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Corporate Greed Well and Truly Exposed

Posted By Don Boudreaux On October 14, 2011 @ 10:23 pm In Balance of Payments,Myths and Fallacies,Other People's Money,Trade | Comments Disabled

Here’s a letter to the Wall Street Journal:

Nucor’s Ruth Kemmish wants to slap extra taxes on Americans who buy Chinese goods (Letters [1], Oct. 15).  She justifies such taxes by asserting that “tariffs exist today to correct artificial imbalances, and this legislation [the Currency Exchange Rate Oversight Reform Act] would aid that effort.”

Never mind that the “imbalance” to which Ms. Kemmish undoubtedly refers – namely, America’s current-account deficit with China – is exactly offset by a higher American capital-account surplus.  Therefore, examination of both accounts that only together are designed to capture the full range of international transactions reveals that these transactions are perfectly balanced.

Instead, focus on Ms. Kemmish’s underlying premise, which is this: if party B pays party C to offer especially attractive deals to party A – and if, in response, party A buys more from party C and less from party N – party N is justified in hiring party U to punitively confiscate extra sums of money from party A until party A significantly reduces his purchases from party C and increases his purchases from party N.

This premise suggests at least two questions.  Why is party N entitled to party A’s patronage?  And why is this entitlement that is claimed by party N superior to party A’s entitlement to spend his money as he wishes – including spending it in ways that enable party A to take advantage of the bounty made available to party A by party C?

Sincerely,
Donald J. Boudreaux

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