Buy American. In recent years, and especially since the recession, this has been the mantra of ‘patriots’ across the nation. The recent jobs bill that went through Congress may even have subsidies to encourage it. But what effect would buying products made in the United States really have? Would it create jobs for Americans? Would it save the flailing auto industry? Or would it ultimately hurt our economy? According to the Theory of Comparative Advantage, the latter could be true. Rather than only buying merchandise from the US, we should refocus our workforce towards industries in which we have an advantage and trade for products created abroad. This is the only way that our global economy can flourish in the long run.
Why does buying American sound so attractive? The most common and convincing argument is that it will create more jobs for Americans. An estimated 8.4 million jobs were lost between the beginning of 2008 and the end of 2009. It stands to reason that if we bought more domestic products, our economy would grow and we could create jobs. Furthermore, if we bought more of our own goods, we could save failing sectors such as automobile manufacturing. This industry employs hundreds of thousands of people, many of whom have become highly specialized workers. This is an enormous investment in human capital that would simply be wasted if they were forced to learn new skills.
Finally, there is our trade deficit. In 2009, we imported $1,455-billion-worth of goods while only exporting $995-billion-worth. In effect, we siphoned almost half a trillion dollars from our economy and distributed it around the world. If we could import fewer items and produce them locally instead, we could reduce the amount of capital that is moved out of the country and hopefully improve our nation. It seems like an absolute certainty that we should only buy things from other Americans. But is it really?
Economics tells a very different story. While it is imperative that we create more jobs for Americans, this is only a temporary bandage over the much larger wound in the system. According to the Theory of Comparative Advantage, self-sufficiency is never the most efficient way to survive. The United States must expand its trade with other countries. In fact,...