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.... The proposals are meant to regenerate heavy manufacturing jobs in the United States by forcing government contractors to use domestic materials and equipment, even if they are more expensive.The logic here is that, in order to prevent stimulus money from leaking abroad, one must spend money on domestic goods. These are, after all, the workers and firms who are going to be hard-hit by this recession. But does anyone else find it odd that these proponents are suggesting that the best way to deal with a consumer-driven recession is to make things that are more expensive? And yet that's what we're seeing once again with the proposed additions to the economic stimulus package that was voted through the US House of Representatives yesterday (see Rory's post below).
It's interesting to see how the arguments for protectionism have changed so little over the years. Thanks to the wonders of the internet, I have managed to track down a biting critique of protectionist logic by 19th century French writer Frédéric Bastiat. In his book, Economic Sophisms, (available at EconLib) Bastiat used his humour and wit to ridicule the policy proposals of his day. Below is Bastiat's essay: "A Negative Railroad" - see if you can draw parallels with today!
I have said that as long as one has regard, as unfortunately happens, only to the interest of the producer, it is impossible to avoid running counter to the general interest, since the producer, as such, demands nothing but the multiplication of obstacles, wants, and efforts.
I find a remarkable illustration of this in a Bordeaux newspaper. M. Simiot raises the following question:
Should there be a break in the tracks at Bordeaux on the railroad from Paris to Spain? He answers the question in the affirmative and offers a number of reasons, of which I propose to examine only this:
There should be a break in the railroad from Paris to Bayonne at Bordeaux; for, if goods and passengers are forced to stop at that city, this will be profitable for boatmen, porters, owners of hotels, etc. Here again we see clearly how the interests of those who perform services are given priority over the interests of the consumers.
But if Bordeaux has a right to profit from a break in the tracks, and if this profit is consistent with the public interest, then Angoulême, Poitiers, Tours, Orléans, and, in fact, all the intermediate points, including Ruffec, Châtellerault, etc., etc., ought also to demand breaks in the tracks, on the ground of the general interest—in the interest, that is, of domestic industry—for the more there are of these breaks in the line, the greater will be the amount paid for storage, porters, and cartage at every point along the way. By this means, we shall end by having a railroad composed of a whole series of breaks in the tracks, i.e., a negative railroad.
Whatever the protectionists may say, it is no less certain that the basic principle of restriction is the same as the basic principle of breaks in the tracks: the sacrifice of the consumer to the producer, of the end to the means.