Tuesday, February 16, 2010

US Trade Deficit (Info-Graphic)

Spending beyond our means since the 1980's. Don't you think we need to collectively reevaluate our lifestyles when we have imported more - in the order of tens of billions - than we have exported for the last three decades? (Source: Mint.com)


Anna said...

I'm not really so sure that the trade deficit is a problem for us, per se. We buy more from other people than we sell to them, yes. The part of the trade deficit that has been financed by people going into debt they can't afford... that's a problem. But the part of the trade deficit that is us buying more than others buy, because we have more money? I'm not sure that's a problem. (You might check out this issue brief on Trade for a look at how international trade works and some of the arguments about the trade deficit. It's kinda long to go through the whole thing, but informative.)

DK said...

The other piece of the problem which I was going to blog about later is where the money is going on the things that we do buy. It's not just about spending less. In fact it might be about spending more, but on things that are produced in America by American companies.

I'll read the link now. Thanks!

DK said...

I still feel pretty convinced that this is unwise and will decrease the future potential of the American economy.

The article listed the following doubts that the increasing deficit is a bad thing.

1. consumers, particularly in the United States, can enjoy a higher living standard than they would if limited to domestically produced goods and services;
2. trade deficits have rarely sparked financial crises in advanced industrial countries; and
3. trade deficits can be a sign of economic strength; as imports tend to increase rapidly during times of economic growth when consumers and firms have more money to spend on foreign as well as domestic goods.

1. is a ludicrous reason.
2. is moot because there has never been an industrialized country in our position before.
3. doesn't seem to apply to American with our increasing unemployment and shrinking wages.

Anna said...

Well, I'm with you on concerns about where the money is going - particularly China with its human rights abuses. I'm not aware of particular abuses of employees in Canada or Mexico, though, which appear to be our other main trade partners.

I would say (1) is not a ludicrous reason. Higher standards of living are, generically, a good thing. They become a problem when they are had at the expense of someone else's misery. Which is, in fact, happening, at least with China, but the problem there is trade with China, not a trade deficit per se.

I'm not so sure that no country has ever been in a position like ours before. But even if so, the point remains that there is no historical evidence that maintaining a trade deficit, per se, causes eventual problems.

The economy certainly isn't in a good condition now, but I wouldn't be surprised if our buying stuff from other countries has dropped significantly, too.

Again, I would measure the "ok-ness" of the trade deficit by questioning (a) whether we are buying products made ethically and (b) whether we are financing our acquisitions with money we have vs. going into debt. Those are each problems related to the trade deficit, but I don't (yet) see any reason why the trade deficit itself should be a problem.

DK said...

I was saying #1 is ludicrous if current standards of living is at the cost of future economic vitality.

Anna said...

Ah. Why do you think that maintaining a trade deficit would be at the cost of future economic viability?

DK said...

Doesn't a trade deficit imply that a countries total wealth is decreasing? More revenue is passing out of the countries borders then is coming in?

Anna said...

Well, I suppose that depends on what you think of the concept of "wealth creation". Is wealth a static quality? Or can someone create wealth, by creating a new service or by turning a natural resource into something useable?

Consider for a moment the alternative. If everyone tries to maintain a trade surplus, then everyone is trying to buy less than the other guy and get the other guy to buy more than them. That seems like a zero-sum game to me, where countries can only get ahead at the other countries' expense.

Frankly, right now, more of our money *should* be going out of the country than in. Because we're the richest country around, right? If we are, then isn't it to the benefit of developing countries to have us buying more of their products than we sell to them, so they can, as it were, catch up? (In theory, anyhow... in practice, we just subsidize China's human abuses.)

Michael Dawson said...

Two comments:

1) The trade deficit is largely about our ruling elite's preference for moving factories to the lowest cost area. That has nothing to do with what you choose to buy.

2) What we choose to buy is a range of choice that are generally dictated to us by the very same overclass that moves factories to where they can pay the least.

The answer is political, not personal.

DK said...

Anna, I love where you took my comments. But my fear is that the general consumer is consciously thinking about it one way or the other and are consequently steering a breaking system in to destruction.

Michael, Great two comments. I see the truth in them. If the problem is only political, is there no "wise" choice that the consumer can make?

Anna said...

Frankly, I have no idea what you meant by what you just said.

DK said...

Haha. I had original types a much longer reply, but it got lost when I clicked to post it. Normally I have a habit of copying text hat I write before clicking anything.

I meant to say the consumer is not thinking about it one way or the other. They are thinking in terms of justice (redistribution of wealth) or in terms of patriotism (building wealth as a nation).

Largely the consumer spends the most money they can on whatever makes them feel good. Meanwhile this is perpetuating a system that is both destroying our ability as a nation to produce goods and "subsidizing China's human abuses".