Protecting 'American Jobs'? How About Protecting American Wealth?

Helen Whalen Cohen | September 08, 2010 3:35 PM

Why would we want to produce batteries in the United States? It's probably cheaper to do it somewhere else. President Obama spoke proudly about protecting 'American jobs' in his Ohio speech but his proposed protectionism will do anything but. Tipsheet readers already know this-it's exactly what Adam Smith and Friedrich Hayek always said.

The law of comparative advantage states that an individual (or company, state or country) should only produce what he (or it) is best at and buy the rest. If it is more efficient for a country to buy a good, then it should, and shore up resources to spend on what it does well. This leads to real economic growth and job creation. Meanwhile, protectionist policies might appear to save some jobs, but prevent further growth because they make hiring more expensive.

You wouldn't expect a small business to create the computers it uses. That would be a waste of time, money and talent. It's the same at all levels, whether the situation involves a single person or a multinational corporation.

Back to the batteries. Given the numerous environmental and consumer protection regulations in the US, it is far from cost efficient to produce them here.

President Obama's speech was all about spurring economic growth. If he means it, he should let go of the "protect jobs" rhetoric.