Tuesday, April 11, 2017

Our trade deficits with China et al. aren’t ‘killing us,’ but rather providing us with job-creating investment capital

Via Mark Perry.

"Below is an excerpt from an excellent  2016 article by George Reisman about how “China et al. Are Not ‘Killing Us‘”:

Far more important than the gain associated with obtaining imports by means of the export of costless paper dollars is the gain associated with obtaining imports by means of the investment of foreign capital. To make this point as clear as possible, think of Saudi Arabia before it had an oil industry but after geologists had confirmed the existence of vast oil deposits there. What was necessary to develop those deposits was flotillas of ships from Europe and America bringing vast imports of drilling equipment, sections of pipe, the materials and equipment required for building oil refineries, and the consumers’ goods required for armies of foreign workers constructing the Saudi oil industry. Indeed, so far from being a source of unemployment in Saudi Arabia, this allegedly unfavorable balance of trade was the foundation not only of Saudi Arabia’s oil industry but at the same time practically all of the worthwhile jobs that exist in Saudi Arabia, which are either in its oil industry or closely connected to its oil industry. Thus, in fact, nothing could be more favorable in reality than what most of today’s economists absurdly describe as an “unfavorable” balance of trade and a cause of unemployment, namely, such an excess of imports over exports.

Today, investment by China and other foreign countries in the U.S. is what enables the American economy to import more than it exports. As in the case of Saudi Arabia, this investment and accompanying excess of imports over exports makes it possible for the United States to have more and better equipped factories and all other types of means of production than would otherwise be the case, and thus to have a larger number of well-paying jobs."

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