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The Stupidity of "Buy American"

Comment

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."

John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "Give Me a Break" and of "Myth, Lies, and Downright Stupidity." To find out more about John Stossel, visit his site at <a href="http://www.johnstossel.com" <http://www.johnstossel.com>>johnstossel.com</a>. To read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

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Comments

15 Comments | Post Comment
Buy American creates jobs. A few examples:
In the 1980s, hundreds of native Korean women lived in a small town in Texas. (They were all here legally, and most were or would become US citizens.) They worked as seamstresses for small companies that contracted work from large retailers -- JC Penny, Sears, etc. -- and were paid only minimum wage. When NAFTA was enacted, all of the jobs were lost to Mexico: every one of them. Because of limited English skills, few of the women were able to find employment elsewhere.
We recently remodeled our kitchen, and I was determined to use as many "Made in America" products as I could. Every appliance we purchased was made in the USA; some were not easy to find, and all were slightly more expensive than foreign-made products, but the higher quality (and it was definitely higher) was worth the extra expense. This is "dumb"?
Comment: #1
Posted by: gregoryhellmann
Thu Nov 3, 2011 7:58 AM
Replace the Honduran example above with the U.S. Many Americans who didn't go to college have seen their lifelong manufacturing jobs go to other countries. Just like the Hondurans in the example in the article, Americans were faced with bleak job options when the Manufacturing company left town. I think lower costs due to goods produced in underdeveloped countries is great, but when an American no longer has his manufacturing job and consequent income, he still can't afford to buy the item in question even if it is lower cost. It's not as black and white as simply clasifying the act of buying American as stupid.
Comment: #2
Posted by: Phillip
Thu Nov 3, 2011 9:33 AM
I agree with some of Mr. Stossel's ideas and columns but I have to strongly disagree with this one. There are some true statements. Yes, if you pay more for an American made product, you will have less to spend on other products. However, when you have no job or a job making significantly less money because a job you used to or could possibly have had, has been moved out of the country, then you have less money to spend as well. The U.S. has been bleeding jobs for decades (long before Presient Obama took office) and average household incomes compared with inflation/cost of living HERE have either dropped or remained stagnant at best. Of course there will always be some under developed country with poor living conditions where manufacturers can move jobs to and pay them pennies on the dollar compared to paying Americans. With the "global economy" the U.S. workforce is going to continue to struggle to keep jobs here while maintaining the standard of living we all expect and in order to compete with a cheap labor force elsewhere, we are going to be forced to dumb down to the lower standard of living elsewhere. At some point we are going to have to put the needs of this country and it's population above a larger bottom line or being able to buy a flatscreen tv dirt cheap.
Comment: #3
Posted by: John
Thu Nov 3, 2011 1:11 PM
It is one thing to believe in free markets, but is another to decimate your clients. Without the manufacturing jobs, people must find other jobs in order to make money to buy things. I don't care that people in Honduras turn to prostitution to feed themselves, prostitution may be an honorable profession in Honduras and where did the people that paid the prostitutes get their money? If all the manufacturers leave, who will buy their products in the US? ALL jobs rely on manufacturing. It is a pyramid or a great ponzi scheme, but reversed. The rich employ the near rich, the near rich employ the middle class, the middle class employs the poor and it all works together.
Comment: #4
Posted by: Pete0097
Fri Nov 4, 2011 8:34 AM
Geeeze - Really he can't be serious! Is it April 1st already? One economist against a 1000. I am a republican non-union worker and I don't plan to work in a factory, but I would if I needed a job. This country was built on Buy American and we need to return to that mentality. I still think Stossel is joking or he is just pure ignorant.
Comment: #5
Posted by: Russ
Fri Nov 4, 2011 11:41 AM
I really can't believe you are that dumb, John. If I have $10 and buy a product that is made 100% in America, I put American people to work. The money spent is used by the American company to buy more raw materials and components from their suppliers and hire the labor for fabrication... The funds paid to the employees is then used for shoes, shirts, food, schooling for AMERICAN Children. The money ultimately generates about 5 times the spent value as it goes through the economy...and has an economic impact of $50.
If I spend $10 on products made in China, then I am sending the money to the Chinese for them to spend in China on shoes, shirts, and food. There is no "multiplier" effect accept for the little amount of the $10 that goes to corporate, and to the clerical activity of selling.
When we buy products made outside of the US, we are, in effect, outsourcing the engineering, design, new technology development and robbing the United States of its intellectual power. It is these jobs, the higher paying production and design engineering jobs, that actually create 5 more jobs in multiplier effect of their spend. Outsourcing just drains us of our intellect as well as our economic wellbeing.
Comment: #6
Posted by: Ricardo09
Sat Nov 5, 2011 7:39 PM
Well argued, but missing a simple point.

I agree that if I buy $10 free trade coffee instead of $3 regular coffee, that $7 was essentially wasted in the belly of the beast. I can't now spend that $7 on, say, a car wash or a sandwich - and so some other business - one that employs Americans - is out of luck. And yes, that same logical path applies to "buy American" campaigns.

However, if you think of the extreme case where tomorrow morning everyone wakes up with a determination to buy only goods with a "Made in USA" label, clearly the situation changes; factories will be built and people will be hired to fill the demand for goods. God forbid that anything - ANYTHING - should stand between the American citizen and his right to consumption. The price of local goods will fall as supply rises (though of course the price will never fall as low as that of the same goods made in China).

Obviously, Stossel's logic breaks down somewhere before that extreme case is reached, and here's the point where it breaks down: As soon as enough people commit to "Buy USA" for an entrepreneur to see a viable opportunity to open a factory in the US, at that exact point, "Buy USA" has started to help the unemployed. Yes, what they make will be more expensive than an imported version, but the premium spent on those goods isn't "lost" because it goes into the paychecks of those workers (and their tax bills).
Comment: #7
Posted by: Lewin Edwards
Sun Nov 6, 2011 3:08 AM
John Stossel:
I appreciated your report "STUPID IN AMERICA". I served on a school board in California. As I studied the Teachers salary system I was stunned to find what I believe is the strongest Good Old Boys System in the country. I'm sure you have looked at them but few people outside the public service Industry have a clue about there pay system. Union's have made sure that new teachers are paid low wage's( The one's who really need it ) and Everyone else gets a raise ever year there on the job. Even if a salary increase is not voted in by contract. It's called a step system. The longer you stay the more they pay. All you have to do is take a few courses or attend some conferences and they don't have to make you a better teacher or even be related to your teaching subject as I remember. So the new be started at $20k to $30k and the one's that stayed around for 20 to 30 years and took some art courses or attended other qualifying events could make $80k or a $100K. There is plenty of money being paid for teachers it's just paid out "Stupid". Most public employees(the fastest growing group in our country) don't pay into Social Security(another little known fact, most teachers pay into a private retirement fund) and claim a retirement based on how much they are making when they retire, not what they paid into the system. Then they receive colas after that. Oh! guess who the largest contributors to school board campaigns are? Teacher Unions. I think if you inventor most school boards you'll find many retired teachers or member's paid for by the unions making decisions about things they will be very bios about. That would be wages and benefits for employees. There are many good teachers but so fare I have not come across any good unions. I'm a retired Teamster. I reached the equal pay grade of all workers doing my trade within 3 months of hiring and it was much more then a degree carrying starting teacher. As my results improved I was paid more but never quit what one get's for hanging around a school for 30 year's regardless of there results.
Comment: #8
Posted by: Ken
Sun Nov 6, 2011 8:40 PM
Mr. Stossel, I am astounded that you could write something so illogical and flawed. Since I have always agreed with your books and commentary in the past, I almost fell out of my chair when I read this article. I'm no rocket scientist (nor an economist for that matter, although I was an economics major) but, come on, that was really bad. Granted you based your arguments on Dr. Henderson's comments, but I think they are just plain wrong. Starting at the top:
"..."Buy American" is the path to prosperity." - I don't know anyone who believes that. I don't buy American because it's the path to prosperity, I buy American simply because I choose to keep my dollars in the U.S.
"...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." - No, that's a non sequiter. Following your logic, that would free more of our resources to buy other things, that are ALSO made elsewhere, because they're cheaper.
"If we save money buying abroad, we can make and buy other products." - Yeah, OR, we save money buying abroad, and buy other products made abroad. If you always go with the cheapest product, you will practically never buy American because we can't compete on the labor costs.
"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?...Buy Montgomery, Ala.?" My jaw dropped when I read that. There's no logic there that I can find. It IS good to buy Alabaman. It IS good to buy Montgomery, Ala. But most of the products I buy are not made in Montgomery, Ala. so that's not even a choice. If I have a choice, I WILL buy Alabaman (or Texan, or Virginian, or Californian, or....) if the alternative is Non-American.
"You wouldn't get very good stuff if everything you bought came [from] Montgomery, Ala." - Another amazingly dumb and totally fallacious statement. And what a slam on Montgomery. WHY wouldn't you get very good stuff if everything came from Montgomery? What, are the people there stupid? Mindless? Sloppy? Irresponsible? Lacking work ethic? I don't get the connection, can you explain?
"If you pay more for coffee, you'll have to buy less, or less of something else." - Well, DUH! Again I'm just shaking my head in disbelief. If you pay more for steak, you'll have to buy less of something else. If you pay more for a Hummer, a Rolex, Chateau Lafite Rothschild, Dom Perignon, etc. etc.... What's your point?
"Then Oxfam discovered that kids who were laid off often turned to prostitution to support themselves." - Using that logic you could say that we should support abortion clinics because the women who are denied abortions often turn to a coat hanger in the alley. Are you claiming that the child labor laws in the U.S. are bogus and should be repealed? So it's okay for foreign countries to exploit children?
"I'm for free trade, but trade means you get the lowest price," - NO, that means you get the CHOICE to buy at the lowest price. This isn't like a government contract. I don't HAVE to go with the lowest bidder. I'm for free trade too. And I choose to buy American (when there's a choice).
"Since Third World countries do not pursue free-market policies, worker opportunities are often foreclosed by self-serving politicians." - Yeah, and that's true in First and Second World countries too.
In conclusion, as a right-wing conservative libertarian I find your "'Buy American' is stupid" remarks reprehensible. It's not about free trade. It's about liberty. There's nothing stupid about liberty. And as an aside, I believe most 'Buy American' proponents are less 'Buy American' than they are ABC (anywhere but China). One thing you forgot to mention about free trade regarding China is that not only will you be helping some poor factory worker, you'll be supporting the Chinese government and their shenanigans.
Comment: #9
Posted by: Frizzy
Sun Nov 6, 2011 8:59 PM
This column is a great example of how some people's "faith" in economics can trump their common decency. Mathematics is great, but it cannot replace morality.
Stosssel tries to create a ridiculous extreme by taking the "Buy American" all the way to "Buy Montgomery Alabama". Somehow he thinks he's won the argument there. He hasn't. He just doesn't get it. Yes, buying from the neighbors around you is a great idea. Every decent human being knows it would be wrong to buy something from someone 2000 miles away to save a dime when your neighbor makes the same product and needs your business. Oh but the mathematics proves that in the long run everybody is better off! Yeah, and in the long run, we're all dead.
Allow me to create another ridiculous extreme. Let's say you graduate from Princeton with a fancy degree (in economics, of course). Let's say your dad runs a carpet cleaning business. He's 55 years old and he worked his tail off to pay your way through Princeton. Now, with your fancy mathematical ability and exquisite economic sense, you manage to become the owner of many office buildings with millions of square feet of carpet that needs regular cleaning. Your dad would like the contract. In fact, the future of his business that he's worked so hard to build seems to depend on him getting this contract. But there's this Chinese carpet cleaning company that bids 2 dollars cheaper than your dad. Of course you're John Stossel so you know you should always buy things where they're cheapest, right? You tell your dad, "Sorry if your business has to close, but I'll give you (GIVE you) the 2 bucks I save. In the long run we'll all be better off." So your dad's business folds and he's too old to start another profession so he just goes to work for this Chinese firm, right? Then they downsize and he gets laid off, but hey, you're a generous man, so you give him a bit more than the $2 you promised him (because he's your dad and you aren't completely heartless, right?). His dignity is destroyed, but that's just the way the mathematics goes. Almost all economists agree you did the right thing, right Mr. Stossel?
Comment: #10
Posted by: David Burton
Mon Nov 7, 2011 6:52 AM
Stossel,
I usually agree with your principals, but you blew it this time. I agree with your Richard Cobden quote in principal, but do you want to live at the economic level of the Third world countries? Complete free trade puts us in competition with countries that are centuries behind us in technology and net worth. By buying American, especially local things, we keep our dollars at home. Yes we might not buy something else, but our country became great because of self reliance, we didn't have a negative balance of trade. This country is one of the richest in the world, our natural resources, our roads, our buildings, our cars. How did we achieve all of this wealth? It sure wasn't by buying all of our products from foreigners. Yes, free trade has created a short time period when we as a richer country can buy many more products from poorer countries with lower pay scales, but eventually, we put our workers out of jobs unless they compete (lower their income) to the level of those living in the third world country. We are seeing that very effect right now with the increase in those out of the work force. Our labor force is being replaced by cheep foreign labor and technology.

How does our government cope with the increase in the number of needy families? It increases taxes on those that have, and on the cooperations that provide jobs, in order to keep money flowing to those not working. As a result, The wealthy have less to spend on goods and services, and guess what, with free trade, the corporations say, why should I pay such high taxes when I can move to a third world country, hire cheep labor and send the product back to the US at a much lower cost, sell it at a higher profit and make rich stockholders happy. So they move abroad, reducing the number of jobs in the US, and therefore, create more needy families.

So what is the bottom line you may ask. As I see it, you have to buy American to keep our money in America. Yes we may not have quite as many goodies, but our neighbor will have a job. If we continue with a free trade policy and high taxes, every country in the world's economy will eventually settle to the same level. And like Codben said we will all be equal, “united in the bonds of eternal peace”( and poverty). I'm sorry Stossel, I don't want to give up my standard of living, even if it is the Libertarian thing to do. Instead, lets lower taxes, say to a flat 12%, on everyone, including corporations. Give companies tax incentives for jobs created yearly, and put Americans back to work.

Yours Conservatively,
John Matyac
Comment: #11
Posted by: john matyac
Mon Nov 7, 2011 9:31 AM
Mr. Stossel, I would suggest that if you really like propping up dictatorships and "American" corporations that pay foreigners slave wages at the expense of American jobs, you should then move to one of these many countries and stop spouting your UnAmerican, Ayn Rand propaganda here. People like you used to be know better. What a sad commentary on the present condition of the national dialogue when idiotic editorials like this actually receive a wage for writing them. Speaking of "Stupid in America!"
Comment: #12
Posted by: Deane
Tue Nov 8, 2011 3:07 PM
Re: KenEverybody pays into Social Security....Everybody!! Even soldiers stationed in Iraq and Afghanistan. They don't pay federal taxes when they deploy, but by God, they pay Social Security. I would invite you to get information for yourself. Find on of these teachers and talk to him and her. Or better yet, go back to your source and say, "Prove it!!"
Comment: #13
Posted by: Matt
Mon Nov 28, 2011 2:55 AM
I didn't have a problem with the content of the article. Much of it rang true in a pure capitalistic sense. What I have a problem with is the absolutist tone. A dumb idea is throwing away a concept because a few realities don't match with the big picture. Yeah its a free market an my phone was made in china. So was my TV and most of my computer. I didn't have a choice in the matter, but there are choices that can be made outside of electronics.
There's no real economic reason for people not to buy American if they can because people will spend what they can afford. Some people can't afford to take the "made in.." label into consideration and some people can. That's reality. Whats really a dumb idea is encouraging those with a real choice to abandon buying American based on global economics when the whole point of it is to help our own country. ***k global economics and ***k you John Stossel
Comment: #14
Posted by: Cdog
Mon May 28, 2012 1:11 PM
John I couldn't disagree more. I've enjoyed your columns in the past but not this one. I've become a bit of a fanatic on the subject of MADE IN THE USA. If it doesn't have the words I won't buy it. The American people need to realize we should buy the things our neighbors make if we want to keep good jobs here. It's not as hard as you might think, google "made in USA" in quotes and whatever you are looking for. I do it every time I need something and find US made stuff most of the time. I'm not afraid to switch brands, styles or even buying used from ebay to find American made stuff. For me it's not a quality issue it's a jobs issue.
Buy American the job you save could be your own.
Comment: #15
Posted by: Andy C
Sat Feb 15, 2014 1:43 PM
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