… is from page 14 of Liberty Fund’s 2016 expanded English-language edition, brilliantly edited by David Hart, of Frédéric Bastiat’s indispensable work Economic Sophisms and “What Is Seen and What Is Not Seen”; specifically, it’s from Bastiat’s April 1845 essay “Abundance and Scarcity” (“Abondance, disette”):
But people will say: if foreigners swamp us with their products, they will carry off our money.
What does it matter? Men do not eat money; they do not clothe themselves with gold, nor heat themselves with silver. What does it matter if there is more or less money in the country, if there is more bread on the sideboard, more meat on the hook, more linen in the cupboards, and more wood in the woodshed?
DBx: Yes. Yet this reality – undeniable when stated as plainly as Bastiat here states it – is the core reality about trade that Trump does not grasp. Trump believes that we Americans get poorer whenever we buy imports with money if at least that same amount of money doesn’t return to America. Trump thinks that our wealth is the nominal amount of dollars that we currently own and possess within our borders.
In this matter, Trump is deeply mistaken. If you doubt my assessment, imagine that you lawfully owned and possessed, in the form of U.S. dollars, all of Jeff Bezos’s or Elon Musk’s wealth, but you are also stranded alone on a desert island with no hope of rescue. How rich would you be? Obviously, you’d be destitute. Money is valuable – it represents wealth – only insofar as it can be exchanged for real goods and services. A logical implication of Trump’s ‘theory’ of trade is that we Americans would be maximally enriched if we toil 24/7/365 producing goods and services for export, for which we receive only money from foreigners – money that we never, ever send abroad to purchase anything from foreigners.
Although Trump, his trade advisors, and his many MAGA cheerleaders appear incapable of realizing it, under the trade regime that Trump regards as ideal for Americans, we Americans would effectively work as foreigers’ slaves: Foreigners would get all the fruits of our labors while we would get nothing in return except scrip that is never presented to foreigners for redemption in anything other than scrip.
It’s an appalling, ludicrous belief, but one that ran through mercantilist writings.
Although this next point isn’t as fundamental as the one mentioned just above, it’s nevertheless important: Trump is also blind to the fact that dollars can and do return to the U.S. not only as demand for American exports of merchandise but also as demand for American exports of services, and as foreign investments in the U.S. Proof of this point is the fact that Trump incessantly complains about America’s merchandise trade deficits – an economically meaningless concept that nevertheless is a principal fuel for today’s U.S. trade ‘policy.’
In a single day I, or any other reasonably competent economist, could teach ordinary fifth graders to have a better understanding of trade than is possessed by the current president of the United States.
