Buy American!

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Every once
in a while, I see a car bearing bumper sticker, “Buy American.”
From what I gather, it is a popular sticker in Michigan, especially
in cities like Detroit and Pontiac.

“Americans
have to pull together,” we are told. “They ought to help each
other. If they don’t stop buying those foreign imports, they’re
going to kill the U.S. economy.” In other words, “What’s good
for General Motors is good for America.”

But Americans
have this distressing tendency — one shared by buyers in
every nation in the world — to buy what they regard as bargains,
irrespective of “Made in U.S.A.” stickers. When Americans “buy
American,” they have in mind something very specific: “Buying
what this American chooses to buy.” They are only slightly concerned
with buying what another American chooses to manufacture.

Does this
indicate a lack of patriotism? Did all those people who bought
Volkswagens in the 1950s deal the national interest a body blow?
After all, they could have bought De Sotos, or Studebakers, or
Packards. Why, they could even have bought Hudsons. But they didn’t.

Are we willing
to modify ex-GM President Charles Wilson’s famous phrase? Are
we willing to declare, retroactively, that “What’s good for Hudson
is good for America”? Would anyone buy that bumper sticker?

For over
two decades, foreign auto manufacturers sold products that saved
on gasoline. Americans in the 1950s didn’t pay much attention
to them. The gas-guzzler was a national institution, a 75-miles-per
hour, 15-miles-per-gallon temple to the promise of unlimited growth
and 5 per cent GNP increases, compounded annually, forever. Now
some people argue that the gas-guzzler is innately evil, a destroyer
of energy supplies. But Americans don’t need stern lectures from
Volvo-driving sociology professors to teach them about the evils
of the gas-guzzler. They get this lesson clearly enough every
time they drive up to a gas pump.

CONSUMERS
CHANGE THEIR MINDS

What wiped
out Detroit’s profits overnight was an overnight shift in car-buying
preferences on the part of American consumers. The presence of
foreign imports allowed them to exercise their preferences. The
buyers had been unable to make up their minds about whether to
give up the long-preferred gas-guzzler. The gasoline lines and
high prices of 1979 convinced them. They didn’t need federally
mandated mileage standards; they didn’t need editorials in the
Washington Post about the necessity of national conservation
(by means of federally financed rapid transit systems); all they
needed was a quick look at their monthly charges from their oil
companies. OPEC sent them a message.

So they changed
their minds, almost overnight. This is what freedom is all about.
Foreign auto manufacturers were there to sell the products people
now demanded. Americans had a choice. In fact, they had several
choices. First, keep the gas-guzzler, or buy another one, and
wind up subsidizing OPEC. Second, buy a foreign import, thereby
profiting Japanese or German companies, but reducing the subsidies
to OPEC. Third, get on a waiting list for an American small car,
few of which were available. Fourth, drive less and ride on the
municipal bus line. (Choice number four is hypothetical, which
I added only to make my model elegant. I believe that hardly anyone
not employed by a university or a newspaper took the fourth choice
very seriously.)

Millions
of Americans decided to start sending dollars to Japan in order
to cease sending them to OPEC nations, by way of Texaco, Exxon,
and so forth (minus 20 per cent for handling). They made that
choice because they calculated that they would serve their own
self-interest better by reallocating their budgets away from Detroit
and Saudi Arabia, and toward Japan or Germany, keeping whatever
money that was left over to spend on something else. That, basically,
is “the American way.” Americans want extra money left for something
else. That is also the Japanese way, the German way, the Swedish
way, and the Lower Slobbovian way. Consumers want money left over
after they have made any given purchase.

TWISTING
THEIR ARMS

Soon we heard
that several automobile brands that were threatened with the fate
of Hudson. I will be a gentleman, and refrain from mentioning
any names. I will simply lump them all under the category, “Son
of Hudson.”

Workers and
management at Son of Hudson Motors were concerned. They found
their share of the market declining, their unit costs of production
rising, and their pension hopes fading. They looked for an answer.
The main reason was that the public was buying fewer cars, or
different brands of cars. But everyone knows that Americans always
buy a new car every three years, or 60,000 miles, whichever comes
first. (This practice, by the way, constitutes the single-most
important form of voluntary wealth redistribution in American
life, given the life expectancy of a car at 110,000 miles, and
the depreciation well over 60 per cent after the third year. The
used car market is a massive subsidy from style-sensitive buyers
to cost-sensitive buyers.
I am one of the latter
.)

What is the
obvious way to revive the sagging fortunes of Son of Hudson Motors?
Twisting some arms. Of course, no one connected with the
company would think of actually going down to the local Toyota
agency and twisting the arms of potential buyers. Those kinds
of tactics are reserved for non-union auto workers, and the union
has a limited number of professionals in this highly specialized
field. Besides, management would regard this as unsporting. No,
there is a better way, a more cost-effective way, a more traditional
way. Manufacturers call it “the American way.” Get the government
to restrict sales of imports
.

“Get your
hands on a Toyota, and you’ll never let go!” The employees at
Son of Hudson Motors apparently believe in this catchy 1979 jingle.
What needs to be done, therefore, is to make sure that fewer American
consumers get an opportunity to get their hands on a Toyota. So
they get a cost-effective, historically acceptable squad of goons
to go out there and twist a few arms. But nobody calls it a goon
squad. They call it Congress.

Picture this
scene. Joe Lunchbucket goes down to his friendly Toyota agency
to check out the new models. As he goes up to look at the price
sticker on one car whose style pleases him, a giant of a man steps
up next to him. “You interested in this car, Mac?” Joe gulps.
“Why, yes. Are you the salesman?” Howls of laughter greet him.
He looks at the price. “That price ain’t no good here, Mac. It
costs 20 per cent more.” Joe, startled, wants to know why. “These
unpatriotic cars cost more, that’s why.” Joe wants to know who
gets the 20 per cent. “Funny you should ask, Mac. I do. It’s all
part of a program to save America. I’m here to help you to save
America. You want to save America, don’t you? What’s good for
Son of Hudson is good for America.”

Of course,
this is all exaggerated. Nothing like this happens. There really
isn’t some giant hulk of a guy in the showroom. There is only
a mild-mannered customs official at the dock. This is more cost-effective.
But your arm is just as sore, isn’t it? If you want to get your
hands on a Toyota, you will have to put up with a sore arm. The
soreness is supposed to be just slightly more painful than the
pain from buying a new Son of Hudson and paying that extra levy
to OPEC. You will have a sore arm in either case, but Congress
wants the comparative soreness factor to favor Son of Hudson.
This is the American way, political-style.

The genius
of the system is that the victim never recognizes the assailant.
Worse, by believing the traditional version of the American way,
the consumer convinces himself that goon squads are necessary,
so long as they only work the docks and carry official identification
when they extract their “protection money.” That really is what
we call it. Protection.

ANOTHER
VARIATION: EXPORT CONTROLS

If the problem
facing Son of Hudson is foreign competition, there is another
way to accomplish the same end. Americans have to buy foreign
currencies when they make a purchase of a foreign product. They
may not understand this, but specialized currency traders do.
They buy a foreign currency with dollars, and then they sell these
foreign currency units to American firms that want to import foreign-produced
products.

What if Americans
couldn’t buy foreign currencies? Wouldn’t that solve the problem
for Son of Hudson? Wouldn’t that stop the devastating flow of
foreign goods to these shores? Of course it would. So here is
my plan.

First, you
get Congress to impose massive export restrictions on domestic
producers. Make it illegal, or at least very expensive, to ship
goods and services out of the country. That way, foreign buyers
will start buying goods that are not “Made in U.S.A.” Just get
the price of U.S. goods high enough, and foreigners will buy elsewhere,
right? And if they refuse to buy American goods, there will be
zero demand (or at least far less demand) for American dollars
on the international currency markets. After all, if they can’t
buy our goods and services, why would they want to buy our money?
Anyone can see this.

Now, if foreigners
stop offering to buy dollars with their foreign currencies, then
Americans will be unable to buy foreign currencies with dollars.
And if they can’t buy foreign currencies, they can’t buy foreign
goods. And best of all, nobody blames Son of Hudson Motors for
its advocacy of a “selfish, short-sighted policy of protectionism.”

This probably
seems like a peculiar way to make the case of saving Son of Hudson
Motors from the onslaught of foreign competition. In fact, it
sounds downright crazy. That, however, is my point. What sounds
plausible from one perspective — the argument favoring tariffs
— sounds nutty from another perspective, namely, the prohibition
of American exports. But the argument is the same, for the economic
consequences are the same.

What if you
were a concerned American citizen who had come to me in search
of an answer to a problem, “How to save Son of Hudson from bankruptcy?”
First, as a defender of tariffs, I might have offered you the
typical arguments: unfair competition, dumping, low foreign wages,
and so forth. My solution: restrict imports.

Not willing
to leave you with any doubts, assume that I then proceeded to
give you my alternative solution: the prohibition of American
exports. At that point, I began to create doubts in your mind.
“Maybe this guy is overstating the problem.” You had come to me
in search of an intellectual justification for “buying American,”
and now I am sounding slightly off my rocker. But my argument
is logical. Let me explain:

“You see,
if foreigners can’t buy American products, then Americans can’t
buy foreign products. You do see this, don’t you? All the government
has to do to protect Son of Hudson Motors is to prohibit the export
of American grain, American chemicals, American mainframe computers,
and American technology in general. That would do it. Instead
of putting a bunch of customs agents on the docks to keep out
foreign-made products, all it has to do is to put them on the
docks to keep in American-made products.

“Now look
here, I want to help. You’re looking at me rather strangely. Sure,
it sounds a bit crazy. After all, isn’t the whole idea to get
people to ‘buy American’? Now I come along and tell you that the
best way to get Americans to buy American is to keep foreigners
from buying American. You say that wasn’t what you had in mind.

“What do
you mean, that wasn’t what you had in mind? Why didn’t you say
so in the first place? You wanted to know how to save Son of Hudson
Motors from bankruptcy at the hands of foreigners. That’s exactly
what I’m showing you. But now you start complaining about my alternative
plan. You didn’t come here to ruin the American farmer, you say.
You didn’t come here to wipe out the international market for
American technology, you tell me. All you wanted to know was how
to save Son of Hudson.

“Look, let’s
only answer one problem at a time. You keep trying to change the
subject. You keep wanting to get foreigners to buy American grain,
chemicals, computers, and so forth, but you don’t want Americans
to buy foreign cars. You want Americans to buy American. But you
also want foreigners to buy American. Look, friend, make up your
mind. You can’t have it both ways. Congress can save a failing
automobile company from foreign competition if we are willing
to accept the destruction of our export markets. Congress can
force Americans to ‘buy American,’ but only by forcing foreigners
to ‘buy foreign.’ But if you want foreigners to have the economic
ability to buy American products, then you have to allow Americans
to buy foreign products. Either you want trade or you don’t. It
takes two to tango, my friend. Just who is it that you want to
‘buy American’?

“Yes, Yes,
I know. You want everybody to buy American. Americans should buy
American, and foreigners should buy American. Everyone should
buy only American. Tell me, what do you mean by the word, ‘buy’?
I thought ‘to buy’ meant ‘to exchange.’ I thought it meant, ‘I
get something of his, if he gets something of mine.’ Now you’re
telling me everyone should buy American products. Then tell me,
please, just what is it that I get from the foreigner when he
gets my property? If I’m supposed to sell him my grain, or mainframe
computers, or whatever, what do I get in return? I’m not running
an international charity, buddy. I’m not in this for amusement.
If some foreigner wants to buy anything in my shop, he darned
well better have something to give me. If I have to ‘buy American’
by law, and he wants to ‘buy American,’ too, he can do his shopping
in somebody else’s store. Some American seller may be stupid enough
to ‘sell’ him something for nothing, but not me. I wasn’t born
yesterday, you know.”

BORN
YESTERDAY

Defenders
of the tariff idea really have yet to come up with an economic
definition of the verb, “to buy.” They call the government to
come to the aid of a particular American industry by imposing
tariffs, quotas, or other import restrictions, and simultaneously
they call for Congress to enact export subsidies, loan guarantees
for exporters, and similar coercive wealth redistribution schemes.
Amazing, isn’t it? Congress passes a tariff, and the next thing
you know, American exporters are going bankrupt. So Congress passes
export subsidies, and the next thing you know, prices for everything
start going up. So Congress passes price controls, and the next
thing you know, everything starts getting scarce. So Congress
passes a rationing scheme, and the next thing you know, the world
economy collapses. What’s a Congress to do?

What Congress
should do is to allow voluntary exchange. I buy, he sells. I sell,
he buys. In fact, every time I buy, he is buying. I buy his goods
and give him money; he is really buying future goods. He is “buying
money,” but only because he expects to buy goods from someone
who will be willing to accept the money later on. I sell him goods,
and I “buy his money,” but only because I want to buy goods later
on.

When we ask
people to “buy American,” what do we really mean? If we ask Americans
to buy American-made products, and only American-made products,
then we are telling American producers to sell to American buyers,
and only to American buyers. If people who want all Americans
to “buy American” are not willing to admit that they are calling
for American producers to sell only to Americans, then they had
better drop their slogan. Conversely, if they want foreigners
to have the option of “buying American” from American sellers,
then they have to allow Americans the option of “buying foreign”
from foreign sellers.

“To buy”
is “to sell.” It is the same transaction. It is an exchange. The
person who suggests that Americans should buy only from Americans
is suggesting the absolute abolition of international exchange.
He is advocating the destruction of the international division
of labor. He is advocating the abolition of international economic
specialization. He is advocating international economic disintegration,
given the key position internationally of American trade, American
capital markets, and American technology. He is advocating economic
collapse. He is advocating a return to barbarism.

We can save
Son of Hudson, but only at the expense of some other American
manufacturer. The more “freedom from foreign sellers” we give
to one industry, the more “freedom from foreign buyers” we impose
on another. The time has come to think through the economic, political,
and moral implications of the slogan, “buy American.” If we are
upset by the implications, we had better abandon the slogan.

December
30, 2003

Gary
North [send him mail]
is the author of Mises
on Money
. Visit http://www.freebooks.com.
For a free subscription to Gary North’s newsletter on gold, click
here
.

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