Here’s a letter to a new correspondent:
Mr. Joe Racz
Thanks for your e-mail.
Unable to understand why I “criticize our President for wanting to lower our trade deficit,” you argue that “President Trump sees that the more money we make on our exports and the less of it we spend importing the better off we are.”
Your summary of what Mr. Trump thinks he sees is accurate. But what he thinks he sees is a mirage. A people are enriched, not as they have more money, but as they have more access to real goods and services. Money is merely a medium of exchange; we accept it for what we supply only because we know that we can later use it to acquire the real goods and services that we desire. Because Trump’s protectionist policies reduce our ability to use our dollars to acquire real goods and services, those policies make us worse off rather than better off – and they would do so even if they resulted in us Americans having literally more money.
Each semester I ask a randomly chosen freshman student of mine if he or she would like to have as much money as Bill Gates has. Of course the student always says yes. I then ask that student to imagine having these tens of billions of dollars all bagged up and available for him or her to use. The student invariably smiles at the thought, no doubt imagining the many splendid things and experiences that he or she would purchase. Then I say: “But there’s a catch. You can have all of Bill Gates’s money, but only if you’re forever stranded alone on a desert island – an island never visited by anyone.” I pause for a moment to let the thought sink in. I then ask the student: “Even owning tens of billions of dollars, how wealthy would you be?” No student has ever replied other than to say “Not wealthy at all.”
Trump’s protectionist policies are merely a milder form of stranding us Americans on desert islands: we might well have more money, but because the policies that bring us more money also restrict our ability to use that money to buy real goods and services, we are made poorer rather than richer.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030