There’s a never-ending drumbeat of school-marmish warnings about the dangers of the so-called U.S. trade deficit, often combined with near-hysteria over the loss of U.S. manufacturing jobs. A couple of recent examples include this op-ed in the New York Times by Senator Bob Kerrey, and this column in the Washington Times by Paul Craig Roberts.
Much of the unnecessary worry stems from confusion engendered by the careless construal of plural pronouns. Talking about “our” trade with foreigners, or of “our” manufacturing base, or of how much of “our” currency or equity is held by “them” creates a too-ready illusion that each nation is a single, unified economic unit – America, Inc., Japan, Inc., Botswana, Inc.
It isn’t so. It isn’t close to being so.
What matters above all are the circumstances and preferences of each individual — individual prospects, successes and set-backs, tastes and preferences, and opportunities. Do I worry about the fact that I manufacture nothing? Do I tremble with fear that I do not weave the cloth used to make my clothes? Do I shudder at the prospect of having forever to depend upon strangers to make my computer keyboards, my shoes, and my toasters?
The Pop View of international trade would have us believe that something is fundamentally different when I depend upon strangers in China to weave my cloth compared to my relying upon strangers in South Carolina to do so. But I see no difference. Nor is there a significant difference if I use my credit card to purchase new clothing from strangers in China compared to using my credit card to purchase new clothing from strangers in South Carolina. If I can service this debt, then it’s okay for me to have undertaken it regardless of the nationality of the creditor; if I cannot service the debt, then it is unfortunate that I went into debt to make this purchase, regardless of the nationality of the creditor.
(I state again that, contrary also to the Pop View of international trade, a trade deficit is not synonymous with debt.)
Or consider the folk wisdom that insists that it’s better to make computer chips than to make potato chips.
This adage is nonsense. Herman Lay made millions producing potato chips. And in the process of producing his personal fortune, he made consumers and workers better off.
