PRETZEL LOGIC ECONOMICS “Buy American is NonSense”

On October 31, 2011 Economist , David R Henderson from the Hoover Institute, proclaimed on the Stossel Show that it is “Nonsense to buy Made in America”.  I would like for you to view the video before reading further, it will make more “Cents” .  Although  the video was broadcast originally on FOX-Business, it is not available so the link  that is provided is from the  Bastiat Institute Website, established in 2009 to promote “Austrian economics”  VIEW VIDEO

I have watched  this several times and I’m still confused if John Stossel  agrees or disagrees with Henderson.   It opens up with making fun of a clip of Diane Sawyer’s Made-in-America series on ABC News with Henderson declaring  that Buying American is not only  economic ignorance but will not create jobs and increase poverty.

This 1975 Steely Dan album (vinyl record) , Pretzel Logic , gave us a definition that really describes Mr Henderson’s thinking; “Fallible , twisted circular reasoning that when dissected …IS WRONG, does not make sense or does not explain the situation rationally.” I think that about covers it.  Henderson says that most economists agree with him when he  promotes his buy-the-cheapest-product-out there-so-that-you-will-have-more-money left-over-to-buy-more-cheap-stuff theory.  (Smell  those Pretzels burning?)  To further  twist the logic, he then states that why would we  just buy, “Made in Alabama”, or even break it down further, “Made in Montgomery , Alabama”?   I don’t know, maybe you might want to ask the town of Fort Payne , AL formerly the “Sock Capital of the World”,  which had  100 mills as late as the year 2000, employing  more than 7000 people.  With NAFTA and CAFTA opening the flood gates for cheap Chinese goods, the town has less than 2 dozen sock companies hanging on.  I’m confused , Mr. Henderson   on how flooding the market with Chinese Socks helps the working force in Fort Payne providing replacement jobs for their lost industry  in your Pretzel Logic World?

At this point, Stossel holds a bag of American Grown Coffee, Henderson  says that by purchasing this at a higher price , reduces your power to purchase other goods because of the premium price that was paid.    Please, could you two find a more obscure American product to use?    There is only one place to grow American Coffee, Hawaii .  Everyone  knows that coffee has always been a world commodity just because of the limited growing locations.  To make a point with American Coffee was nothing more than a set-up to prove their point.

Continuing  the video , Mr Henderson defends that  that are very few sweatshops in the world and that companies (conglomerates to be exact) actually pay more than  working in the fields and local factories, and if we disrupt that “Econo-system” now , you will have young children in the streets involved in a life of prostitution.  So   moving the sock industry to China, got the kids off the streets and gave them slave labor jobs, and the folks in Fort Payne moved into the streets and unemployment lines and that is good ………How?  (A little more salt on that Pretzel please).  At this point , I had enough of this convoluted thinking and would like to present my “Mark, my Words Logic”.  I’m going to try and type slow and use one syllable words  to present  my “Hypothetical”  point.

TRI-CITIES  AREA TENNESSEE

Bristol TN/VA        43,511 population

Kingsport TN          44758 population

Johnson City TN     63,141 population

Dismantling Pretzel Logic

All of these towns have their own economy.  Gas stations, Florists, Hair Salons, Grocery Stores, Car Dealers, Lawn Services, Lumber Yards, you get my point.  IF  everyone in  the Bristol area decided to buy their goods and services in Kingsport, how long would it be till  those who worked in those stores and businesses in Bristol would lose their jobs, because there was no business?  Keep in mind those folks who went to Kingsport  to shop, live in Bristol , probably have family working in Bristol, but still trek to Kingsport to get groceries or gas or get new tires on their car.  Sooner or later the businesses would close completely and the owners and  the work force  of Bristol have to find a new way  to earn a living.  Kingsport  prospered with all the extra business,  but never reciprocated. They hired some of the people from Bristol, but now they have to commute 30 miles to work and  have less discretionary income to spend on “Cheap things”.  And since they have already driven 30 miles to go to work, they now have formed the habit of shopping in Kingsport because there are no businesses left in Bristol.   Housing values start to decline, the foreclosure demons are  rearing their ugly head and the business base is gone.  People are stuck.

Johnson City wants in on this and buys up the old equipment and inventory in Bristol and gears up for Business. Johnson City starts an ad campaign in Kingsport  (“It’s Cheaper in JC”) to lure customers and slash prices on all products and services .  The Folks in Kingsport who were taught that buying cheap stuff , gives you more money to buy cheap stuff, start day-trips to Johnson City to buy their cheap stuff.

The shopkeepers in Kingsport who prospered when  the Bristol Boom took place, now start to feel  the negative impact of  the  “Day-Trippers”  who abandoned their loyalty to the hometown vendors producing the first round of lay-offs starting with  the folks hired  from Bristol.  Next, comes, or should I say “goes”, the lay-offs of the local employees, because everyone is going to J-City to “Reap-the-Cheap”. Kingsport  finds out it’s not too big to fail and businesses close, jobs are gone and the housing values fall off the cliff, just like Bristol.

Johnson City never had it so good. All the people from Bristol and  Kingsport have to shop in their stores and can do what they please with the prices.  The Johnson City business owners are inundated  with job applications from the folks desperate for work,  who live in Bristol and Kingsport ,  learn quickly that they will work  a lot cheaper than the Johnson City residents.  Little by little the hometown Johnson City workers are “laid off” and replaced  with the people who will drive 30 miles for any kind of job.   Making less money than ever, the economy is reduced to the essentials.   Higher end restaurants, furniture companies , car/boat/RV dealers  and Home builders, slowly start to drop out and add  more to the unemployment lines.   It doesn’t even matter anymore how much goods and services Johnson City can offer, the populous are only looking for Essential Cheap Things.

The only way Mr Henderson’s Economy works is in a Social and Economic level Playing field, which means he advocates a  Global Economy fueled by Socialism.   After Word War II the United States was the World  Economy, supplying the planet  with the best products ever produced.  Apply this Tri-Cities  example on a National  Level and you can see why  a country who has given away it’s manufacturing base is doomed to spiral to mediocrity.

I’m sorry, Mr Henderson, you may have schooling and letters after your name but you are Dead Wrong on this.   We have to take care of our own, buy local, look for things made in the USA and buy the best we can.  An old carpenter told me 30+ years ago, “A poor (working) man, CAN’T afford Cheap things”.   AMEN, a working person can’t afford to keep replacing  cheap stuff, he needs to buy the best he can.  I learned this lesson in 1985 when I paid $459. for a commercial Snapper Lawnmower.  I got 20 years of continuous service from it, that was $22.95 per year vs buying a cheap $100 mower every other summer.

True Capitalism doesn’t mandate the world, it’s working conditions or products be equal.