TRADE MATH 101
John Tamny is Director of the Center for Economic Freedom at FreedomWorks, and Editor of RealClearMarkets. He’s the author of several books. His latest is The End of Work: Why Your Passion Can Become Your Job . To reduce America’s trade deficit would be to lobotomize tens of millions of American workers and cut the arms and legs off the rest. The imports that flow into the U.S. are not just a sign of our greatness, but an even more powerful signal that we’re getting better all the time. Imports endlessly benefit us because they free us from taking the nightmare test that we’re not prepared for day after day after day. our time and effort to produce. These imports free Americans to create Microsoft, Amazon, Apple, and Google. We have trade deficits because the United States is populated by the best workers and best businesses in the world. And these workers and businesses have global capital showered on them. Trade deficits are a sign that we’re the biggest badasses on the planet. We’re worshipped by the world’s capital allocators. Their copious investment in all that we do and think about doing (see Silicon Valley) means that we’re highly liquid in our pursuit of the world’s goods. The trade deficit is a happy signal that incredibly productive Americans found a way to avoid the work equivalent of the classes they despised in school and can now pursue the subjects they can’t get enough of. By doing what we love and what elevates us, we’re the recipients of an investment without which there is no growth.
The U.S. is largely a global open market. (This remains true even in the age of trade-barrier threats from Donald Trump.) Our workers are unusually productive. This has proven to be an enormous lure for investment. As a result, America, more than any other country, exports its stock shares and bond issues to investors around the world. They are eager to apply their wealth to the most talented workers on Earth. The investment that flows into the U.S. enhances our output in the way that a tractor would enhance the output of the farmer who’d formerly used a mule. The problem – a wholly theoretical, not to say imaginary, problem – is that the export of stocks and bonds doesn’t count in the calculation of U.S. trade balance, but our import of shoes, socks, and t-shirts from China does. Basically, China and other enterprising nations make certain prosaic goods for us because those goods aren’t worth A trade deficit is a sign that productive workers are attracting the capital that will multiply their output. capital. If Bezos had moved to Baltimore, the city’s trade deficit would have skyrocketed. Trade deficits are an effect of surging investment into a city, state, country, or continent. A trade deficit is a sign that productive workers are attracting the capital that will multiply their output. (Just as Baltimore’s trade surplus is a sign that its workers aren’t as productive as they should be.)
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January 2019
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