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Quotation of the Day…

… is from page 343 of A. James Meigs’s Fall 1988 Cato Journal paper, “Dollars and Deficits: Substituting False for Real Problems,” as this paper appears as chapter 14 of Dollars, Deficits, & Trade (James A. Dorn and William A. Niskanen, eds., 1989) (footnote deleted):

The total capital stock available to U.S. workers and businesses, for any given U.S. saving rate, surely must grow more rapidly with an inflow of capital from abroad than it would without that inflow, even though some imported capital may be consumed instead of being invested in productive facilities. The greater growth of capital stock, therefore, must be reflected in greater growth of total U.S. product (and consumption) than we otherwise would have. So the “burden of debt service” can be paid out of the greater product. How would this be different from the burden of domestic debts? Why does it matter who holds the debt (or equity)?

Foreign owners of businesses in the United States receive the marginal product of their capital, but American workers and various state, local, and federal tax authorities get the rest of the product of the enterprises in which the capital is employed. The total product is certainly greater than it would be without the capital. Moreover, Japanese and European plant managers are now bringing improved management techniques to our country, just as American managers took improved management techniques to other developing countries in the past.

DBx: Worrying about a U.S. trade deficit is akin to worrying about your neighbors saving some of their income in order to invest in your business.

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