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Here’s a letter that I sent to the Wall Street Journal:
Peter Navarro asserts that “China mops up vast sums of export dollars through sterilization efforts that are tantamount to forced saving. In the process, Chinese consumers lose significant purchasing power because of the undervalued yuan – and Americans lose millions of jobs” (Letters [2], Nov. 21).
Ignore the question of whether or not Beijing’s commitment to peg the yuan to the dollar really is currency manipulation. Instead, suppose the Chinese people truly did – voluntarily – have a very high savings rate. Would Prof. Navarro argue that trade with the Chinese under those circumstances would cause Americans to “lose millions of jobs”?
If not, why does Prof. Navarro believe that “forced saving” by the Chinese depresses American employment? From Americans’ perspective, the particular reasons why the Chinese people save as much as they do are economically irrelevant.
But if Prof. Navarro does believe that even voluntarily high savings by the Chinese makes U.S. trade with that country a source of higher unemployment in America, then Prof. Navarro must believe that America’s best trading partners are those foreigners who are most profligate – in which case Prof. Navarro should also believe that he is better off trading with individuals who are profligate than with individuals who save and accumulate capital. I wonder if Prof. Navarro trades only with mall-rat teenagers and other irresponsible spendthrifts. Given his economic ideas, he should seriously consider this course of action.
Sincerely,
Donald J. Boudreaux