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Quotation of the Day…

… is from page 8 of Alan Greenspan’s and Adrian Wooldridge’s 2018 book, Capitalism in America: A History:

The Constitution divided power in large part to protect propertied people from the predations of the masses or a dictator. This vigorous protection of property not only encouraged entrepreneurialism at home, because people had a reasonable certainty of keeping their gains, it also encouraged foreign investors to put their money in America on the grounds that they wouldn’t see their capital stolen and their contractual rights ignored.

DBx: Note that among the consequences of America being an unusually attractive place for non-Americans as well as Americans to invest is a tendency for America to run so-called “trade deficits.” (Foreigners need dollars to invest in America, so they reduce their purchases of American exports in order to have dollars to invest in the U.S.) People who bemoan American trade deficits, therefore, bemoan America’s high attractiveness to investors – that is, they bemoan America’s high propensity to attract capital to her shores and to retain it without force.

Just why so many people interpret this happy feature of the American economy as a both a signal and source of American economic decline is a mystery. But nevertheless this faulty interpretation continues to be embraced stubbornly by people on both the political left, such as Robert Reich and Joe Biden, and on the political right, such as Oren Cass and Donald Trump.

I chalk up their faulty embrace of trade-deficit fears to their ignorance of economics. But of course rent-seekers, many of whom know better, are more than pleased to stoke these fears in order to drum up support for policies that enrich these rent-seekers at the greater expense of the unsuspecting general public.

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