Could this simple strategy turn the economy around?
By Sheryl Nance-Nash
With the economy still sputtering, great minds continue to search for solutions to our financial woes and worries. Among them is the concept of “Buy American”—a strategy for economic buoyancy that’s been around since the founding fathers.
George Washington was one of the first to advocate a Buy American policy, and his personal decisions and actions strengthened America’s economy, says Roger Simmermaker, author of How Americans Can Buy American. Next up were Thomas Jefferson and Abraham Lincoln. The first Buy American provision was enacted at the height of the Depression. Some say it choked the economy for several years thereafter.
Fast forward to today. What sparked the conversation again? The American Recovery and Investment Act of 2009 contained a provision that restricts the use of federal funds to the purchase and use of US-origin materials. None of the funds appropriated or otherwise made available by the Act may be used for a project that involves the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel and manufacturing goods used in the project are produced in the United States. The European Commission quickly voiced its opposition; the provision was viewed by some as being contrary to the G-20 agreement to not raise any new trade barriers in 2009.
Nevertheless, Simmermaker believes the Buy American concept has the potential to turn the economy around. “It can help us get out of the economic crisis today and keep us from getting into another one tomorrow. The answer to our economic problems is in our own backyard,” he contends.
Similarly, Christine Siler, developer of the website www.IwantmadeintheUSA.com, a comprehensive list of American-made products and their companies, says that Buy American will boost the country’s economic engine. “If everyone would buy American whenever possible, the economy would turn in a matter of months. The average quality of our products is much superior to cheap foreign products,” she says.
Siler argues that Buy American will put more Americans to work, increase tax revenue, increase consumer spending and lower the trade deficit.
Then too, there’s another reason to keep manufacturing close to home: Safety, says Simmermaker. “Think about China. The headlines have been filled with one tale of blatant disregard for safety after another—toothpaste, pet food, toys.”
But the opposition is loud. “This appeals to our most jingoistic instincts. It will not turn the economy around, as it does not address the main issue of improving liquidity and being an attractive economy in which companies want to invest their capital, create jobs and hire educated and relevant workers,” says Blythe McGarvie, author of Shaking The Globe: Courageous Decision-Making in a Changing World.
She adds that, “Waving the flag, whether it be American, Canadian, Mexican, or any other nationality, does not build trust between two parties that are seeking economic stability and gain. In my experience, a populist phrase like ‘Buy American’ creates damage because it is a belligerent approach to relationships rather than a rational approach with good intentions to help both parties.”
David McClough, Ph.D, visiting assistant professor of economics at Ohio Northern University in Ada, is an even harsher critic. “It may be good politics, but it’s horrendous economics. It’s bad in the short run and the long run. It is a classic example of the ignorance that pervades society and politics.”
Why doesn’t the theory add up in practice? “We depend on foreign trade. We need to sell to other countries to have a trade surplus. Cutting out buying does not solve that. We need products that are competitive in the global marketplace. Isolationism and protectionism are just bad business. Just look at North Korea, the ultimate in patriotic ‘buy local.’ It has destroyed their economy and furthered their isolation from the world,” says Bruce Fenton, managing director of Atlantic Financial in Norwell, Mass.
Furthermore, “The freedom to trade is a key ingredient in the recipe for economic prosperity. Unfortunately this freedom is under attack by protectionist forces that would stifle economic exchange,” says Kristina Rasmussen, executive VP of the Illinois Policy Institute in Springfield. The Illinois Policy Institute joined the Freedom to Trade campaign (F2T), which launched in April 2009 in London, UK. The coalition is made up of 67 think tanks and civil society organizations from around the world.
“We’re committed to monitoring the actions of governments and challenging attempts to institute protectionist policies,” says Rasmussen. “If anything, Buy American will likely hurt our longterm growth. In this increasingly global and mobile world, the king-makers should be quality and price, not geography.”
Shoppers win when businesses—both domestic and international—compete for consumer dollars. Rasmussen says competition helps individuals and families save for things they wouldn’t otherwise be able to afford. “Keep in mind that many domestic companies rely on lower-priced foreign goods to manufacture products for America. When Buy American provisions force higher-priced domestic raw goods on domestic manufacturers, consumers lose,” she explains.
The provisions also may invite retaliation from foreign purchasers of US goods. For example, she says, “If South Africa stops buying our goods because we disadvantage their goods with Buy American provisions, American businesses and workers that rely on exports to South Africa would suffer.”
The experts are having their say. But what about consumers and corporate America?
“In the interest of good public relations, companies are working on emphasizing their American connections, and those few who coincidentally do make things in the United States will emphasize that,” says Fenton. “At the end of the day, the job of a corporation is to maximize shareholder value, so very few, especially the large ones, will make a decision based on anything other than profit. So far, it’s profitable to send their work elsewhere.”
For companies that offer only 100-percent, made-in-the-USA products, this could be a boom. Simmermaker cites the example of Glass City Café in Toledo, Ohio. In January when licenses were up for renewal, the switch was made to All-American beers since America’s last major American-owned brewery, Anheuser-Busch, was bought by Belgium-based InBev.
“The owner told me he was pleasantly surprised when most customers are told that beers like Bud Light are no longer served there that they are just as happy to try Samuel Adams or other American-owned, American-made beer,” says Simmermaker.
Then too, Siler explains, companies that are really listening to the American people are keeping their companies here, and others are starting to bring their companies back so they can have greater control over their products.
What does the average Joe and Jane think about all the fuss? “Just like the ‘support our troops’ bumper stickers, people pay this lip service, but do they actually do anything about it? Do you see many Wal-Marts (whose many products are made in China) hurting? Do you see anybody giving up DVDs or even giving up televisions or computers? People talk, but vote with their checkbooks. So far, the checkbook says no,” says Fenton.
Scott Testa, a marketing professor at St. Joseph’s University in Philadelphia, agrees. “People want the idea, but it’s hard to pull off. Try finding American-made toys. If you decided to buy only American-made toys for Christmas you would have a very limited selection.”
Testa personally made a decision to buy American-made cars. He owns three, and one that is a GM product made in Canada. “The theory is nice, but some products are just not available in the United States,” he says.
Some consumers, however, are responding favorably and fervently. Simmermaker points to a Harris Interactive poll on behalf of the Alliance for American Manufacturing conducted earlier this year. The national poll found that 84 percent favor Buy American requirements and only 4 percent strongly oppose and 7 percent somewhat oppose it. Simmermaker notes that support was consistent regardless of gender, age, income level, education or region.
“More taxes collected means more benefits reaped, like better public schools, libraries and parks. People are growing more aware of what Buy American can ‘buy’ them. Consumers are starting to connect the dots. I see an increase in my business,” he says.
What’s more, some state legislatures are advocating Buy American policies and, based on the United Steelworker’s campaign, it seems that more than 4,000 local governments have adopted their Buy American resolutions, says Susan Kohn Ross, international trade counsel at Mitchell Silberberg & Knupp in Los Angeles.
Just as all eyes remain on the economy, the debate continues.