Freedom in One Lesson

80.

A Better Way to “Buy American”

Samuel Johnson once wrote that “patriotism is the last refuge of a scoundrel” (Boswell 1791). He was wrong: patriotism is the last refuge of many scoundrels.

This was well illustrated by the political furor over Team USA uniforms being made in China for the 2012 Summer Olympics. Many politicians asserted that it was un-American. Senate majority leader Harry Reid said the uniforms should be burned. Supposedly, there were immediate patriotic pressures to mandate “ buying American,” and Ralph Lauren quickly capitulated, promising to “go and sin no more.”

While some details of this flap are unusual, protectionism dressed up as patriotism follows a well-worn script. Domestic producers harmed by imports seek protection from their superior competitors and lead the patriotism bandwagon with calls to “ buy American.” The Team USA case exploited the pro-American sentiment hovering around the Olympics, but the claims made no more sense than an argument that we should grow our own coffee and bananas for American athletes.

Imports always harm competing domestic producers, so the patriotism argument can be used as political cover whenever they get the government’s ear. And there are always politicians ready to listen.

Leonard Read recognizes the abuses and illogic of this approach in “Buy American,” from his 1974 book Having My Way (Read 1974), where he lays out a better way to approach the issue.

The admonition to “Buy American” has two diametrically opposed meanings. The first is its popular and mischievous meaning—shun goods produced in foreign countries. The second, and loftier meaning embodied in these words, is rarely mentioned or thought of—shun principles and practices alien to the American dream of limited government and personal freedom.

Producers who plead with consumers to “Buy American” are appealing to blind patriotism. Buy my product because it is made here; heed not its price or quality. This is sheer chauvinism. Suppose I were to urge your acceptance of my ideas, rather than those of Marx or Machiavelli, merely because of our differing nationalities. The absurdity of such an appeal is obvious: neither goods nor ideas are properly judged in this fashion; geographical origin has nothing to do with the matter.

Read points out that the traditional use of the slogan “Buy American” is to justify the rejection of foreign goods rather than something that advances our general welfare. But there is an interpretation under which it does advance our general welfare: Don’t buy—that is, accept and make use of—actions that violate the American principle of freedom to choose productive associations that don’t violate the inalienable rights of others.

For Read, whether a principle is true or not has nothing to do with where it comes from. Ad hominem, or “against the man,” attacks, for example, do nothing to invalidate something that is true, no matter how often political rhetoric may try to make that case. As a result, he offers an excellent way to test whether a general principle is valid: change “Buy American” to “Buy Chinese” or “Buy Mexican,” and ask Americans if, based on their patriotism, they think the proposition is a good one to follow.

If it is a general principle, it should be as valid for whoever deals with us as their supplier as it is for ourselves when we deal with our suppliers. We would support the protectionism of others as much as our own. But if it is only special pleading, rather than a general principle, then we can expect people to answer differently for themselves than for others, just as people hypocritically attack other countries for their protectionism while defending their own as principled.

Read also recognizes that the extent of protectionism goes far beyond international trade: “All obstacles to competition, be they foreign or domestic, are but variants of this theme.” There is only a difference of degree between, on the one hand, a ban on buying a foreign country’s products and, on the other hand, imposing tariffs, quotas, or any of a host of nontariff barriers. Whether it benefits or harms Americans does not change—only the degree. Similarly, change “Buy American” to “Buy Local” (a common slogan of locavore campaigns in agriculture), and the logic is equally invalid.

If you change the wording to “Buy Union,” essentially the message of labor agreements and prevailing wage laws, the logic remains the same. Union members are protected from the competition of those who would work for less, but their protection harms both nonunion workers and the customers who must now pay more for the product. For the same reason, price controls are also a form of protectionism. A minimum wage, for example, protects workers from competing with those willing to work for less but harms those denied employment as well as consumers.

Most antitrust cases are also forms of protectionism. They are not brought by consumers—who generally gain from the practices being challenged—but by outcompeted rivals who want to take away the advantages of the other firm—advantages passed on to customers. Outcompeted rivals don’t want their potential customers to go elsewhere, so they use antitrust laws to restrict consumer access to superior options.

Many licensing schemes follow the same protectionist pattern. They hide behind masks of quality or safety but primarily keep out new competitors who might offer lower-quality options at lower prices.

Leonard Read offers a powerful solution, powerfully illustrated by America’s own past.

Enough of this mischievous notion. Let us try instead to appreciate and “ buy” the American ideal of freedom. . . .

Ralph Waldo Emerson had this to say:

America is another name for opportunity. Our whole history appears like a last effort of divine Providence in behalf of the human race. . . .

As to the best in political economy, consider the Constitution of the United States. Regardless of its several flaws, no other nation’s charter has equaled it in an economic sense. In what respect is this distinctively American? Here is the answer:

No state shall without the consent of the Congress, lay any imposts on imports and exports. . . .

In a nutshell, no tariffs, quotas, embargoes between the several states. . . . The world has never known a free trade area as large as the U.S.A. when measured in value of goods and services produced and exchanged. Never perfectly free, but the nearest approximation to freedom!

The freedom to associate for productive purposes however and with whomever one chooses was the essence of the American miracle. Under that principle, people were protected from many of its violations that other governments had imposed throughout history. It was, at its heart, as Thomas Jefferson wrote in a letter, April 6, 1816, “the first principle of association, the guarantee to everyone of the free exercise of his industry and the fruits acquired by it” ( Jefferson 1905).

Read’s understanding of America’s free internal trade offers a counterpoint to those who, defending protectionism as a valid principle, claim that it was the protectionism adopted by the United States in the form of tariffs that made possible our staggering early economic success. While it is true that import tariffs were imposed, and eventually dramatically raised (see the “ Tariff of Abominations”), they were not the source of our success any more than hurdles should be given credit for increasing running speeds. The reality is that the positive impact of our massive internal free-trade zone and other constitutional restrictions on government interference far outweighed the negative impact of international trade restrictions.

Read addresses a common defense of protectionism: the “infant industry” argument that free trade may be good in general but that industries must be protected until they can grow to a scale where they can compete. This amounts to a claim that enjoying the benefits of freedom requires restricting the freedom that generates them. “In reality, it is competition which protects “infant industries”; it protects them from stagnation and persuades them to grow. In the absence of competition and freedom of transactions, producers stagnate. It is only when others are doing better that one attempts to overcome, to gain strength. Competition, combined with free exchange, makes strong giants out of weak infants—this is the password to economic opportunity and well-being—an American idea well worth buying.”

From the perspective of consumers, competition that takes place without artificial assistance or restriction expands their options the most. It does not matter whether competition leads to a foreign producer offering better terms because of superior efficiencies or to an American producer. There is no reason to artificially nurture American infant industries, because it is the results of real superiority that benefit consumers. Artificially tilting the playing field only inhibits the best process for discovering and passing on the gains of such superiority.

If we accept protectionism in principle, we should be for it in all cases. But, as Read notes, we are all free traders when it benefits us. We recognize that we gain from free trade except when we benefit by special treatment— necessarily at an even greater cost to others. We abandon our own revealed preference for freedom only when bribed with something stolen from others.

Regardless of all the noisy arguments to the contrary, everyone known to me favors both competition and free trade. Name one who does not favor competition among those from whom he buys. Logically, then, how can one favor competition among millions of others and be against it for himself ! This is irrationality, not disagreement.

Precisely the same can be said for free trade—domestic or foreign. Name one who would not welcome an order for his products from another country or county. Everyone favors exports. Imports? Favoring exports and objecting to imports is the same as favoring selling and objecting to being paid. This is an absurdity, not disagreement.

Leonard Read demonstrates that the logic of protectionism is riddled with errors and that the practice of protectionism, in its myriad forms, is theft that impoverishes everyone except those bribed with protected status and those whose political clout greases the wheels. It is a far cry from either liberty or justice for all.

What then is meant by “Buy American” in its proper sense? Let willing exchange prevail among all people, locally and worldwide. Let each buyer or seller be guided by his own scale of values. Sell the American way and buy the American way—not as presently practiced, but as once prevailed and ought to be reinstituted. Keep ours the land of opportunity for everyone.