Yet More Deficient Thinking

by Don Boudreaux on April 24, 2010

in Balance of Payments, Myths and Fallacies, Trade

Here’s a letter to the Washington Post:

Worried about America’s “longstanding manufacturing-dominated trade deficits,” Alan Tonelson asserts that “To pay for their current consumption of manufactured goods responsibly, and start paying down still dangerously high debts, Americans and their leaders must start caring about U.S. manufacturing output – and start generating much more of it” (Letters, April 24).

Forget that American manufacturing output, just prior to today’s downturn, reached an all-time high.  Forget Mr. Tonelson’s mistaken belief that U.S. trade deficits necessarily increase Americans’ indebtedness.  Instead, focus on his assumption that the only way to pay for manufacturing imports “responsibly” is with manufacturing exports.  No notion could be sillier.

Mr. Tonelson himself works in the service-sector.  He manufactures nothing, yet he has ready access to manufactured goods.  He enjoys this access because he supplies valuable services that yield to him an income that, in turn, allows him to buy – to import into his household (and without going into debt!) – automobiles, cell phones, sofas, and countless other manufactured products.

If Mr. Tonelson loses no sleep at night over a mistaken worry that he owes some ‘debt’ to the manufacturers from whom he buys, or over a worry that his future is doomed lest he find work in a factory, then why does he worry that other Americans – who act just as he does – condemn themselves to a future of poverty by working in the service-sector at jobs such as neurosurgery, banking, and newspaper reporting?

Donald J. Boudreaux


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