Buy American; G. North

Gary North BUY AMERICAN! EVERY once in a whHe, I see a car bearing a bumper sticker, CCBuy American." From what I gather, it is a popular sticker in Michigan, espe cially in cities like Detroit and Pon tiac. Whenever there is an economic recession, and the sales of American automobiles begin to slide, we can count on a television report on the ailing auto industry, complete with interviews with unemployed auto workers, who have UBuy American" stickers on their cars and even on their homes' front doors. C1\mericans have to pull together," we are told. CCThey 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 Dr. North is President of the Institute for Christian Economics. The I.C.E. publishes a free bimonthly newsletter, Biblical Economics Today, available on re quest from P.O. Box 6116, Tyler, Texas 75711. words, cCWhat'sgood for General Mo tors is good for America."

But Americans have this distress ing tendency-one shared by buyers in every nation in the world-to buy what they regard as bargains, irre spective of uMade in U.S.A." stick ers. When Americans CCbuy Ameri can," they have in mind something very specific: CCBuying 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 patri otism? Did all those people who bought Volkswagens in the 1950s deal the national interest a body blow? After all, they could have bought De 8otos, 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 3 4 THE FREEMAN January phrase? Are we willing to declare, retroactively, that UWhat'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 na tional institution, a 75-miles-per hour, 15-miles-per-gallon temple to the promise of unlimited growth and 5 per cent GNP increases, com pounded 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 pres ence 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 editori als 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. So they changed their minds, al most overnight. This is what free dom is all about. Foreign auto man ufacturers 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 prof iting Japanese or German compa nies, 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 hypo thetical,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 Ara bia, and toward Japan or Germany, keeping whatever money that was 1981 BUY AMERICAN! 5 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. Twistingtheir Arms It would appear that several au tomobile brands are threatened with the fate of Hudson. I will be a gen tleman, and refrain from mention ing any names. I will simply lump them all under the category, ~(Son of Hudson." Workers and management at Son of Hudson Motors are concerned. They find their share of the market declining, their unit costs of produc tion rising, and their pension hopes fading. They look for an answer. The main reason is that the public is 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 vol untary wealth redistribution in American life, given the life expec tancy of a car at 110,000 miles, and the depreciation well over 60 per cent after the third year.) 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 po tential buyers. Those kinds of tac tics are reserved for nonunion auto workers, and the union has a lim ited number of professionals in this highly specialized field. Besides, management would regard this as unsporting (at least in the early stages of the recession). No, there is a better way, a more cost-effective way, a more traditional way. Manu facturers 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 jingle. What needs to be done, therefore, is to make sure that fewer American con sumers get an opportunity to get their hands on a Toyota. So they get a cost-effective, historically accept able 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 Lunch bucket 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.

6 THE FREEMAN January Are you the salesman?" Howls of laughter greet him. He looks at the price. CCThatprice ain't no good here, Mac. It costs 20 per cent more." Joe, startled, wants to know why. ccThese unpatriotic cars cost more, that's why." Joe wants to know who gets the 20 per cent. CCFunny you should ask, Mac. I do. It's all part of a pro gram 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 as sailant. Worse, by believing the tra ditional 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 ccprotection money." That really is what we call it. Protection. Another Variation: Export Controls If the problem facing Son of Hud son is foreign competition, there is another way to accomplish the same end. Americans have to buy foreign currencies when they make a pur chase of a foreign product. They may not understand this, but specialized currency traders do. They 'buy a for eign currency with dollars, and then they sell these foreign currency units to American firms that want to im port foreign-produced products. What if Americans couldn't buy foreign currencies? Wouldn't that solve the problem for Son of Hud son? Wouldn't that stop the devas tating 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 do mestic producers. Make it illegal, or at least very expensive, to ship goods and services out of the country. That way, foreign buyers will start buy ing goods that are not cCMade 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 1981 BUY AM:ERICAN! 7 dollars on the international cur rency 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 cur rencies, then Americans will be un able 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 advo cacy of a ~~selfish, shortsight~d pol icy of protectionism."

This probably seems like a pecu liar way to make the case of saving Son of Hudson Motors from the on slaught of foreign competition. In fact, it sounds downright craz~ That, however, is my point. What sounds plausible from one perspective-the argument favoring tariffs-sounds nutty from another perspective, namely, the prohibition ofAmerican exports. But the argument is the same, for the economic conse quences are the same. What if you were a concerned American citizen who had come to me in search of an answer to a prob lem, ~~How to save Son of Hudson from bankruptcy?" First, as a de fender of tariffs, I might have of fered you the typical arguments: un fair competition, dumping, low foreign wages, and so forth. My so lution: restrict imports. Not willing to leave you with any doubts, assume that I then pro ceeded to give you my alternative solution: the prohibition of Ameri can exports. At that point, I began to create doubts in your mind. Maybe I was overstating this thing. You had come to me in search of an in tellectual justification for Ubuying American," and now I was sounding slightly off my rocker. But my ar gument is logical. Let me explain: <CYou see, if foreigners can't buy American products, then Americans can't buy foreign products. You do see this, don't you? All the govern ment has to do to protect Son of Hudson Motors is to prohibit the ex port of American grain, American chemicals, American 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 Ameri can-made products. uNow 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 8 THE FREEMAN January wanted to know how to save Son of Hudson Motors from bankruptcy at the hands of foreigners. That's ex actly what I'm showing you. But now you start complaining about my al ternative 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 Amer ican technology, you tell me. All you wanted to know was how to save Son of Hudson.

uLook, let's only answer one prob lem at a time. You keep trying to change the subject. You keep want ing to get foreigners to buy Ameri can grain, chemicals, computers, and so forth, but you don't want Ameri cans to buy foreign cars. You want Americans to buy American. But you also. want foreigners to buy Ameri can. Look, friend, make up your mind. You can't have it both ways. Congress can save a failing automo bile company from foreign competi tion if we are willing to accept the destruction of our export markets. Congress can force Americans to tbuy American,' but only by forcing for eigners to tbuy foreign.' But if you want foreigners to have the eco nomic 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 tbuy American'? ((Yes, yes, I know. You want everybody to buy American. Americans should buy American, and foreign ers should buy American. Everyone should buy only American. Tell me, what do you mean by the word, (buy'?

I thought (to buy' meant tto ex change.' I thought it meant, (I get something of his, if he gets some thing 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 for eigner when he gets my property? If I'm supposed to sell him my grain, or 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 for eigner wants to buy anything in my shop, he darned well better have something to give me. If I have to tbuy 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." Born Yesterday Defenders of the tariff idea really have yet to come up with an eco nomic definition of the verb, (tto buy."

They call the government to come to the aid of a .particular American in dustry by imposing tariffs, quotas, or other import restrictions, and si multaneously they call for Congress to enact export subsidies, loan guar1981 BUY AMERICAN! 9 antees for exporters, and similar coercive wealth redistribution schemes. Amazing, isn't it? Con gress 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 every thing 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 col lapses. 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 Ubuying 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 Ameri can-made products, and only Amer ican~made products, then we are telling American producers to sell to American buyers, and only to Amer ican 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. Con versely, if they want foreigners to have the option of ((buying Ameri can" from American sellers, then they have to allow Americans the option of ~~buying foreign" from for eign sellers. ~~To buy" is ~~to sell." It is the same transaction. It is an exchange. The person who suggests that Ameri cans should buy only from Ameri cans is suggesting the absolute abo lition of international exchange. He is advocating the destruction of the international division of labor. He is advocating the abolition of interna tional economic specialization. He is advocating international economic disintegration, given ·the key posi tion of American trade, American capital markets, and American technology. He is advocating eco nomic 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 cCfree_ dom from foreign buyers" we impose on another. The time has come to think through the economic, politi cal, and moral implications of the slogan, ~~buy American." If we are upset by the implications, we had better abandon the slogan. , A New Year's prayer of faith and hope for friends of freedom. RALPH BRADFORD 10 The Basic Law 1 We men of Earth have searched to find A moral principle or guideA basic Law for humankind, To light our steps, and to provide Direction for our earthly course, Derived from some celestial Source. 2 And this has led, along the road That spans the dim, unfolding ages, To many a prayer and creed and code, And volumes of unnumbered pages, As we have hopefully explored The mystic purpose of the Lord.