Biden versus Bastiat
Whether well-intentioned or otherwise, a “Made in China” ban for construction materials on federally funded infrastructure projects will benefit a chosen political class to the detriment of all else.
“This rival, which is none other than the sun, is waging war on us so mercilessly . . . We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights.”
Frédéric Bastiat’s scathing satire of the absurdity of protectionist policies, written over 170 years ago, hammers the point home: sunlight is free so no wonder the candlemakers need regulation to compete with the sun.
It would appear President Joe Biden’s economic advisers have not only ignored Bastiat but also the centuries-old fundamental economic insights of specialization and gains from trade. The Biden administration’s plan to force all federal infrastructure projects to only use US-made materials must be called out for what it is: not really possible.
Once again, a policy with an undeniably patriotic name like “Buy American” does the exact opposite of its goal. If only the Biden administration would try to encourage, lure, entice, treat, or even negotiate with the construction industry. Perhaps the administration believes such behavior is antiquated.
The unintended consequences of “prosperity by decree” are as varied as rationality is homogenous. Here are just some the plan’s expected outcomes in the construction industry:
- Higher prices. If Americans were making the materials for less, then American companies would already be using these materials.
- Carve outs or Sold Out signs. The US needs construction materials that are made overseas. Every construction industry in the world needs imported materials to avoid a “tractors without gas” scenario. Without them, there may be shortages as local manufacturing is forced to reinvent the wheel to build said wheel.
- Diverted resources. There are only so many resources in the economy at any time, so some resources will have to be diverted from already internationally competitive US manufacturers and exporters to meet the new demand for US-made materials.
- Lower output. Higher prices mean less material can be afforded. The public construction contractors can’t use German widgets. The “Made in the US” widgets cost more. The contractors must build with fewer widgets.
We could hope that those who deliver the government construction contracts are all laissez-faire at heart and decide to push back against this absurd policy at their operational level. The bureaucrats, lawyers, engineers, architects, electricians, builders, and plumbers could all ignore the orders. That’s not a realistic answer, and incentives matter. There are contractors providing employment and helping their workers try to survive the cost-of-living crisis. They haven’t read Human Action. Who can blame them? There may be others close to the spigots; the pottage tastes too good for them.
Not to worry. The ideas of the Austrian school have put these protectionist policies to bed time and again. We just pray these wealth-destroying policies are short-lived.