It's actually very natural for individuals to look to themselves during times of hardship. I mean, let's use a neighborhood as a microcosm for the world. If times are tough at the Jones' house, the Wilson's, being upstanding citizens and good Samaritans, are more than happy to do what they can to help. If times are tough for the neighborhood, often times it becomes 'protect my family and make sure they are secure.' The idea that helping the Jones' house would help you in the medium/long-run is something that most people don't see. One clear example of this tendency to focus on 'your own' during times of hardship is seen in how charitable donations tend to decline during periods of economic decline.
It also seems rational to save more. In terms of economic theory, the literature on consumption versus saving during times of uncertainty is abundant. Here, during times of uncertainty, like our current economic climate, people's APC (average propensity to consume) declines, and for most people the MPC (marginal propensity to consume) also declines. I say 'most', because in a graph of consumer spending as a function of cash-on-hand often those with much cash-on-hand are not inclined to change their consumption patterns based on uncertainty as much as those without a high level of cash-on-hand.
Here, those with much liquidity (disposable income) could see steady or possibly increasing levels of consumption. A millionaire in this economic climate may say "yeah, times are tough," but then still go out and buy that Lamborghini because he can still afford it. But a blue-collar auto worker, who is just breaking even with household costs, may be inclined to save more and not buy a flat-screen t.v. to prepare for the possibility that she may get laid-off due to the uncertainty of the U.S. auto industry. In the case of the blue-collar auto worker, her marginal propensity to save has increased and hence her marginal propensity to consume has decreased. For the millionaire, although disposable income may decline, her consumption is not effected by uncertainty as much. Thus, the MPC could increase in this setting. Looking at the definitions (MPC = dC/dY and MPS = 1 - MPC), one can see the relationship.
So, in the current political climate, why wouldn't politicians strive to "look after their own." It's a natural tendency. Just like the Wilson's restricting their giving and helping, a country's first inclination is to help their own, in this case 'America' is a country in the integrated global neighborhood.
As a result, what we see is a rise in economic nationalism. If times are tough for the neighborhood, why not just help ourselves?
This level of self-interest is inherently flawed when taken to the global scale. If every country sought "buy/employ your own" clauses in their economic policies, we would see a dramatic decline in trade, which in turn would raise the prices of goods (for a number of reasons resulting from decreased competition), which would then lower household consumption even further (your dollar/euro/yen would buy you far less good/service so you would focus only on necessary purchases). Further, under labor protectionism policies foreign companies that employ U.S. workers and own factories in the U.S. could fire American employees and move industries back to their home country in retaliation for 'employ American' policies affecting their home country. Let's just say Hyundai decided to close its auto manufacturing plants in the southern United States, hundreds if not thousands of Americans would be affected by this move. The sheer magnitude of the trade and labor wars would do a lot more harm than the "buy/employ American" clause would do the economy well. The government would lose tangible private sector jobs for the hope that the "buy/employ American" clause would increase domestic employment in the long-run.
I am all for "hope," but when the bottom line is jobs, why not keep the ones we know we have? Running the risk of decreased trade in goods, services and labor for this short-term gain may in fact backfire leading to an even harsher economic decline.
If you look at the article from the economist I posted a few weeks ago, the choice by countries to restrict the flow of goods, services and labor exacerbated the severity of the Great Depression and led to prolonged economic hardship. We need to help China, Europe, Japan, Mexcio, South Korea and all of our trading partners as much as we need to help ourselves. If we allow the market to control the free flow of goods and services between countries, then in the long-run, consumption rates, income and demand for labor will increase with the stimulus spending plans.
It's funny, protectionism may seem like the helpful thing to do, but in the long-run the harm is greater than the short-term gain.
It seems China is more free-market oriented than the United States these days (see link).
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