Thursday, August 19, 2010

Localism as a proxy for protectionism

I often refer to localists by such charming euphanisms as neo-mercantalists, economic nationalists and hyper-protectionists. The last one is the most useful for finding modern experts to reference.

I've stumbled into a nice niche as the only blog that focuses critically on the "buy local" movement. I will see similar posts pop up here or there, but I've yet to see any other writer spend the majority of his or her time on this subject from a pro-trade perspective.

But that's not true for protectionism. A lot of people write about the fallacy of protectionism, which by no coincidence, is the same fallacy of localism. It's a simple trick for me to take something an economist wrote about protectionism and show how the same rules apply to localism.

Another non-coincidence is that people who become localist activists often hold strong opinions against free trade and globalization.

In the past week two very good posts against protectionism came up from Don Boudreaux at Cafe Hayek. The first is a response to a letter that said Mexican workers hurt America when they work here and send their money back home.

"The vast majority of these immigrants acquire their wealth by working – a fact that means that the wealth that immigrants accumulate while in America is paid to them voluntarily.

"That is, these immigrants acquire wealth only by creating goods and services that are valued by the Americans who hire or otherwise do business with them. The process that Ms. Pavia describes and dislikes benefits both working immigrants and Americans, regardless of whether or not immigrants take their earnings back to Mexico."

The wages paid to foreign workers is analogues to money paid to distant merchants, and Boudreaux's logic applies equally to both of them.

Localists make the common mistake of confusing dollar bills with wealth. The more a community relies on expensive local production, the less a dollar bill will buy, so even if money is trapped in the community, it's value will slip away into the abyss.

In another post, Boudreaux writes about the protectionist mentality of political commentator Lou Dobbs - a charge Dobbs, dishonestly denies. Boudreaux shares some quotes from Dobbs that says otherwise. The following examples from Dobbs could easily be used to defend a localist mindset:

“Our lack of self-reliance and inability to produce our own goods is seen by most economists as simply a global economy at work, but our growing dependency on the rest of the world for commodities and finished goods alike is, in my opinion, reason for considerable concern, if not alarm.”
Or how about this one:

“...Or is it in our national interest not to spend those hundreds of billions of dollars on imports, but rather to preserve our national manufacturing base – even expand it – and create more jobs at home? These are questions that should be addressed in a national dialogue.”
Localism is protectionism, through and through. But instead of looking at the world past the national border with cold, slitted eyes, the proponents share that same distrust for the world past the border of their home town.

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