Donald Trump went to the Wisconsin home of American manufacturer Snap-On Tools to sign a “Buy American, Hire American” executive order aimed at cracking down on the abuse of skilled worker visas and reviving laws aimed at getting government agencies to buy more products made in America.
This was immediately greeted by howls of outrage. Liberals and so-called conservatives who imagine themselves the forever-vigilant guardians of free-trade orthodoxy flew into various manias. There were those, like Jake Tapper of CNN or Phillip Bump of the Washington Post, who accused Trump of hypocrisy since some of his own products were not made in America and some of his companies had hired foreign workers. Still others hollered that Trump’s order wasn’t economic nationalism so much as “backdoor handouts to favored corporate interests.” And, of course, there were plenty who decried the executive order as “protectionism,” as close as one can come to a mortal sin for many economists.
Those paragons of hurtling outrage who flung charges of hypocrisy at Trump are probably best ignored. Nothing in Trump’s executive order would prohibit American businesses from employing foreign workers or companies to manufacture goods sold in America. Rather, it instructs the agencies of the U.S. government to take seriously the legal requirements that they prefer goods produced in the United States when they procure goods above a certain value. This has been the law of the United States since it was signed by Herbert Hoover in 1933–but it has been badly undermined by years of the administrative state diktats and trade agreements granting waivers and exceptions.
Those thundering that the order amounts to protectionism or a form of crony capitalism deserve a more serious response. It is true that many of the historical episodes of American protectionism that flew under the Buy American banner were often constructed by domestic corporate interests seeking to protect their market share from foreign competition. All too often, these domestic manufacturers were themselves some of the worst exploiters of American workers, paying starvation wages, violently resisting attempts by workers to organize, and running manufacturing plants rife with dangerous conditions. Many of the free-traders of the past were trust-busting progressives who sought to introduce competition to break the monopoly power of America’s corporate titans. A good review of this sordid history can be found in Buy American: The Untold Story of Economic Nationalism by University of California historian Dana Frank.
The notion that Trump’s new executive order is a continuation of this story may seem initially plausible. But that plausibility evaporates when exposed to even passing glimmer of thought. The corporate titans of contemporary America are not advocates of protectionism; they are the biggest advocates of globalization. Their political donations, endorsements, and propaganda are not marshaled in support of tariffs, trade barriers, and a self-sufficient economy. Throw a brick at a gathering of Fortune 500 chief executives, and you’ll be sure to hit a self-styled free-trader.
The crony, corporatist protectionism of days of yore has nothing to do with contemporary populist critics. In fact, today’s critics of trade orthodoxy are so far removed from those of the past that perhaps we shouldn’t call them “protectionists” at all. Let’s call them what they are, economic nationalists.
But as wrong as Trump’s critics are when they see old-style protectionism in the new executive order, they somehow manage to commit even deeper errors when looking at the substantive matter of “Buy American.” Far from being a restriction on the free trade of goods by participants in an open and liberalized market, both the Buy American Act and Trump’s order are fully compatible with support for free trade.
Concede for a moment that one of the central tenets of free trade theory is correct: import barriers stand in the efficiency gains that are identical to those we see from technological innovation, better ways of organizing production, and other ways of increasing productivity. All other things being equal, it is better to produce more for less than less for more. What’s more, trade barriers raise costs for consumers and have the tendency to reduce the real income of the country.
It hardly follows from this that all barriers to trade or trade preferences are somehow “bad.” The wealth and welfare of a country consist of more than its income. As Ludwig Von Mises and Murray Rothbard were at pains to explain, wealth is subjective, which means material wealth is not the only thing that counts. It is altogether possible that one may prefer lower living standards in favor of a more humane distribution of wealth or a government procurement policy that recycles dollars taxed and borrowed back into the domestic economy.
Keep in mind that nothing in free trade theory tells us that there are not losers from international trade and that this can have significant undesirable consequences. As far back as Henry Martyn’s 1701 Considerations upon the East India Trade, we’ve known this. Martyn was himself a free-trader of sorts and explained the theory of comparative advantage by imaging a hypothetical example where workers in India could “by fewer hands” produce as much if not more than workers in England;
If nine cannot produce above three bushels of when in England, if by equal labor they might procure nine bushels from another country, to employ these in agriculture at home, is to employ nine to do no more work than might as well de done by nine.
In other words, there’s a theoretical opportunity cost to preferring English wheat to Indian wheat. But that’s only true if there are actual opportunities for the displaced workers at home. Martyn goes on:
If the same work is done by one, which was done before by three, if the other two are forced to sit still, the Kingdom got nothing before by the labor of two, and therefore loses nothing by their sitting still.
A free trade economist might be tempted to say the there was, therefore, no cost at all to giving over wheat production to India. But that ignores the cost of unemployment of the two English workers. If those workers are subsequently employed in less productive jobs--say, as a barista in a coffee shop–not only will the overall productivity of the economy falter, their wages will also. This breeds inequality, resentment, and damages the mental health of the displaced worker.
In the dreamscapes of libertarians, that’s just the way things go. Those workers should find ways to become more productive, move to areas like San Francisco where the magic dirty will somehow make their labor more valuable. And if we lived in that dream–some would call it a nightmare–perhaps that would be the end of the conversation.
But Trump’s executive order has not been issued into the dreamscape. It has been issued to the agencies of the U.S. government, who are charged with spending money appropriated by Congress in laws signed by the President of the United States. When we choose to spend money on defense or highway construction or airport improvements, we are acting collectively through the Republican institutions set up by our founders to implement our values. Why should not one of those values be to help U.S. workers and U.S. companies?
To put it in even starker terms, libertarians who favor voluntary association have no grounds to oppose Trump’s “Buy America” order, because it gives expression to the right of Americans to voluntary association and freely-chosen trade. When their government spends, Americans have declared–through laws enacted generations ago and through the election of Donald Trump–that they prefer the government to spend locally. Depriving Americans of this right to control their government’s spending in this way isn’t free trade: it is forced trade.
When Americans expressing their preference for their government to purchase domestically manufactured goods, they no more infringe on free trade than someone who buys organic milk infringes on the rights of non-organic milk farmers. It is inconvenient for companies that would like Americans not to exercise this preference but they have no more right to bar this preference than McDonald’s has to bar my preference for home cooked meals.
“Buy America” is simply another way Americans express their spending policy preferences. It isn’t some autocratic departure from the American way. It is the American way.