Guest Post: Economic Localism Is No Better than Economic Nationalism

The best path toward enriching everyone is allowing everyone to trade with everyone else.

by Steven Horwitz

As Black Friday has continued to expand in recent years, one response to its orgy of discounts and deals has been to promote the following day as “Small Business Saturday.” The idea is to encourage people to shop at their local stores rather than at national chains or big-box stores, or perhaps on the Internet. Doing so, argue its proponents, is both moral and good for the local economy, as it keeps jobs and money in “our communities” rather than, presumably, in the hands of faceless and distant corporate masters.

Let’s ignore the irony that the sponsor of this movement is the international corporation known as American Express. Is there a moral or economic case for shopping local, whether on the Saturday after Thanksgiving or in general?

There is not. Many of the same arguments made by progressives in favor of shopping local are the same as those made by Trump and his supporters in favor of what they call “economic nationalism.” For the same reasons that shopping local isn’t morally or economically superior to buying from chains and big boxes, neither is buying “Made in the USA.” The most moral and economic choice is to buy from whomever you want based on your preferences about price, service, or any other number of factors.

Big Boxes Employ Locally
If we only shopped from locally-owned businesses, we would be paying higher prices and overall employment and incomes would be lower.  The moral and economic cases against buying local are intertwined. Consider the argument that buying local is better because buying from Walmart or Target doesn’t keep money and jobs in the local community. This argument ignores that the average Walmart Supercenter employs around 400 people and the numbers are similar for Target. Those jobs continue to exist because people shop at those stores. The hundreds employed at any given big box store are just as much members of the local community as are the owners of the small business that compete with the big boxes. 

To the extent that the prices at the big box stores are cheaper, they enable those who shop there to have income left over to spend on other goods and services, including things from locally-owned businesses, creating jobs that would not exist otherwise. If we only shopped from locally-owned businesses, we would be paying higher prices and overall employment and incomes would be lower. Plus, consumers would not have access to the variety of goods available at chain and big box stores, forcing them to not only spend more but get less value for it.

Buy National?
The same logic applies to international trade. Those imploring us to “buy local” are falling for the same sorts of fallacies that Trump, and many who voted for him, implicitly accept when they argue for raising barriers to international trade. “Economic localism” is nothing more than a smaller scale version of the “economic nationalism” of Steve Bannon and other Trump advisors.

Increasing duties on imports, thereby forcing more Americans to buy “local” in terms of the global economy, does nothing to create jobs or improve the economic standing of Americans. “Keeping the money in the USA,” like “keeping the money in the community,” harms those it is intended to help, and does so for the same reasons.

Forcing Americans to buy only, or predominantly, American-made products means we will spend more to get less, and the net effect on jobs will be zero at best. Globalized trade certainly shifts the mix of jobs in the US economy, as we have shifted in relative terms from manufacturing to hi-tech or services for example, but does not reduce the total number of jobs. One need only look at the data on overall job growth, and the increased variety of cheaper and better goods available to even the poorest Americans, over the last 30 years to see this.

The moral case for buying local is similarly weak. It’s best seen by making the moral case for buying globally.

The promoters of buying local often argue that buying from international corporations is problematic because so many of their products are bought from China or other parts of the world where wages are low and working conditions are bad. The belief is that by buying from those firms, consumers are supporting the exploitation of workers in those countries, making such purchases morally questionable.

Here is where the economics entangles with the morality: large firms are morally suspect because of the supposed negative economic effects they create. But are those negative economic effects real? Without an extended discussion of so-called “sweatshops” (but do see Ben Powell’s excellent book), two quick points are in order.

How Wages Rise
That Chinese workers have factory jobs that pay as well as they do, compared to the other options available to them, is a result of firms like Walmart buying the products those factories create. Wages depend on the productivity of workers (and the capital they use) along with the value of what they create. When the demand for those Chinese products goes up, thanks to us buying at Walmart, wages for the workers in those factories rise. And the evidence is clear that rising wages and the pressure of large Western firms are key drivers of improved working conditions.

Buying Chinese made products at Walmart not only doesn’t further exploit Chinese workers; it is of positive help to them.

Geography and Morality

It is not clear why people more near to us geographically should have moral weight than those further away. Given the choice between helping a middle-class small businesswoman in our neighborhood or increasing the chances of better employment at a higher wage for much poorer men and women in China, why should we believe that the former is necessarily morally superior? 

If human beings deserve our moral consideration by virtue of their humanity, and if those who are worse off economically are deserving of more such consideration, then it would seem that if there is a moral case for anything, it’s for buying in ways that help the least well-off, regardless of their nationality or ethnicity.

Certainly most of the progressive proponents of shopping local do not imagine themselves to be guilty of the same prejudices as Steve Bannon and other partisans of Trump’s economic nationalism, but the underlying logic is the same. The best path toward enriching everyone is allowing everyone to trade with everyone else.

Buy Wherever
To be clear, my argument is not that buying local is somehow wrong. It’s not. But it’s also not morally or economically superior to buying from Walmart or Target or even Amazon. Many local businesses offer better products or superior service, or perhaps fill a unique niche that large stores cannot. They also provide better opportunities to socialize with friends and neighbors. Those are all good reasons to buy from local businesses.

But don’t fool yourself into thinking that you are somehow benefiting your local economy or doing something that’s morally superior. You’re just doing what globalized markets with a range of alternatives allow you to do: deciding what elements of your economic activity matter to you and choosing accordingly. Restricting those alternatives, whether through well-intentioned progressive “economic localism” or the darker, reactionary forces of “economic nationalism,” harms people, and often those who can ill-afford worsening poverty.

Steven Horwitz is the Schnatter Distinguished Professor of Free Enterprise in the Department of Economics at Ball State University, where he also is a Fellow at the John H. Schnatter Institute for Entrepreneurship and Free Enterprise. He is the author of Hayek’s Modern Family: Classical Liberalism and the Evolution of Social Institutions. and is a Distinguished Fellow at FEE and a member of the FEE Faculty Network.

This article was originally published on FEE.org. Read the original article.

From the Archives: Two views on breaking the free-trade policy logjam

Publisher's note: This article was originally published on Examiner.com on April 22, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Two views on breaking the free-trade policy logjam
April 22, 2010 6:35 PM MST

There are three major free-trade agreements pending in Congress: one each with Colombia, Panama, and South Korea.

Congressional approval is necessary to implement the agreements, which are intended to reduce tariffs and quotas and smooth the way for the United States to increase its exports to those countries while also allowing the three trading partners to export more products to the United States.

Brink Lindsey, now vice president for research at the Cato Institute in Washington, formerly served as director of that organization’s Center for Trade Policy Studies. He is the author of The Age of Abundance: How Prosperity Transformed America’s Politics and Culture and, with Daniel Ikenson, Antidumping Exposed: The Devilish Details of Unfair Trade Law.

Trade Policy in the Mud
Lindsey spoke about the prospect of ratification for the three free-trade agreements when he was in Charlottesville on April 15. He told the Charlottesville Libertarian Examiner that “they are all stuck in the mud for the foreseeable future.”

In order to get them out of the mud, Lindsey said, “we would need President Obama to see that his credentials as a multilateralist would be burnished by getting these bills through Congress.” At the moment, he continued, Obama is “not putting pressure on Congress.”

Moreover, Democratic control of Congress “means they are very sensitive to the interests of organized labor, it doesn’t want to move on them. That logjam has to be broken.”

Breaking the Logjam
Lindsey went on to say that “it’s possible now that [since] Obama is well to the left of public opinion and is suffering in the polls as a result,” the president will be “looking for things to make him seem more moderate, make him seem more pro-business, more pro-market”

In other words, Lindsey suggests that “this is one possibility for him to buck the interest groups in his party and push sound trade policy. It’s possible, [but] I’m not holding my breath.”

Would any one of the agreements be more likely than the others to be approved first? Lindsey thinks not. “They’ll all rise or fall together,” he said.

A Candidate’s View
GOP congressional candidate Matthew Berry explained the importance of free trade policy during an interview on April 17.

“We need free trade agreements for two reasons,” Berry said. First, “more American exports mean more American jobs… a billion dollars worth of exports creates about 15,000 American jobs.”

Second, he said, “Trade increases competition, which means lower prices for American consumers, so your dollar goes farther.”

Obama’s Willing Partners
To break the logjam that Lindsey identified, Berry argued that if Republican candidates do well in 2010, President Obama will have “more willing partners in Congress” because even though the President says that he favors ratification, “he hasn’t been willing to expend any political capital to get them ratified.”

Berry concluded that, “if the Republicans could retake Congress, it will be easier for President Obama to put these on the table and [get them] passed.”

From the Archives: Poultry industry is trade-talk pawn of South African government, says analyst

Publisher's note: This article was originally published on Examiner.com on May 5, 2015. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site was scheduled to go dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Poultry industry is trade-talk pawn of South African government, says analyst

In the run-up to the recent introduction of bills in the U.S. Congress to reauthorize the African Growth and Opportunity Act (AGOA), which has broad bipartisan support because of the benefits gained by both African and American economies, there was a minor glitch owing to objections in South Africa to potential sales of U.S. poultry products in that country.

According to Kevin Lovell, CEO of the South African Poultry Association, the dispute stems from the United States “not selling chicken at the right price. They’re trading unfairly by dumping their chicken in our market. And that makes competition impossible for us to compete fairly.”

Senators Chris Coons (D-Delaware) and Johnny Isakson (R-Georgia), who represent major poultry-producing states, disagreed with Lovell and obtained a provision in the AGOA renewal bill (sponsored by Senate Finance Committee chairman Orrin Hatch) that requires a 30-day review of poultry policy in South Africa.

"It's not fair for them to continue to get” AGOA benefits, said Coons, ranking member of the Senate Africa subcommittee, “when they aren't playing fair with American exports.”

In a press release, Isakson stated that he and his colleagues “believe passionately in AGOA’s value and support its long-term renewal, but believe it unfair and inappropriate that the country that benefits from the law the most — South Africa — continues to maintain unreasonable tariffs on American poultry.”

Playing Chicken
One South African analyst sees something bigger at stake in the dispute.

After a presentation about South Africa's economy at the Cato Institute in Washington on May 4, the CEO of the South African Institute of Race Relations, Frans Cronje, suggested that this “playing chicken (literally)” represents a significant and troubling trend within South Africa's policy making circles.

In an interview with the Charlottesville Libertarian Examiner, Cronje -- author of A Time Traveller's Guide to Our Next Ten Years (2014) -- explained that “South Africa is recording a trade deficit with every major region and country in the world except the United States and non-energy Africa, and that's only because of the generosity of AGOA.”

In the AGOA negotiations, he said, what we saw “was the chicken producers being used as a pawn by South Africa's Department of Trade and Industry.”

That is because, Cronje explained, “within the Communist left that has such influence over policy formulation in South Africa now, there is a drive to limit the influence and exposure of Western countries in the South African economy, even if that comes at the price of growth.”

From his point of view, “the chicken producers have been used as a pawn in this respect, to create stumbling blocks” that work to the advantage of left-wing factions within the South African government.

“Should South Africa see the benefits it draws from AGOA being limited, the chicken farmers can always be blamed by government as having caused this,” he said.

At the same time, “the government will accept that situation because it gives them one thing they don't have at the moment, which is a high-level excuse to explain our weak economic performance. They can say, 'Well, look at how the West is starting to treat us.'”

'Carcass' of economy
The attitude showed toward the United States in the AGOA negotiations has precedents, he noted.

The hostility that South Africa has “displayed on AGOA,” Cronje said, “is the same hostility we showed eighteen months ago in unilaterally canceling bilateral investment treaties with fifteen European countries.”

The result of that decision, he explained, is that “if that investment continues, South Africa will welcome it, but it's going to be on the terms and conditions set by the left of the South African government. Should the investment leave, to put it quite directly, the leftists will prefer to have absolute control over the carcass of the South African economy than to progressively lose control over a high-growth economy.”

The House Ways and Means Committee has approved H.R. 1891, the AGOA Extension and Enhancement Act of 2015, and the Senate Finance Committee has approved a companion bill, S. 1009. Both bills are expected to come to a vote on the floor of the House and Senate in June.

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Original URL: http://www.examiner.com/article/poultry-industry-is-trade-talk-pawn-of-south-african-government-says-analyst

From the Archives: Virginia Congressman Robert Hurt speaks out for free trade in Charlottesville

Publisher's note: This article was originally published on Examiner.com on June 13, 2015. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site was scheduled to go dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Virginia Congressman Robert Hurt speaks out for free trade in Charlottesville

Appearing at the monthly Albemarle County Republican breakfast on June 13, Congressman Robert Hurt (R-VA5) vigorously defended his vote in favor of the Trade Promotion Authority (TPA) in the House of Representatives on June 12.

Noting that opposition to the TPA and related bills (Trade Adjustment Assistance, or TAA, and the Trans-Pacific Partnership, or TPP) comes largely from labor unions and left-leaning liberals like Senators Bernie Sanders (I-VT) and Elizabeth Warren (D-MA), Hurt said that support for free trade is a conservative principle that “would make Ronald Reagan proud.”

In an interview with the Charlottesville Libertarian Examiner immediately after his breakfast remarks, Hurt explained what the TPA does and what it does not do, and emphasized that there is not yet an agreement for the Trans Pacific Partnership – that the TPP is still being negotiated.

“What we voted on yesterday was the Trade Promotion Authority, also known as TPA,” Hurt said. The bill “passed with a large Republican majority in support.”

Framework and authorization
He explained that TPA sets up a framework and gives authorization to the President “to finish negotiating trade agreements” that have been under consideration for years. The Trans-Pacific Partnership, he noted, “was begun under George Bush, so this is not like this is Obama's idea. This was initiated under a previous president.”

Hurt pointed out that “in order for us to even consider a free trade agreement – which was not on the floor – in order for us just to consider it, we had to pass a Trade Promotion Authority to give the president the ability to finalize the negotiations with the other 11 countries (in the case of TPP) and, not only that, but it gives Congress and the American people a tremendous amount of transparency” that would not be available without the TPA in place.

The congressman said that “as it is now [the President] doesn't have to share anything with Congress. That's why the negotiating text of a free trade agreement that does not exist is classified. That's because the Administration has the power to control that negotiating text and doesn't have to do anything with Congress.”

Under TPA, he said, “the President not only has to give us access to it currently and in the future, [he] also has to make it publicly available before anybody votes on anything for at least two months prior to it is even considered by Congress so that our constituents can hear and can look at every single word and see what the agreement does and what it doesn't do.”

Hurt explained that since he has been in Congress, he has voted for two free trade agreements (with Colombia and Panama) and voted against another (with South Korea).

“The devil's always in the details,” he said. “For people who are getting so upset about this bill, I think there's some misunderstanding that somehow what we voted on Friday was a free trade agreement. It was not a free trade agreement.”

Asked whether a trade agreement like this would get pushback from conservatives if it were promoted by President Romney rather than President Obama, Hurt demurred.

“Great question,” he said, adding “I don't know. It's hard to say. It's hard to attribute motive.”

That question makes the point, he suggested, that “this President has so soured any reasonable relationship with Congress and he is so distrusted among so many of the American people because of his abuse of the rule of law in this country that people push back for that reason – but this vote yesterday had nothing to do with President Obama.”

Hurt stated that he does not “trust President Obama to follow the rule of law. He's demonstrated again and again that he cannot.”

Setting that aside, he said, the TPA does not give the President “any authority to do anything that he cannot already do. It gives him restrictions in negotiating objectives that are in TPA but it doesn't give him any additional power to make any law.”

'Hogwash'
Hurt cited Internet rumors like “'this means we're going to give the president the authority to change immigration law!'” Those, he said, are “just totally, 100 percent false. It does not.”

He explained that, contrary to those rumors, “in order for any law of the United States to change, it has to come through Congress.”

Moreover, he said, “if it's pursuant to a free trade agreement, it has to come through Congress twice, because it has to be adopted as a free trade agreement and, secondly, the actual change of the law has to be adopted through implementing legislation, which would be a second shot at the apple.”

Taking aim at the Internet rumor mill, Hurt asserted that “the idea that this President can affect any of our laws unilaterally or that we're going to submit to some international tribunal is just hogwash.”

Hurt also emphasized how free trade will benefit his constituents in Virginia's Fifth Congressional District.

As a legislator, he said, “I have to look at the economy of the Fifth District the way it is in 2015, not the way it was in 1980 or 1990 or 2000. Our economy has changed a tremendous amount” over the past thirty years.

He pointed out that “agriculture is huge,” the largest sector in Virginia's economy, with $75 billion in output each year. The Fifth District has 23 counties and cities and “with the exception of Charlottesville and Danville, it is mostly rural, mostly agricultural.”

'Opportunities for growth'
“There are huge opportunities” in agriculture, he said, “but let me tell you this: There are opportunities for growth. There are opportunities for our manufacturers to access these foreign markets and sell our products that we make here there and we get their cash.”

If the Trans-Pacific Partnership is finalized – a prospect that Hurt says is a year or more in the future “I will look very carefully and make my best judgment as to whether or not this is good on balance for the people I represent.”

If, by his consideration, the agreement is not good on balance for the Fifth District, “I'll vote against it and work for its defeat. If it is good, on balance, for the people I represent, [if it] creates jobs and opportunity and growth and it projects American strength in a very sensitive area geopolitically, in the shadow of China,” he said, he will vote for it.

As to free trade in general, Hurt concluded, “I think it's consistent with Republican principles, consistent with conservative principles. It would make Ronald Reagan proud.”

Note: the full audio of this interview with Congressman Robert Hurt is available as a podcast from Bearing Drift.

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Original URL:  http://www.examiner.com/article/virginia-congressman-robert-hurt-speaks-out-for-free-trade-charlottesville