run it costs considerably more than say a single purchase of a quality, long lasting appliance. Unfortunately, too few people are smart enough to see this.Unfortunately, domestic producers have followed suit and produce rubbish to try to compete on price. One classic example is Maytag. Their appliances used to last for decades, now the QC since outsourcing to Mexico has "gone south" so to speak. Given that western nations have been seduced by the lure of cheap imports and are importing too much in relation to exports, the "buy local" message is all the more valid.
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