Msilitnacrem

by Don Boudreaux on December 9, 2006

in Trade

Understanding basic economics doesn’t require genius, but it does require genuine thought.  It requires looking beyond labels.

Many people who rightly applaud commerce between two or more citizens of the same country get all confused and befuddled if the very same commercial transaction takes place between people living in different sovereign jurisdictions.

Consider this exchange yesterday between Kai Ryssdal, host of the radio program Marketplace, and stock broker David Johnson.  Johnson is telling Ryssdal about a table in Wednesday’s Wall Street Journal that reveals that many of the 30 companies that make up the Dow Jones Industrial Average earn substantial portions of their revenues outside of the United States.

Johnson told Ryssdal that this was "just a remarkable table of how much revenue [earned by corporations in the Dow 30] comes from abroad. … Intel was number one…..  How much of their revenue do you think comes from abroad."

Ryssdal guessed 46 percent.  Johnson, with lots of "wow" in his voice, then reported that the real figure is 85.4 percent.

Ryssdal seemed less excited by these figures than was Johnson.  So Ryssdal asked Johnson "if that troubles you or not that all these big American companies are so dependent now on revenues from overseas."

Johnson answered immediately and correctly: "no."

But Ryssdal’s question startled me.  Usually we are assaulted with concerns that American companies aren’t selling enough to foreigners; that Americans generally are spending, spending, spending while foreigners are prudently saving, producing, saving, producing — that policy changes are needed to enable American companies to sell more to foreigners.  (Regular Cafe patrons know that neither of the Cafe’s co-proprietors put much stock in such mercantilist concerns.)

Ryssdal’s question above, though, was the reverse of mercantilism; let’s call it msilitnacrem.  It’s the worry that "our" domestic firms are "too dependent" upon foreign sales — that too many foreigners, relative to domestic citizens, are buying the outputs of "our" domestic firms — that "our" domestic firms are earning too much money from trading with foreigners.

Proving that there’s always a negative, ominous spin to put on almost any factoid, Ryssdal suggested that it might be cause for concern that American corporations "are so dependent" upon sales to foreigners.

If exports are good — more generally, if it’s desirable to earn revenue on sales of goods and services to foreigners — then why ask if such "dependence" is troubling?

Is Safeway supermarket "troubled" by the fact that it is "dependent" for almost all of its revenue on people who aren’t associated in any way (except as customers) with Safeway?

Listening to Ryssdal ask his question drove home to me the reality that many people in the news media see problems that don’t exist.

Of course, neither sales to foreigners nor purchases from foreigners are problems.  It’s just commerce, pure and simple.  And it should remain free of artificial obstacles — obstacles thrown up by greedy rent-seekers and applauded by those who cling to the ridiculous superstition that a political boundary makes voluntary trade suspect.

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