Friday, November 11, 2005

A Deficit of Understanding

There are good reasons not to be worried about our trade deficit with the rest of the world, but at least I can understand the concern. What I don’t understand is why anyone worries about our trade deficit with any particular country – like, say, China. This is, as Don Boudreaux notes, akin to worrying about your trade deficit with the grocery store: You keep buying stuff from them, and they never buy anything from you! It’s a catastrophe waiting to happen!

Read Boudreaux for more.


MT said...

Well, they are a quarter of the world population. Plus as their economy develops while Africa and Latin America goes nowhere, as is forecasted, they become an ever larger proportion of the world with any money in their pockets. Plus they're quasi-communist and they have a good track record with getting a hundred million people to chase after grasshoppers at the same time, so a successful "Buy Chinese!" domestic propaganda effort seems not out of the question. If a rich China buys exclusively Chinese, that gives Chinese manufacturers a huge economy-of-scale head-start and advantage in everything manufacturable. That sounds like a recipe for world domination to me. But then I don't know beans about world trade.

MT said...

I might have prefaced that reply with a "yeah, I've puzzled over this one too."

Ben said...

I think it's a greater risk to the rest of the world that end up owning more and more of US property and money. They are vulnerable to US government policies that can be used to manipulate the value of this property and if inflation problems arise, those who own US money would share the consequences.

gt said...

I worry quite a bit about my deficit with the grocery store. I write this while drinking coffee bought at the store and eating a salad that wasn't.
In general I try to take myself out of the scarcity-based old economy and live in the new online post-scarcity economy. But not to the point where I'm willing to give up coffee.
It's not that we're worried about china per se -we'll worry about any country with a billion slave laborers, nukes, and spaceships.
-arbitrary aardvark.