'Buy American, Hire American': Cruel to U.S. Businesses and Workers

'Buy American, Hire American': Cruel to U.S. Businesses and Workers
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Whether it’s Wal-Mart, Safeway, CVS, or any other kind of local or national retail chain, the norm nowadays is for customers to swipe loyalty or “customer care” cards during checkout.  Membership is a way for customers to accrue purchasing points, receive e-mail alerts about future buyer discounts, and most often reduced prices on certain goods selected at time of purchase.

Why do retailers offer these deals? Are they feeling extra generous, or are they oblivious to profits? Not a chance.

Retailers reward their loyalty-card swiping clientele simply because knowledge of the buying habits of their customers is extraordinarily valuable.  If they know what various demographics tend to buy, and better yet how and when they like to buy it, and in what quantities, they can plan inventory with much greater precision.  Lest we forget, inventory is very expensive, which means it’s crucial that retailers know buying habits so that they know best how to clear their shelves as quickly as possible.  Let’s also not forget that buying trends similarly help retailers divine what buyers are losing interest in; the latter equally crucial. And while it’s perhaps an apocryphal story, it’s been said that Target often knows its female customers are pregnant before they do.  All based on what they buy. 

All of the above requires mention in consideration of President Donald Trump’s recently reiterated promise to “Buy American, Hire American.” Since the federal government awarded more than $445 billion in contracts in 2014 alone, Trump figures the spending should be directed toward U.S. companies.  Up front, let’s be clear that the feds were able to award $445 billion in contracts only insofar as taxpayers had $445 billion less to spend.  Consumption is always and everywhere an effect of production that always and everywhere takes place in the private sector.  Politicians get to play Santa only to the extent that we taxpayers have less to give away, or spend, or save.

Back to President Trump, at first glance even the fiscally conservative might cheer on the idea that if the federal government is going to waste money, at least it should waste it on American companies.  In truth, such a belief is cruel. 

It is simply because there’s very little useful information in government spending, but much that will impede company growth.  When it’s someone else’s money, buying is distorted to the point of unrecognizability.  Getting right to the point, government spending blinds businesses to economic and market realities.  When businesses cater to the needs of governments, they’re almost as a rule setting themselves up for a less prosperous future thanks to government waste not transmitting crucial information about the evolving needs of the real marketplace. 

A visit to a government office is almost always a visit to the past, and to the technologies of the past.  Governments as a rule have to be conservative (in the non-ideological sense) about what they waste money on, and it’s invariably on what is already known and useful as opposed to what will be known, and what will transform. “Buy American” is cruel because it transmits false, growth-sapping information about what used to be valuable to businesses.  The problem is that investors generally only reward the businesses developing the goods and services that will be valuable in the future. 

“Hire American” is also cruel. 

Government contracts that Trump would like directed toward American companies that hire American workers are as previously mentioned, blinding.  Government spending is once again not information as much as it’s irrational noise transmitted by prodigals spending the money of others.  Just as it harms businesses by shielding them from market realities, so does it harm American workers.  Trump talks about the “theft of American prosperity,” but his support of that which shields American businesses and workers from the message of the markets reveals Trump as the burglar.

Some may respond that government spending often has a forever quality to it such that its recipients don’t require information necessary to adapt, and they have a point.  But their point further underscores just how cruel is the notion of “Buy American, Hire American.” Precisely because government spending sometimes has endless qualities, its recipients aren’t as much required to positively evolve.  When corporations know the federal contract will be there no matter what, there’s reduced pressure to adapt their goods and services to the private marketplace on the way to sales that could eventually eclipse government buying that so often rewards stasis. 

It’s probably easier to understand the above through the prism of the worker.  As is well known, governments rarely fire.  But because they don’t, because constant stress and fear of failure are not part of the government employment bargain, neither is the grand success that only comes to those bloodying themselves daily in the proverbial arena.  The U.S. is littered with great successes who failed a lot on the way to major wealth, major prestige, or both.  In that case, “Hire American” amounts to high sounding rhetoric that obscures something much darker.  Those employed thanks to government spending are meanly ensnared by what is relatively easy, and by extension, are paid to pursue a path to average.  This means that American workers who might “benefit” from Trump’s generosity with the money of others will be deprived of an employment path that’s difficult and often defined by periodic failure, but that for just those reasons offers the potential for the greatest advancement alongside personal fulfillment.  The paradoxical truth is that “Hire American” is cruel precisely because the possibility of embarrassing failure is not part of the equation.

As for decrees about private businesses hiring the American born over foreigners, sadly even conservative publications like National Review have bought into the latter.  While members of the right would be horrified almost unanimously by governments planning what businesses import in order to create goods and services, some want that same government to plan the accession of easily the most important driver of company growth of all: human capital.  It’s a silly idea, so it’s no surprise that Trump buys into it.  At least rhetorically.

Indeed, it’s possible that all the talk from Trump is just that.  One can hope.  “Buy American, Hire American” is war on the American people of the non-shooting kind.  And while Trump is promoting what is mindless with our money, that it’s our money he’s wasting is perhaps the least injurious aspect of his latest policy proposal meant to lure more American companies and more American workers onto Washington’s dole.

John Tamny is editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). He's the author of Who Needs the Fed? (Encounter Books, 2016), along with Popular Economics (Regnery, 2015).  His next book, set for release in May of 2018, is titled The End of Work (Regnery).  It chronicles the exciting explosion of remunerative jobs that don't feel at all like work.  

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