Every once in a while, the Christmas holiday might roll around, and you hear commercials playing in the area to buy their gifts at local mom-and-pop stores rather than international corporations such as Amazon or Walmart. The Trump administration has pushed this rhetoric themselves with the use of tariffs to incentivize more purchasing of products on American land.
But the concept of buying goods & services only at the local level isn’t a wise economic policy. The results from history consistently show it’s nothing more than a catchphrase to instill some patriotism and reduce competition from foreigners, who may be able to create a superior product at a cheaper cost.
In theory, trading in local communities while excluding the outsiders and foreigners sounds like a great way to foster trust and friendship in one another. Especially in the midst of the Trump administration, the act of exchanging only with other Americans is supposedly a sign of strength within the United States. Even former President Barack Obama, in one of this first acts in office to address the recession, pushed for legislation to essentially block the purchase of foreign-made goods. But there are well-researched and legitimate reasons why many Democrats and pro-Trump Republicans have it wrong on the issue of international trade.
Perhaps the most pressing reason the “buy local” campaign is doomed for disaster is that we live in a global economy. This is just a fact. The technology we have in this age has allowed us the potential to interact with billions of people throughout the world. Once the Industrial Revolution initiated in Britain in the late 18th century and made its way across Europe and North America, global interaction and international trade deals became an inevitable outcome.
Japan is a prime example of a country blossoming directly from free trade agreements. Japan was once a country who strongly enforced the “buy local” economic policy during the 17th and 18th centuries, completely shutting down their barriers to all but a few countries in the Western world. By the mid-1800’s, their economy was one of the worst in the world, still running on an agricultural and feudal economic system, and refused to adopt the technological developments brought about by Western countries.
A lack of international trade was also detrimental to Japan’s economy prior to the Meiji Restoration due to their lack of natural resources and their difficult geographic location from Europe. Once Commodore Matthew Perry landed in Japan in 1853 and successfully ended their era of national seclusion from Europe and America, the country endured one of the fastest rates of economic growth any country has ever seen. In just over a century, Japan went from one of the most impoverished nations in the world to possessing the 3rd largest economy in the world, behind the United States and China.
Proponents of local spending and investing point to failures in free-market policies, such as outsourcing jobs abroad where labor is cheaper. While it is true that jobs and industries will be outsourced in the absence of any economically protectionist policies, their concerns are short-sighted and fail to see the larger picture. Free trade allows each country to take advantage of their comparative advantage on the international market, which provides benefits to all countries involved.
If President Trump continues to put restrictions on outsourcing, not only will it keep foreigners from gaining any meaningful employment, but it will reduce economic competition within the American community and force American companies to produce goods that could be more efficiently produced elsewhere. The effects of both reduced competition and inefficient production of goods is an increase in the prices on the goods and an overall decrease in the standard of living.
Other times, supporters of local investment point to carbon footprints from purchasing goods abroad. While international trade does create major carbon footprints, only about 1/3 of the carbon emissions come from well-developed countries. The underdeveloped countries benefit the greatest from international trade. As these underdeveloped countries begin to prosper from free trade with well-developed countries, they will have the ability to implement more eco-friendly energy to exchange goods abroad. By restricting trade to third-world countries, they will be forced to create goods for their citizens using cheap but non-renewable resources that damage the ecosystem. Like those concerned with outsourcing, opponents of free trade on the grounds of increased carbon emissions fail to grasp all of the long-term effects of free trade policies.
The catchy policy of “buy local” is really just that: it’s catchy. However, it has no firm foundation in reality. For every resource that is systematically funded towards one group where it wouldn’t belong in an open marketplace, another group misses out on economic growth. “Buy local” economic policies foster a lose-lose situation. Not only do less-developed countries miss out on opportunities for economic growth, but communities in well-developed countries face more expensive goods and services.
The concept of “buy local” also creates social and political resentment. It divides the world into “us” vs. “them.” This divide is enhanced and widely seen in events such as Charlottesville and organizations such as Antifa, and it’s a divide we cannot afford to hold politically or culturally in American society.