Obama and Protectionism
I don’t follow political/economic blogs or thinkers like Davey does, so it could just be that I haven’t looked in the right places. However, it appears that the mainstream US media is ignoring the protectionism hidden inside Obama’s gargantuan stimulus package. (I always knew that it would pay off to read non-American media—thank God for the National Post.) A quote from my beloved Canadians:
An $819-billion version of the stimulus bill, passed last week in the House of Representatives, bans foreign iron and steel from being used in projects launched under the stimulus plan.
The more expensive Senate version, however, goes even further. It currently includes language requiring that all stimulus-related projects use only American-made goods.
Whoa! (Read the entire article here.) Why isn’t CNN, Fox News, or Drudge talking about this?
Some economists have already offered helpful editorials on the problem with protectionism and Obama’s economic strategies. Let me propose another way of looking at this situation.
I think it safe to claim that the USA holds the most responsibility for the global economic crisis, if only because they are the global economic leaders. (Blame and responsibility can definitely be doled out all around, but since America is the greatest global power, she ought to buck up and take the responsibility that comes with that position.) If America tries to save herself by enacting “Buy America” policies for all stimulus spending, it sends an appalling message to the rest of the world. How will the rest of the world recover if America refuses to take care of anyone except its own?
America already has a terrible reputation abroad. Some of it is undeserved, and some if it is envy. But an action like this—an action that can only be described as “selfish”—will give the entire world justification for hating the USA.
This is not an endorsement of the stimulus package—I remain as “free market” as ever, and I really wish the government would stop trying to solve the problem by printing more and more money. That said, if money is going to be dished out (which is inevitable at this point), it needs to be dished out in a helpful way. The “Buy America” part may be just one of many flaws with the stimulus package, but it’s the one that will matter to everyone who doesn’t live in America and whose lives will be made harder because of it.
Kate, 
D 9:44 am on February 3, 2009 Permalink
Frankford,
Are you suggesting that stimulus package should bail out both the US and the world? Am I misreading you?
F 9:52 am on February 3, 2009 Permalink
Not at all.
What I am suggesting is that the stimulus package shouldn’t deliberately cut out the rest of the world for the supposed benefit of America. (Protectionism doesn’t work in the long run, but that’s beside the point.)
I’m not asking America to give money to the rest of the world. But if America tries to save her economy by deliberately shutting down imports from other countries (something that they rely on), how is that loving your neighbor?
Why would America deliberately exclude the rest of the world from the indirect benefits of her “remedies” (as flawed as those remedies may be)? It’s arrogant, and it implies that America doesn’t care about what she’s received/taken from other countries around the world.
And it’s the kind of selfishness that’s awfully easy to remember.
That’s all I was saying.
D 10:14 am on February 3, 2009 Permalink
Frank, you are officially more of a Chicagoan than me.
I don’t hold to the Chicago School phobia of protectionism, so I guess we’ll just have to disagree on this one. But if you’ll let me indulge in some sweeping, untenably unnuanced generalities… local economies are more sustainable and more beneficial than globalism. Cheapest is not always best–not for domestics, and not for the cheap labor that’s necessary to sustain cheap foreign manufacturing.
F 10:35 am on February 3, 2009 Permalink
Two things.
1) I don’t really have a phobia of protectionism—I just believe that it doesn’t work. Say whatever you want about capitalism or free market economics, I think they have one true observation: humans are innovative creatures who do act out of self-interest. Which means that if the government demands that businessmen spend more money for so-called “localization,” the businessmen will find ways to do something cheaper.
2) Your argument feels akin to what people say about the Iraq Wars. If you created a global problem (which the US has), you can’t fix it by suddenly turning to a “localized” solution. As my recent post about Starbucks should show you, I’m all for community businesses. But that’s not something that can happen overnight. What’s more, protectionism isn’t a way to achieve localism: it’s a way of giving to the government, lulling big businesses into thinking that they’ll be safe, that the government will always take care of them.
D 10:42 am on February 3, 2009 Permalink
I’m going to call you Friedman for the rest of the week.