A Protectionist is Someone Who…

by Don Boudreaux on March 26, 2018

in A Protectionist is..., Balance of Payments, Myths and Fallacies, Trade

… describes a country that attracts a net inflow of investment funds as “failing”; the protectionist wants his favorite country, on net, to repel capital (or at least not to receive more capital in any one period than other countries receive).  Does the protectionist believe that capital is destructive?  Does the protectionist suppose that investors worldwide actively seek out failing economies as destinations for their funds?  Perhaps.  But a better explanation for the protectionist’s confusion is simple ignorance: The protectionist, it seems, cannot avoid being misled by a mere term: “trade deficit” – which is the popular name of the accounting artifact that has another name: “capital-account (or financial-account) surplus.”

The protectionist, in short, simply has no idea what he’s talking about when he discusses the so-called ‘balance of payments.’


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