Who Cares WHO is Doing the Saving?
5 May 2007
Editor, The Washington Times
Dear Editor:
Economic growth requires market-driven investment, and investment requires savings. So you are right to argue that a fall in Americans' savings rate threatens to reduce the U.S. economy's growth rate ("The GDP," May 5).
But why do you often lament the U.S. trade deficit? The larger is this deficit, the greater are the amounts that foreigners invest in America. And the more that foreigners invest in America, the higher is the U.S. economy's growth rate. R&D in the U.S. funded with dollars from South Korea is just as productive as the same R&D would be were it funded with dollars from South Carolina.
If Americans truly are saving virtually nothing, we should be especially pleased that foreigners so willingly save and invest on our shores.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The Washington Times
Dear Editor:
Economic growth requires market-driven investment, and investment requires savings. So you are right to argue that a fall in Americans' savings rate threatens to reduce the U.S. economy's growth rate ("The GDP," May 5).
But why do you often lament the U.S. trade deficit? The larger is this deficit, the greater are the amounts that foreigners invest in America. And the more that foreigners invest in America, the higher is the U.S. economy's growth rate. R&D in the U.S. funded with dollars from South Korea is just as productive as the same R&D would be were it funded with dollars from South Carolina.
If Americans truly are saving virtually nothing, we should be especially pleased that foreigners so willingly save and invest on our shores.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Sunday December 30, 2007 at 2:46pm