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February 15, 2009

Buy Local, Sell Global

It doesn't scale. We can't all buy locally and sell globally. The less politically correct sounding version is "beggar thy neighbor".

Last week when we were vacationing in very friendly Apalachicola, I was mildly offended by a banner one block off the tourist street advising everyone to buy local. "What, no Vermont maple syrup? No ski vacations?"

This Thursday the front page of the "what's happening"" supplement of the usually excellent Stowe Reporter , the section tourists presumably read to see what to do with the rest of their money when the ski day is over, is all about taking a "Stay-CATION" – that's a vacation taken from the convenience of your own home. I doubt if people'll just pack up and go home because the skiing's still pretty good. But Stowe'd be in a pretty pickle if all our visitors had decided to take stay-cations instead.

In Vermont neither our university nor our state colleges would be economically or educationally viable if they took only in-state students. We would be a very insular place if all our own kids were educated here in the State (and stayed). But there's constant pressure to limit State financial assistance to Vermonters who attend college in Vermont.

On a larger scale, undeterred by the example of the Smoot-Hawley tariff (a Republican idea) which some economists believe greatly deepened the great depression, pandering legislators are trying to sneak protectionists measures into almost every piece of bailout legislation.

Labor leaders are pushing to restrict immigrant visas. "We don't have enough jobs for our own people." If an immigrant does a job, she spends most of the money she earns here. If a job is outsourced, the money is really gone. Someone in India suggested, only partly tongue in cheek, that the US should expand the number of visas for foreign workers because the Indians who come here to work will buy houses and stabilize the housing market. They may also know how to spend without massive consumer credit.

But, people argue, if US taxpayer money is going to a company, should it then be used to pay foreign workers? Good question. The answer is in the premise of the question, however. US taxpayer money shouldn't be going to corporations as aid unless it's meant to help in the orderly dismembering of a corporation that's too big to fail on its own.

We are spending fortunes in US taxpayer dollars to bail out US corporations. Other countries are doing the same for their corporations. The bailouts preserve capacity but don't increase demand. To a large extent the bailouts by different countries to their own industries cancel each other out leaving taxpayers poorer and erasing current or future demand. Failure to recognize that the economy is global was catastrophic in 1930. It would be really dumb to double down on that mistake.

"Buy Local, Sell Global" makes no sense at all. In the context of a recession which could easily be deepened by a panic, it's a dangerous idea.

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