The Fallacy of 'Buy American'

There has been an ongoing debate in our local newspaper on the topic of buying foreign cars vs. buying American cars. In addition, we've had letters stating that we shouldn't buy anything from a foreign country. The idea is that buying American will save American jobs. The reality is that this action would actually cost American jobs.

When people buy foreign products, it's entirely possible that there will be Americans who lose their job because their company can't compete with the foreign company. When American car companies are suffering because people aren't buying their products, we can see the result, some works lose their jobs. However, this isn't the entire picture.

By buying products with the most value, we conserve our wealth. If we simply purchased products because they were supposedly made in American, we might be spending more money that we would have to. By spending more money on one product, we have less money to spend on others. This may save the jobs of some American auto workers, for example, but it may cost jobs of workers who make other products or provide other services that we would have been able to spend our money on if we weren't over paying. In addition, if we only buy American products, American workers who work in the shipping industry would lose jobs because there would be no products to import. If we aren't importing, we can't export. Nobody would have any dollars with which to purchase our products. Again workers involved in import/export would lose their jobs. Why are auto workers jobs more important?

We can even take this scenario further. Surely if it is wrong to import products from foreign countries, it also wrong to import products from other states. If it's wrong to import from other states it must also be wrong to import from other counties. Taken to it's logical conclusion, no one should by anything from anybody. We should all just make our own stuff. Guess what? We've been there, done that. I personally wouldn't want to go back to a world where everyone makes their own clothes, grows their own food, builds their own houses, etc. Trade is what allowed our standard of living to dramatically improve. Trade is a personal thing which isn't and shoudn't be constrained by artificial political boundaries.

Creative Destruction

Sheldon Richman has a great Perspective piece in the current issue of The Freeman - Ideas on Liberty, the monthly publication of The Foundation for Economic Education. In it, Richman has some great quotes from Sudha Shenoy, an economist at the University of Newcastle, Australia. The piece is about how economic nationalism is senseless. For example he quotes Shenoy as saying:

When you read a label which says 'Made in China,' it is not made in China. It is made by the world economy as a whole.... It is impossible to make anything in one country.

However my favorite quote is one which answers the question about how we are going to compete with all these other countries, particularly ones with low wages:

You say, how are we going to compete with all these other countries? The answer is, of course, you compete by producing goods that were not produced before.

Americans have always been great at inventing new things and we should continue to do so. We shouldn't dwell on maintaining mature industries. We can take advantage of the cost savings afforded us by cheaper manufacturing elsewhere to invest in developing and building new things. That's the way to make the entire world richer.