By JR on Sunday, November 06, 2011
The case against economic protectionism. If everybody did it, trade would cease and living standards would plummet. And American exporters would grow broke, sending millions out of work -- JR
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 from 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."
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."