Investment is Investment

by Don Boudreaux on May 7, 2007

in Trade

The Washington Times today published this letter of mine:

Economic growth requires market-driven investment, and
investment requires savings. So the editorial "The GDP" (Editorial,
Saturday) was right to argue that a fall in Americans’ savings rate
threatens to reduce the U.S. economy’s growth rate.

But why do you often lament the U.S. trade deficit? The larger
is this deficit, the greater are the amounts that foreigners invest in
America. And the more that foreigners invest in America, the higher is
the U.S. economy’s growth rate. Research and development in the United
States funded with dollars from South Korea is just as productive as
the same R&D would be were it funded with dollars from South

If Americans truly are saving virtually nothing, we should be
especially pleased that foreigners so willingly save and invest on our



Department of Economics

George Mason University



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