Reaching Around the World to Punch Ourselves in the Nose
Categories: Finance | Economics
Posted by
Paul Orfalea
at
9:40 AM
0
comments
Buckaroo Banzai said it during brain surgery: "No, no, no, don't tug on that. You never know what it might be attached to."
The global economy is no less complex and interconnected than the human brain - maybe more so. The funny thing about American protectionist jingoism is that we do know what we're connected to, but we're adding a "Buy American" provision to the economic stimulus bill anyway. Once again, politicians have chosen symbolism over good policy.
There is consensus that the current global recession started in America and then spread around the world. Politicians need to understand that the "global economy" is not an intellectual construct or a product of policy. Rather, the global economy simply exists, a natural outcome of information and transportation technology advancements. We are the world, so to speak. The current crisis proves that the old saw is still true: when America sneezes, the world catches cold. Protectionists should be warned that when America kicks a neighbor in the shin, it is America that develops a bruise.
Ironically, "Buy American" jingoism hurts our best friends most. Our closest trading partners lose business, ostensibly so we can create jobs here in America. But as Barron's points out, under the proposed provision, "taxpayers could pay a 25% surcharge." And that's just on the cost of goods and services. No one can calculate the long-term cost of further disrupting the economies of our allies.
Protectionism, whether through tariffs or purchase restrictions or embargos, disrupts economic, political and social connections far beyond the seemingly simple decision to use American rather than Canadian steel to rebuild bridges. It seems to me that one clear lesson of the twentieth century was that protectionist policies not only prolong recessions, but they can also divide nations. And when the competition for natural resources is most extreme, when whole nations suffer from "beggar thy neighbor" policies, the resulting privation can destabilize governments, prop up fascists, and lead to war.
If we really want to create jobs in a lasting economic recovery, let us strive to compete on a level playing field, respectful of the fact that even though we are still the richest, most powerful nation in the world, we are very much a part of that world.


