Well, I thought that Obama was too smart to enact protectionist policies, but it looks like he does indeed mean to try to plunge the USA into a new depression, just like Hoover did when he signed the Smoot-Hawley Tariff Act in 1930. What protectionism says to consumers is this: working families must pay more for inferior products manufactured by government’s favored special interest groups, (e.g. – unions). The standard of living of consumers of those protected products will be reduced, because consumers are overpaying for something that they could get cheaper elsewhere.
What this means that those of us who prefer to use our dollars for purchases that are important to our worldviews (e.g. – Christianity), is that we will have less purchasing power to spend on charity, private schools, apologetics resources, or anything else we want to buy to express our values. Money is the fuel that people use to live out their worldviews in the public square. The more money is wasted by government, the less money we have for our individual priorities. And the way that a secular government spends money is never as good as the way an informed Christian individual will spend it.
Reactions to Obama’s “Buy American” plan worldwide have been swift and alarming:
- In Canada, the Globe and Mail’s headline is “Buy American, spark a global trade war“
- In the UK, the Telegraph warns that “Protectionism could destroy us all” and the Times declares “Spat with China raises fears of trade war“
- In Australia, the Canberra Times reports that there are “Fears ‘Buy American’ bid could ignite ignite trade war“
Over at Pat Toomey’s Club for Growth, Andrew Roth notes that India is angered at the prospect of having their exports taxed. The headline from Reuters India is “Policymakers sound alarm over protectionism“. We can expect to pay more for goods imported from other countries, because they will retaliate against our tariffs. More consumer purchasing power is lost!
Over at William J. O’Neill’s Investors Business Daily, an editorial describes how firms such as GE and Caterpillar faces job losses because they are denied access to cheap foreign steel. By the way, if you haven’t clicked on the IBD podcasts over there on the rightmost column, what are you waiting for? Those are the best podcasts on the Internet!
Over at the Cato Institute blog, Daniel Ikenson notes that the American Steel industry has been enjoying record profits, and that the steel tarrifs supported by Obama’s plan cause other companies to lose exports to foreign nations, because businesses here are forced to pay too much for steel that they could get cheaper abroad.
It was Adam Smith who first explained so long ago:
It is a maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes but employs a tailor.… What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage. (Adam Smith, The Wealth of Nations, Book IV, Chapter II)
A more complete explanation of the effects of imposing tariffs on imports can be found in Robert P. Murphy’s new introductory book to free market capitalism, The Politically Incorrect Guide to Capitalism. A review of this book is here. Another good book analyzing free market capitalism applied to a number of different areas including crime and abortion, is Freedomnomics by John R. Lott. A review of this book, by the eminent economist Walter Williams, is here.