Irrational Response: Protectionism

20121128-235506.jpg

Homo economicus is a rational person when seeking to achieve their ends. Whether that is deciding what to buy, or how to live, that is the guiding principle.

So what to make of a recent Rational Response Squad (RRS) email that has gone beyond encouraging atheism?

The average American spends $700 on holiday gifts and goodies, totaling more
than $465 billion. If that money was spent entirely on US made products it
would create 4.6 million jobs. If every American spent $64 on American made
goods during holiday shopping, the result would be 200,000 jobs.

So much for humanism being a global unifying theme. Economic decisions are not always a zero sum game. The king in the market should be the consumer – that is you and me. What we need to buy, and what we want to buy, is what the market should be responding to. That way people are employed, and resources used, based on our choices.

Plus in what sense is “buying American” the thing to consider. All raw materials coming from the USA to maximise American employment? Well, without foreign oil most American production would cease to exist. That illustrates the importance of a global market to achieve output by being able to make imports of essential inputs. Insisting on domestic inputs which may be more expensive than imports pushes costs onto consumers.

Perhaps RRS mean assembled in the US, though often 100% assembly again does not happen because it either is not made domestically or components from abroad are cheaper and better quality. Those things again benefit the consumer. You get a product that either would not exist if left 100% to domestic production, or the competition gives you more choice. The modern assembly line is often a global factory.

20121129-000659.jpg

The caricature view of globalisation above – actually a powerful tool for raising living standards when embraced wisely.

Should you buy Richard Dawkins (British author) books, if they were printed in the USA over Sam Harris (US author) if printed in Canada? Of if both printed in USA favour Sam by buying all American? Or would we agree your driving factor in making the decision is whose book you want to read first!

Patriotism is fine, the issue I have is that the solution to any countries economic development and growth is not going towards autarky. Being able to trade with other countries in an open market is one of the most significant reasons for prosperity in the modern era, together with the industrial revolution.

There are issues to do with the environment, and international labour standards which are very creditable things to be concerned about. Equally, giving the low paid in the developing world higher living standard should be as much an issue for a humanist as the poor in their own developed world. Globalisation is a significant means in achieving that goal.

So my message is clear. Be thoughtful about what you want to buy, and need to buy. I trust you to make your own choices in an open free trade economy.

Enjoy your shopping.

If you want a much more detailed economic answer to trade, and the impact of going only domestic you may want to read this from Cato The High Cost of Protectionism.

UPDATE: 29/11 see comments for Brian Sapient’s (of RRS) reply.

Article written by John Sargeant on Homo economicus’ Weblog

Follow @JPSargeant78

Advertisements

2 Comments

Filed under Economics, economy

2 responses to “Irrational Response: Protectionism

  1. I agree with everything you said. I was calling for a balanced approach. You seem to as well. You titled your piece “irrational response” so I imagine you don’t realize that in your article you have summed up my feelings as well. I am not in opposition to you.

    I do worry that you put a stress on arguments I’ve now come to believe we give too much blind adherence to. Throughout my life I’ve slowly learned not to look at labels as production moved overseas because I was accepting what the stores were offering me. They have slowly moved to offer me more foreign goods and less American. The consumer is not king, profit for the megacorp has become king. The big box stores squeeze every penny they can out of low cost goods, and we buy it because it’s there. But what if there is a similarly priced American replacement that isn’t in the big box store I do my shopping at?

    I am suggesting we heighten our awareness, not eliminate global trade. Last week I was at the grocery store, and had a decision to make when purchasing onions. They had yellow and spanish onions, and it didn’t matter which I used. They were the same price, same weight, I couldn’t decide. I checked the labels. One came from Peru, the other from the US. I bought the American onions. Was that so wrong? I also reduced my carbon footprint with that purchase.

    I am not arguing for government protectionism, I don’t want to see tariffs restricting trade, or other barriers and subsidies typically associated with protectionism. I want to encourage people to make informed decisions. There are American products that are made at similar quality and similar price, or higher quality at similar price. Yes these items may have foreign parts… great!

    I agree with your message. “Be thoughtful about what you want to buy, and need to buy. I trust you to make your own choices in an open free trade economy.” I only have a small quibble here. I trust myself to make my own choices, but today I realize that I made poor ones in the past. Blind trust in anyone is no good, including blindly trusting myself. There were many times I could have reduced my carbon footprint by buying local and helped my own economy even more. I blindly accepted the notion that I should just buy foreign.

    As for the poor countries of the world, Americans have shown that when we have money to give, we will. And we’d have more of it if we just dedicated a little more of our energy to buying homegrown. And I would advocate for the same if you are from a country other than the one I live in. Are we about to go over the fiscal cliff? I’m just trying to do about the only thing I can do to help.

    • Thanks for clarifying.

      The title of the blog was aimed more at protectionism being considered a solution to a country’s economic woes – it can actually add to them.

      Definitely consumers having the information they need when making purchases can only help.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s