If Trade Surpluses are So Great, the 1930s Should Have Been a Booming Decade

by Don Boudreaux on December 21, 2006

in Myths and Fallacies, Trade

The incessant fretting over the U.S. trade deficit is unwarranted.  As I point out (probably too) often, the trade deficit, along with its broader cousin, the current-account deficit, are no cause for concern.

Earlier today I visited the National Bureau of Economic Research’s Macrohistory Database.  I clicked on Chapter 7 and then looked at the value of U.S. imports and the value of U.S. exports for each of the 120 months during the 1930s.

Turns out that for only 18 of the 120 months of that dreary decade did the United States run a trade deficit (that is, imported more, value-wise, than it exported).  For each of the remaining 102 months of the decade of the 1930s the U.S. ran a trade surplus.

On an annual basis, the only year of the decade of the 1930s that the U.S. ran a trade deficit was 1936; in each of the other nine years the U.S. ran a trade surplus.

And for the Depression decade taken as a whole, the U.S. ran a substantial trade surplus.  Exports over those economically challenging ten years totaled $26.05 billion while imports totaled only $21.13 billion.  In other words, the U.S. trade surplus during the entirety of the 1930s was nearly 19 percent the size of the total value of U.S. exports during that decade.

The above data prove nothing.  Economies are far too complex to justify drawing simplistic conclusions such as "The 1930s was a decade of U.S. trade surpluses; the 1930s was also marked by one long economic depression; therefore, trade surpluses are bad for economies."  But the above data do show that all the fashionable fretting about trade deficits (which the U.S. economy has run for most of its history) is itself simplistic and uninformed.

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Chris Meisenzahl December 21, 2006 at 3:14 pm

Great point.

John Konop December 21, 2006 at 4:10 pm


NPR-Violent Crime Surge Hints at Troubling Trend

Violent crime rose in cities and towns across the country in the first half of 2006, according to preliminary data from the FBI. The findings signal that a long period of declining crime in the United States is not just at an end, it’s heading in the other direction.

Alfred Blumstein, a criminologist at Carnegie Mellon University who has been tracking crime numbers for 30 years. “There’s clearly a growing number of people who have no future in our economy,” Blumstein says. “There are basically three modes of earning income: One is to have a job, the other is welfare. The third is theft.”

The trend of American families feeling left out of our economy will only grow with real wages being driven down by cheap overseas labor and illegal immigration. We need to fix our trade and immigration policy soon or we will only see more destruction to American families and our way of life.

We cannot fix the problem with unions. Our competition in Countries like China who promote slave labor use unions to control the people.We must follow the EU and demand the end of child and slave labor in our trade deals. What do you think?

John Konop December 21, 2006 at 4:11 pm


This is an editorial on the web site economy in crisis. Do you think Americans should be concerned with our kid’s future due to poorly negotiated trade and immigration policy?


EC-In 1994, more than 1 in 8 jobs in America was in manufacturing. In 2014, if US government (Bureau of Labor Statistics) projections are to be believed, that figure will have slipped to less than 1 in 12.

The government is actually telling us in black and white that the policies that they are enacting will decrease absolute and relative manufacturing employment to levels below that of the 1950’s – over 2 million jobs below. In the 1950’s, 30% of US employees were in manufacturing – almost one in three jobs! This country was a relative manufacturing superpower.

In less than 20 years since America put in place some of its most self-devastating policy decisions (NAFTA, WTO, CAFTA, etc.), this country will have almost completely converted from a self-sufficient sovereign state, capable of manufacturing what it needs to sustain and protect itself, to a country of servants – serfs, working at the behest of foreign employers or engaged in the sales, marketing, and distribution of foreign-made goods – working at their discretion, for wages they determine, and forced to pay their prices for needed goods. This is the definition of a servant.

Patrick December 21, 2006 at 5:09 pm

John, You're kidding, right? That socialist crap is just utter nonsense. Markets, for labor or otherwise, if left alone are always right. And don't get too attached to manufacturing jobs (my advice to the Chinese as well), they will go away for all of us, and quickly. Labor costs are simply too much and automation will simply be too efficient for human interaction. Event the Chinese will find that they are too expensive to satisfy the demand of quality, low cost goods made at light speed and keeping in perfect sync with just in time inventory practices. In the place of these jobs, new ones always pop up, provided we don't become the EU.

The Dirty Mac December 21, 2006 at 5:12 pm

Here in Fairfield County, our automobile industry closed down one hundred years ago. After we sold our souls to Michigan, our brass, hat, and textile industies left. Nothing is made here anymore. The largest "employers" include foreign devils like UBS and some company called Boehringer Ingelheim Pharmaceuticals. I wonder how much longer we will be able to walk the streets of Greenwich.

Patrick December 22, 2006 at 4:44 am

Dirty Mac….way funny. You're so right, Greenwich may become Camden NJ and then Calcutta in short order! OK…I'm sorry and listen, God Bless America for UBS, they're a great firm that pays high wages and bonuses even to the less skilled clerical classes.

JohnDewey December 22, 2006 at 8:33 am

John Konop,

U.S. manufacturing output in 2005 was at an all time high. The U.S. leads the world in production of automobiles, aircraft, chemicals, medical equipment, and much more.

Is there a large economy other than China that has grown faster than the U.S. since NAFTA was implemented? I don't think so.

Do you really think imports have had much impact on manufacturing jobs since the 1930's? It's automation, Mr. Konop, that eliminated manufacturing jobs, just as automation eliminated so many agriculture jobs.

David Gillies December 26, 2006 at 9:55 pm

The imports vs. exports thing seems to be one of those 'Common Sense Economics' fallacies that most people believe in (like an erroneous belief in the zero-sum nature of free trade, for example, or confusing wealth and income, and claiming Bill Gates is richer than Paraguay). I'm not sure it's a tractable problem. There may be some sort of evolutionary psychology phenomenon at work here, where belief sets that work well in a prehistoric environment do not scale to the modern era.

Of all the economic things that people know that just ain't so, Konop's addle-pated romantic attachment to manufacturing (the merctantilist/autarkic fantasy writ large) is probably the most pernicious, and combating its malign effects should be the principal duty of every economist in the public sphere.

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