“Buy American Only?” A Letter From a Concerned Citizen

By Zach Foster

This excellent article was also featured on Only the Money! Blog

Dear [friend], thank you so much for writing to me with your concerns.  I happen to share your deep concern for the fate of working class America, especially since the recession (which I justifiably call the Second Great Depression) has fallen the hardest on the backs of the working poor and the middle classes.

I'm also concerned with the fact that so many of our products come from China and other overseas producers.  Unfortunately, this is not necessarily the fault of American producers but rather that of government intervention in the economy.

What I'm about to say to you might seem a little crazy, but I urge you to bear with me.

The Myth of Protecting American Industry

Buying American products alone will do nothing to restore our economy, nor will it bring production and jobs back to the country.  Instead, what this does is actually raise prices and diminish the quality of domestic products, since producers now know that they have American buyers captive and no longer need to make the best products; they know that the law is on their side.

When I say that I'm all for free market capitalism, it means that the market needs to be truly free and unrestrained in order for consumer sovereignty to take place.  By consumer sovereignty, I refer to the old notion that "the consumer is king" or "the customer is always right", and according to this ideology, producers who want to get rich know that the only HONEST way to do this is to produce the BEST QUALITY goods at the LOWEST COST and sell them at the lowest possible price.  This is how hard-working Americans have been getting rich for centuries.

Unfortunately, there are those who have found easy ways to get rich through the evils of government intervention.  I’ll explain this momentarily.

There have been periods in American history where there were high tariffs on imported goods (and some of these taxes still exist) which were meant to improve conditions for American businesses and consumers, but instead made things worse.  The free market is all about competition, and tariffs are essentially meant to kill competition.  Not only do tariffs on imports cause many American producers to lose their incentive to produce high quality goods at low prices (because without the competition they know they have their consumers by the throat), but often times foreign countries retaliate.  Because our high taxes make it harder for them to sell their countries’ products in America, they in turn set super high tariffs to punish American producers.  Therefore, the quality of goods produced at home goes down, the prices of those low-quality goods goes up, and the quality of foreign goods which are often good quality is now super high.

Interventionism

This happened during the Great Depression, and both the Hoover and Roosevelt administrations have blood on their hands.  Both administrations, among many other anti-free market crimes, dramatically raised tariffs on foreign goods under the myth that it would boost American industry.  They also set minimum wage laws that were meant to protect incomes.  Well, guess what the tariffs DIDN’T do for our economy and job creation, and guess how foreign countries reacted to them.  Regarding the minimum wage laws, they made production more expensive and unmaintainable for producers, so instead of only having some pay cuts, they ended up having to lay off workers or just went under completely, thus laying off all workers.  Furthermore, small and medium-sized employers were no longer able to afford to hire people because they couldn’t pay X dollars per hour.  Removing the regulations and interventionist measures that strangle industry will ultimately make it less expensive to create jobs in America, and jobs will migrate back from the third world.

Because of the government stepping in to be the hero, business growth is stunted, and that stunted growth also stunted job creation, and things are more expensive for everyone.  Many big businesses will send lobbyists to the federal government because most of this is EXACTLY what they want.  They want to be able to charge higher prices for cheaply produced goods, and they want no foreign competition, especially not from foreigners who are probably making things better and selling them cheaper.  The one thing these greedy businesses DON’T see is that, while they’ll make a profit from their captive consumers in the short run, everyone gets poor in the long run and these businesses fail and end up having to be bailed out by the federal government. This is not what the free market ever intended.

For more on the evils of regulation, you can check out Frederic Bastiat’s book The Law, which talks about how government intervention and regulation empowers the two main forms of plunder: stupid greed and false philanthropy.  The producers getting lazy on the quality of their products because people can only afford to buy American falls under stupid greed.  The regulations and minimum wage laws and “job creation” bills, “consumer protection” bills, etc., fall under false philanthropy.  You can also see chapter 18 of Jeffery Tucker’s book Bourbon For Breakfast (chapter titled “How Free is the Free Market?”).  I also HIGHLY recommend chapters 1 and 2 of Kel Kelly’s book The Case For Legalizing Capitalism, which fully explain the consequences of government intervention on stateside producers as well as international trade (and this book is a lot of fun to read and easy to understand).  All three books can be downloaded in full and for free at Mises.org/books.

Continued in part 2: Bailouts, the Federal Reserve, and the Contender

No, We're Still Not Protected

By Zach Foster
Best read with companion article No, Your Money Isn't Safe

Many members of the Democratic Party are celebrating the one year anniversary of President Obama’s signing into law the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The White House has sent out a video release outlining why the banks and Wall Street agents are bad and why the Dodd-Frank Act is good and American families and consumers are much better off.  While the video is somewhat informative and marginally interesting, much of it is either redundant or not quite true.  DNC Chair Debbie Wasserman Schultz is also waving the Party banner as she cheers on the President’s so-called accomplishments.[1]  Schultz bragged that “our economy is more protected from the threat of future economic crises.”

The truth is that, while there are a few more restrictions on what the clowns on Wall Street can do, Americans are not better off than they were a year ago before the magical everything-proof shield was signed into law.  Banking is still highly unstable in the country, and the banks still exist as entities only because they were artificially revived in the form of massive bailouts.  All across the political spectrum, Americans are angry that the massive bailouts ever happened, and they haven’t forgotten that this bailout, spearheaded by Treasury Secretary Tim Geithner (who was present at the appointment ceremony for the head of the CFPB), happened under President Obama’s watch and he failed to take action against it. (Find out why banking is still highly unstable)

Schultz is attempting to pin poverty on the Republican Party, especially Republican members of Congress.  Much of her attack against the GOP is dismissible, as it’s just another serving of partisan rhetoric.  However, she accuses the GOP of “doubling down on the failed policies of less regulation and more tax breaks for the wealthy.”  She is mistaken to do so, because the policy of less regulation is not a failed one.  While several are undoubtedly opposed to the Obama administration’s agenda simply for the reason that they passionately hate the President, most are even-tempered people with some idea of what they’re doing.  By no means do Congressional Republicans advocate, nor are they trying to implement, no regulations at all.  What they are trying to do is remove some of the chains that cripple industry, such as tariffs, trade agreements that favor one country or company over another, and many of the other industry killers that remain unseen.[2]

Despite whatever noble intentions are spoken of by the Consumer Financial Protection Bureau, the fact remains that American consumers are not protected.  They are only partially protected from a few unscrupulous consumer goods producers, but they remain exposed to the oppression of government regulation.  This is why it is nearly impossible for consumers to get their hands on raw milk, which when boiled is more nutritious than pasteurized milk,[3] though federal think tanks denounce it and federal regulations outlaw it in the interest of public health.  The same is why many shower heads have a weak water flow and high power therapeutic shower heads used by masseuses are widely outlawed.[4]  For the “protection” of all consumers, citizens are instructed to prevent drought by using less water, even though the local Raging Waters park, Soak City park, and even the community pool use untold gallons every minute.

Similar reasons over time turned the health insurance market into the fiasco it is today.  Heavy regulations by state governments are what makes the prices of health care plans vary widely and mostly unaffordable.[5]  The same regulations that make health care so expensive are all meant to protect consumers from being cheated by health insurance providers who want to charge high prices… go figure.

To further damn the idea that fewer regulations are beneficial to economic growth, Schultz tries to make the case that fewer regulations caused this [brink of] depression.  To counter this statement it is necessary to analyze the common denominators between the Great Depression and today’s Second Great Depression (a.k.a. the Great Recession).  The main two factors that stick out are: (1) fractional reserve banking, meaning most of the money that was supposed to exist never actually existed, and (2) extensive use of credit in making large transactions, which means banks, stock markets, and many other firms were buying and selling with promises to pay based on money that never existed.  In the daily lives of the American citizens, receiving something on credit and then not paying for it is called FRAUD.  This is not due to fewer regulations; this is clearly a case of people stealing and other people thinking they had more monopoly money to spend in the real world than they actually had.

So when the President, the Secretary of the Treasury, and the DNC Chair tell the American people that they are protected, who do they really think they’re fooling?


The image is artwork by the author.  It was compiled from various images on Wikimedia Commons.

---

[2] Bastiat, Frederic. That Which Is Seen, and That Which Is Unseen. Chapter 9: Credit.

[3] Thornton, Mark. “Legalize Milk, Real Milk”. http://mises.org/daily/5365/Legalize-Milk-Real-Milk

[4] Tucker, Jeffrey. “The Bureacrat In Your Shower” (also chapter 1 of Bourbon For Breakfast).

[5] “The Easy Fix For Health Care and Why Obama Opposes It.”
[1] Chair Debbie Wasserman Schultz Marks One Year Anniversary of Wall Street Reform and Consumer Protection Act. http://political-spectrum.blogspot.com/2011/07/chair-debbie-wasserman-schultz-marks.html

A Question for Socialists, part 2

By Zach Foster
Continued from Part 1

Capitalism already has remedies for such ailments:  1)  relief organizations will be prepared to assist, and the majority of their funding comes from the private sector and private individuals, NOT from the government.  2)  the federal, state, and city governments will hire builders from the private sector who will bring their own materials; 3) though the government will oversee the rebuilding process, it may be slow and cumbersome, so many private citizens will simply rebuild their damaged private property themselves, or hire someone to do it, thus furthering their self-sufficiency and independence from government.

Still, the rebuilding process is not beneficial to the economy because the resources being used to rebuild are not creating new things.  For more elaboration on that, see Frederic Bastiat’s parable of the broken window.  Capitalism makes the economy and infrastructure able to eventually bounce back from destruction, whereas socialism collapses because destruction ruins the best laid plans of mice and workers’ councils.  Regardless of the setbacks of wars and natural disasters, capitalism produces much more than socialism, and much faster, and in better quality.  Frank Chodorov elaborates in his book Out of Step:

Capitalism, without benefit of a theory, and operating solely on the mundane profit motive, has disproven Marx on every point. To be sure, the economists of the Austrian School had done in the labor theory of value — that the value of a thing is determined by the amount of labor put into producing it — by showing that value is entirely subjective and has no relation whatever to labor. But capitalists did it in their own way; when people wanted a thing and were willing to pay for it, the capitalists made it, and when there was no demand for a thing it simply was not made. That is to say, the consumer puts a value on what he wants.

Marxists love to argue that capitalism doesn’t get anything done, that it is entirely wasteful, and that there is enough food produced worldwide to feed everyone several times.  While that much food does exist, capitalism is the system that produces that high quantity of food while socialism can only dream of doing it (and all socialists CAN do is dream).  Free market economies produce much more than socialist and centrally planned economies (which explains why the Chinese economy has grown exponentially after Maoism was replaced by some free market trade).  Kevin D. Williamson writes in The Politically Incorrect Guide to Socialism (recommended for beginners in economics)—a very well researched book that cites economists like Hayek, Rothbard, and Von Mises—writes how socialists love to accuse the U.S. for consuming 40% of a given global food supply, but they ignore the fact that the U.S. produces MORE than 40% of that food supply.  Here are some statistics for the skeptic:

According to the Environmental Protection Agency:

-The U.S. produces 10 billion bushels of corn out of the global total 23 billion (43.47%).

-The U.S. produces over 50% of the world’s soybean supply.

-The U.S. supplies 25% of the world’s wheat exports.

-The U.S. produces 18% of the world rice supply (the U.S. is the second biggest rice producer).

According to Answers.com:

The U.S. exports 70% of its maize and cereal.

According to the UN Food and Agriculture Organization:

-The U.S. is the fourth biggest supplier of potatoes in the world.

Clearly, the United States under a capitalist economy not only sustains itself with food but also exports much of the total food supply to other countries.  How many people have socialist economies been able to feed?  Not even those at home.  Famines have killed millions under socialist regimes, and massive food shortages are occurring even in countries where the economy is not socialistic but the socialists are in power.  One example of this is Venezuela, where inefficiencies in central planning cause such food shortages, meanwhile what food there is simply rots in store houses.  Not even the New Socialist Man, despite the best collective efforts, can change this brutally inconvenient reality.

What worries the author is the very collective nature of the utopia maintained by the New Man, who seems more like an ant than like a person.  Another question I have for Socialists is: other than the right to conform unquestioningly to dictated social requirements, does the New Socialist Man have any rights as an individual?

Continued in Part 3: Those who perish in the fires of Revolutionary Holocaust