"Trade deficits"

Once again I saw someone whining about “trade deficits”. This, again? People still believe in that sort of thing? Well, yes, people who believe in The State still believe in other meaningless things, too.

There can be no such thing as a “trade deficit”. There can be trade, or there can be theft. The component that makes the difference, by its presence or absence, is coercion. When you trade, there is no deficit; no imbalance. Not ever.

One example that is much overused in regard to “trade deficits” is China. Chinese manufacturers make cheap stuff and sell it to customers in America. And we customers pay them for it. No one forces us to buy any one thing in particular. Even government has so far failed in this area (except in the “market” of “services” like insurance).

When we give a Chinese manufacturer dollars (in the roundabout way this sort of thing occurs), we have made an even trade. Dollars for products. There is no deficit. If you are losing something in a trade, don’t trade. Unless a government or mugger gets involved and takes your property (products or dollars) and gives nothing (or too little) in return, the trade is always an even one.

But this brings up a philosophical question. Which is more valuable: printed paper with dollar signs or real goods that can be used to make a better life for the people who possess them? Apparently, under current circumstances, to most people, they are of equal (but fluid) value. When the dollar eventually collapses (as all fiat money does) would you rather have a big bank account or a house full of useful items that you purchased indirectly from sellers in other countries (who now have your worthless paper)?

If you claim the money traded for the products is worth more than the product you got in return, you are an idiot to agree to the trade. Personally, as an individual. If you wish to claim that US dollars are worthless (or worth less), you are saying the Chinese company got ripped off, not you. You have no “authority”, nor enough wisdom, to judge another person’s trade. What makes sense to them may seem one-sided to you. That is not for you to judge.

If you are mad that “PlastiCrap World” sells cheap Chinese products, don’t buy them. Pay more and get a better item instead, either from the same store or from a competitor. Or get what you want from a yard sale or flea market. Or design and build your own. I do all the above, and so can you. Plus, sometimes I buy the “cheap junk” because it suits my needs at the the time, at the price I am willing to pay. Once again: voluntary trade = no deficit.

The whole myth of “trade deficits” is just an excuse to tell you who you can trade with, and under what conditions. It also always funnels some money into thieving governmental hands. This myth is an authoritarian power-grab and is bad for liberty and good for coercive government.

But what about “American jobs” going overseas? Outsourcing is a form of “division of labor”. If you are good at doing something, people will seek you out to purchase that product or service. As long as you charge a price people are willing to pay, that is. Minimum wage laws mess with that formula. They skew the market and make it harder to do business affordably and competitively where they exist- but that’s another issue for another day.

Also, when governments subsidize a company so it can sell cheaper to another country, that skews the market, but also is a net drain on the people of the country doing it (“taxes”, etc.) so they are shooting themselves in the foot in the long run. And, again, you can choose to refuse to trade with companies you believe take advantage of government handouts, wherever in the world they may be based. Governments screw up everything they touch- that’s a reality you need to deal with.

Now, I am not sure what companies are thinking when they set up their customer service phone centers in places where the employees have such a strong accent that they can not be understood by the average person. Unless they really have no interest in “serving the customers”, which seems likely in many cases.

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Adapted from two old posts of mine, here, and here

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5 Responses to “"Trade deficits"”

  1. Enlightened Rogue Says:

    The Mises Institute recently published an excellent article on this: “Free Trade is the Path to Prosperity.”
    https://mises.org/library/free-trade-path-prosperity

  2. Kent McManigal Says:

    That's a good one.

  3. JdL Says:

    I stand right with you in getting government assholes out of the business of telling me whom I may trade with, or at what price, or on what terms.

    What your column doesn't address is debt. If, instead of paying dollars I've earned for Chinese goods, I borrow those dollars from the Chinese, in exchange for a promise that my children will pay the debt back, then something more problematic than pure trade has taken place. If, as a nation, Americans are heavily in debt to non-Americans, that does portend hard times here in the future.

  4. Kent McManigal Says:

    If there's any debt there, it is the debt of US politicians and their cronies. Not mine, yours, or our kids'. I know they expect us to pay their debt, but that only works if you and I buy into the lie that a “nation”- a collective- can be in debt, and it is on those of use who never signed on the dotted line to pay it. I don't buy it.

  5. Kent McManigal Says:

    “those of us”… Grrr. Typos.

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