Anthony Faiola writes in the Washington Post:
A Senate version, yet to be acted upon, goes further, requiring, with few exceptions, that all stimulus-funded projects use only American-made equipment and goods.
Proponents of expanding the "Buy American" provisions enacted during the Great Depression, including steel and iron manufacturers and labor unions, argue that it is the only way to ensure that the stimulus creates jobs at home and not overseas.
Opponents, including some of the biggest blue-chip names in American industry, say it amounts to a declaration of war against free trade. That, they say, could spark retaliation from abroad against U.S. companies and exacerbate the global financial crisis. …
Douglas Irwin writes in the New York Times:
One way workers get ahead is to get salary increases. But an equally important way is by keeping the cost of goods low relative to income. The person experiencing little or no growth in income becomes wealthier if the cost of the goods and services she purchases doesn't grow as fast (or even declines) relative to income.
I understand some people's concerns regarding sweatshops and unfair conditions in other countries. It is an issue to be reckoned with. But blanket protectionism is destructive, particularly for the poor.
If we're compelled to buy American products when these businesses are not the cheapest suppliers, then we are raising the cost of living for everyone. Meanwhile, impoverished people around the world who could see their economic fortunes rise by selling products in the U. S. are compelled to cut costs to make their goods even cheaper. That means fewer resources to improve benefits to employees, improve environmental performance, and make other changes justice advocates are frequently clamoring for. If protectionism goes high enough, it can wipe out the livelihoods of the poor (or at least the less wealthy) altogether.
The irony of justice advocates embracing protectionism is that it is an exercise in creating monopolies. American labor unions are the big winners, but at what cost? The poor outside the U. S. are shut out of the market. Inside the U. S., labor unions keep wages high by restricting the number of people they will allow to be qualified for work. This is great for those with a job but disastrous for those who are kept out. American Big Labor becomes a monopoly. Meanwhile, everything becomes more expensive relative to income because the monopoly has effectively eliminated competition.
Finally, other nations will inevitably retaliate with their own protectionist measures making it harder for American businesses to export goods and services, thus shrinking the markets for many American businesses, with small businesses being disproportionately hurt. In short, protectionism becomes a temporary boon for certain sectors of big business and big labor but ends up being a disaster for everyone, including the world's poorest citizens.
Welcome to the new age of economic justice under Obama.
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