Trade Defict Adds to America's Capital Stock
24 October 2007
Editor, Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
Robert Samuelson unnecessarily weakens his case for globalization by accepting the myth that the trade deficit depresses U.S. employment ("A Villain To Our Rescue," October 24).
It's not that "domestic job creation and destruction ultimately overwhelm trade's effects." Rather, the trade deficit itself has no negative impact on employment. When foreigners invest their dollars in America (rather than cash them out buying American exports), the trade deficit rises. But these investments create jobs no less surely than do foreign purchases of American-made goods and services. Moreover, these investments - by increasing the size of America's capital stock beyond what it would otherwise be - directly promote greater worker productivity and, hence, higher wages.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
Robert Samuelson unnecessarily weakens his case for globalization by accepting the myth that the trade deficit depresses U.S. employment ("A Villain To Our Rescue," October 24).
It's not that "domestic job creation and destruction ultimately overwhelm trade's effects." Rather, the trade deficit itself has no negative impact on employment. When foreigners invest their dollars in America (rather than cash them out buying American exports), the trade deficit rises. But these investments create jobs no less surely than do foreign purchases of American-made goods and services. Moreover, these investments - by increasing the size of America's capital stock beyond what it would otherwise be - directly promote greater worker productivity and, hence, higher wages.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Wednesday April 16, 2008 at 2:18pm