Earlier today I sent a letter to the New York Times in response to Neil Irwin’s mostly admirable essay, in today’s edition, entitled “What Candidates Are Saying By Harping on Trade Deficits.” (I’ll share that letter in a later post depending on whether or not the NYT publishes it.) But in this post I wish to make a point that is somewhat different from the one I make in that letter.
Suppose that you happen to live in a neighborhood that is located on the only patch of ground on earth on which there grows wild a plant whose leaves are treasured by many people the world over. People from around the world are willing to buy these leaves by exchanging for them cars, textiles, household appliances, and other valuable goods and services. The plants that grow these leaves do not (for whatever reason) grow anywhere other than in your neighborhood. You and your neighbors simply walk into your yards and pick the treasured leaves from these unique bushes.
Would you and your neighbors reckon yourselves to be economically harmed by having these bushes growing naturally in your yards? Would you reckon yourselves to be damaged by other people’s high demand for the leaves of these bushes? Asked differently, if these bushes suddenly stopped growing in your and your neighbors’ yards, would there be any effect of the disappearance of these bushes that you would describe as a benefit to you and your neighbors?
I hope and trust that you understand that, were you so fortunate to live in a neighborhood blessed by the natural growth of such bushes, you (and all who live in that neighborhood) would be unambiguously benefitted by having access to these bush-leaves that are so highly demanded by people around the world. It’s true that, because of these special bushes, you and your neighbors do not have to work as hard to acquire material goods and services from others as you would have to work were you not so fortunate as to have ready and unique access to these bush-leaves. But, honestly, wouldn’t this reality (of having ready access to, essentially, money growing on bushes) be for you a benefit and not a cost? Of course it would be a benefit for you.
And yet Neil Irwin (the author of the New York Times essay) might disagree with you. Judging from some of his comments, he might think that you and your neighbors, in this hypothetical example, are harmed by your access to these highly demanded bush-leaves. Here’s what Mr. Irwin writes about the United States:
There’s no doubt that maintaining the global reserve currency creates costs for the United States, namely a less competitive export industry.
We Americans – or, more generally, people who are paid in U.S. dollars – are very much like you and your neighbors in the above hypothetical example: the demand for U.S. dollars to serve as a global reserve currency only increases our access to global goods and services. We get more real output from others in exchange for less of our own sweat, toil, time, and real resources.
It cannot be said too often that exports are costs, not benefits.