Is The Time Right For Economic Patriotism?

A World War II-era poster calls upon the patriotic spirit to help the war effort. i i

hide captionA World War II-era poster calls upon the patriotic spirit to help the war effort.

National Archives
A World War II-era poster calls upon the patriotic spirit to help the war effort.

A World War II-era poster calls upon the patriotic spirit to help the war effort.

National Archives

From Planet Money

Congress is considering legislation that would heavily tax bonuses paid to executives by companies that are receiving government assistance. But a lot of Americans wonder: Why don't these executives do what's right for the country and just give back the bonus money?

Meanwhile, President Obama is asking private investors to step forward to purchase devalued mortgage-backed securities to help clean up the toxic assets clogging credit.

And U.S. automakers want Americans to buy domestic cars to help save their industry.

But do such appeals for economic patriotism make sense? It may sound cold, but most economists say the capitalist system works best when individuals act in their own economic self interest — and not try to take patriotism into account.

So far, consumers appear to be doing just that, at least as in terms of auto sales, according to Bernard Baumohl, chief global economist for The Economic Outlook Group, a forecasting firm.

"I haven't seen any evidence in the data to suggest Americans are making an overt effort to buy American," he said.

That's because "it's hard to know how much of any product is really made in the United States," Baumohl said. "These days, 'Buy American' is more of a slogan than anything meaningful."

'Selfish' Decision-Making

Most mainstream economists would argue that the U.S. capitalist system benefits from "selfish" economic decision-making. If an American buys a car just to help the domestic industry, she may take away the U.S. company's incentive to become globally competitive.

"What we try to encourage is have people buy the best product at the best price," Baumohl said.

One exception was during World War II, when Americans were encouraged to make many economic decisions to help the country. For example, they were urged to buy war bonds, restrict use of gasoline and other commodities, and reorganize factories to make tanks, planes, etc.

"When you have a wartime situation, people are willing to help protect and defend the United States," Baumohl said. The current global recession is "a dramatically different situation," best solved by people trying to boost economic efficiency, he said.

For example, private investors will partner with the government to buy up toxic assets, but only because they believe they will make money on them, not because the president is requesting their help, Baumohl said.

Recession May Choke Corporate Generosity

Whether executives should give up bonuses is more a question of ethics than patriotism, he said.

Henry J. Aaron, a senior fellow at the Brookings Institution, a think tank in Washington, said that while "selfish" actions are central to capitalism, companies often do act in altruistic and patriotic ways.

"Enlightened business leaders want their companies to invest in their communities," he said. That may cover everything from supporting the Little League team to funding the arts. But the recession may choke off some of that community spirit.

"It's easier to be generous when you are prosperous," Aaron said.

Marilyn Geewax is senior business editor for NPR.

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