Neoliberalism at Work

Anti-tariff spin in the media--article and rebuttal
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It is informative to read the slant that corporate media dishes.  This article was published by Huffington Post (proving that their editors don’t understand the economic issue and what the fix is).  There is a rebuttal of the neoliberal distortions below this article. 


Buy American Sounds Patriotic, But the Protectionist Policy Could Start a Trade War

Huffington Post

Gary Shapiro, February 16, 2009 

The world cheered when President Barack Obama took the oath of office - many hopeful that this young leader would emerge as a guiding light for the global economic crisis and restore America's reputation as a wise and generous neighbor. President Obama warned that we are in the greatest financial crisis since the Great Depression and offered up a nearly $800 billion economic stimulus package to create jobs, support states and protect the country's future. At the same time, President Obama urged lawmakers combing through proposed investments that "we can't send a protectionist message."

What happened?

Tucked inside the nearly 700-page stimulus text is a short clause that sounds at face value as cheerful as vanilla ice cream on warm apple pie. It's called "Buy American" and it provides that all iron, steel and manufactured goods used in stimulus-funded projects be produced in America. As Senator Sherrod Brown, a Democrat from Ohio put it to the New York Times: "Who could be against it? Well, some Ivy League economists don't like it - something about Smoot-Hawley and the Great Depression."

Perhaps too much time has passed since the financial crisis of the 1930s or our lawmakers are not reading their history books. The "Buy American" provisions are dangerous protectionist policies thinly guised as feel-good patriotism. Politicians know that with American jobs being lost they must be seen as doing something to put people back to work. But history teaches us that policies designed to prop up a country's economy and its industries tends to backfire. Countries rush to save themselves, stop trading with one another, and endanger the global system.

The "Buy American" provisions will signal to our trading partners around the world that the United States is returning to the bad old days of protectionism and economic nationalism. Rather than stimulate the American economy, these provisions will lead to retaliation from abroad and cost precious jobs in the United States.

The Peterson Institute for International Economics, a nonpartisan think tank, estimated that a few thousand jobs would be created by "Buy American" whereas as many as 65,000 jobs could be lost if other countries put similar laws in place.  [Bipartisan doesn’t mean anything concern tariffs since both parties follow the neoliberal pipers--jk.] 

The United States' global economic leadership is not a guaranteed thing. It is something we build and maintain every day with our ideas, our products and our longstanding policy of international engagement. That leadership has paid huge dividends for Americans, contributing to an increase of 25 million jobs in the United States between 1993 and 2006 - a period that coincided with an unprecedented expansion of U.S. trade policy.

"Buy American" is poised to unravel much of that trade policy, putting at risk previous trade agreements and violating other concessions made to our trading partners. That lawmakers say that the provisions are consistent with the letter of World Trade Organization rules is meaningless if the effect of "Buy American" is to turn our country inward and halt trading opportunities.

If we reverse ourselves on trade now, the negative impact will be felt across the globe. We don't have to speculate about this. We know what happens when the United States makes a conscious step toward protectionism, ratcheting up tariffs and closing its borders to the outside world.

The Smoot-Hawley Tariff Act of 1930 helped precipitate a decade-long economic downturn[i]. In our increasingly global economy, the effects of such a move today may well be even more disastrous. Both established markets like ours and fragile emerging markets in the developing world now depend on the free flow of goods and services. If we shut off that flow, we'll hurt ourselves, abandon the developing world and irreparably damage the global leadership we've fought so hard to establish.

Trade is not to blame for our economic crisis. Indeed, continuing our global leadership on trade may pave the clearest path back to prosperity, not just for our nation but for the world at large. Our new leaders in Congress in the White House must reject the inevitable protectionist propaganda and do what they know to be right for our country.

Gary Shapiro is the president and CEO of the Consumer Electronics Association, which represents more than 2,200
U.S. technology companies. Consumer electronics is 95% manufactured overseas; therefore protectionist tariffs would reduce his association members’ ability to import electronics. 

[i]   This is bull shit, because foreign trade in 1929 was under 10% of our GDP.  A reduction of it through rising tariffs would not major force bringing on the great depression.  Rather it was falling wages through the 20’s.  Reduced buying power coupled with a credit bubble that burst was the principle cause.  GDP already fell before the act.  Roosevelt didn’t take office until 1933, the act was passed in 1930.  Moreover the depression ended in 1937 with high tariffs in place.  For an account of that period  

Get the facts straight and see why history has repeated itself.  First, it is not the lack of tariffs that has created the millions of jobs between 1993 and 2006, but rather the 10% fractional loan policy of the Federal Reserve Bank.  Secondly hourly income as measured by buying power has shrunk.  Family income has shrunk at a slower rate because of the ever increasing percentage of wives entering the work force.  They flooded financial institutions with easy money, and it was loaned out. Increasing demand was created through credit bubbles—the seeds of the second great depression.  Mr. Shapiro thinks that our workers should compete with those who are making less than 30 cents per hour.  The second seed of the current depression was the out sourcing of jobs and the trade imbalance.  History has repeated itself.  Take a look at the excellent concise account of what happened leading up to the Great Depression, (see   You will find out that in the 1920s wages fell and this was hidden by easy credit.  The bubble burst in 1929 when for the months of August and September the U.S. GDP fell at an annual rate of 20%. 


Today’s stock market crash has been brought on by imbalance of trade, falling wages, falling GDP, and credit bubbles.   According to Reuters, between January and September, 2008, the stock market index for "emerging markets" lost nearly 55 percent of its value and the index for "developed markets" lost 42 percent (Professors Jeremy Brecher, Tim Costello, & Brendan Smith, November 30, 2008 at  And George Soros ( states that the problem is even larger than 1929:  “Total credit outstanding was 160 percent of GDP in 1929, and it rose to 260 percent in 1932 due to the accumulation of debt and the decline of GDP. We entered into the Crash of 2008 at 365 percent, which is bound to rise to 500 percent or more by the time the full effect is felt.” History has repeated itself:  falling wages and GDP has burst the speculative bubbles caused by credit expansion. 


I wonder why the president of the Consumer Electronics Association thinks that tariffs would be a disaster; a disaster for whom?  What percentage of consumer electronics is made here and what percentage under President Eisenhower?   Mr. Shapiro does your association track such changes?   


Teddy Roosevelt's advice that, "We must drive the special interests out of politics. The citizens of the United States must effectively control the mighty commercial forces which they have themselves called into being. There can be no effective control of corporations while their political activity remains."