by Gary North
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."
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
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