Wednesday, April 23, 2008

Trade Decifit BS

So the United States has a massive trade deficit with China. Many argue that this benefits the Chinese but hurts Americans.

However, consider that I operate on a massive trade deficit with my local grocery supermarket. Am I worse off for it? Would I be better growing my own food? First of all, I haven't the acreage necessary to grow enough wheat to fulfill my consumption of bread, or corn for its products, or beef, or pork, or hops, etc. So if I stop buying from Kroger, I and my family will starve. Secondly, even if I had the necessary capital to provide my own foodstuffs, I would then be unable to do anything else, for managing a farm/ranch is an all day occupation.

Basically, those who argue against free trade with countries such as China are also arguing that you never buy anything from any company. You should just make it yourself.

That's absurd. I am wealthier because I buy my food from someone else; because I didn't build my own car from my own steel, plastics from my own petroleum, wires from my own supply of copper ore, and rubber from my own rubber trees; because I didn't grow, clean, and weave the cotton that composes my clothes; etc.

Kroger provides me with things that I need at a price that is much cheaper than I can provide for myself, so I buy from Kroger. Similarly, since Chinese companies supply many goods at a better price, I am better buying them than from anywhere else that is more expensive. With the money saved by purchasing cheaper goods, I can better provide for my other wants or needs.

Buying Chinese goods hasn't made me poorer. It has made me wealthier.

3 comments:

  1. I disagree with your use of a microeconomics example to explain a macroeconomics concept. The rules aren't necessarily the same. What works for individuals may not be practical for whole nations, and the pompous asses "elected" to violate the Constitution by making economic decisions.

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  2. Disagree all you want. The more you do, then the more you're wrong. The laws of economics don't change. The rules are the same.

    Similarly, no government should be empowered to do what no individual would have the rightful power to do.

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  3. Perhaps the fear of a trade deficit stems from the belief that no new jobs will be created here to replace the ones lost to foreign competition. Not everyone sees working at McDonald's and buying cheap Chinese shit at Wal-Mart as progress. The real problem is that we have high school diplomas making as much as master's degrees in this state, and not because they look nice dancing on a pole. Every time I see one of those bumper stickers that says, "Lost your job yet? Keep buying foreign" I want to punch the driver in the face. So, in a way, I'm agreeing with most of what you originally said, and I did from the start. I just thought that your personal example was not the best possible way to make your point. Show me a nation that has a more sensible economy than ours, and I will be happy.
    Vive Ron Paul!

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