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65 Responses to “Imports are a benefit, exports are a cost. Is it clear now?”
Stephen Gordon will be hardpressed to convince anyone of this with such a short exposition as he doesn’t explain why exports are a cost and imports are a benefit. This is clear from the unanimous view against the author in the comments. North America has a very mixed view on free trade because although it has made the continent richer as a whole, the distribution of those riches has been asymetric.
I think the average worker sees it differently. Income is a benefit, while spending (outflow of cash from their account) is a cost. They measure costs and benefits based on the flow of accounting figures, rather than the flow of real economic goods and services (labour as a cost, consumption goods as a benefit). Exports generate income (a benefit) while imports cause cash outflows (a cost). Like the debates in Washington surrounding the deficit, we’re blinded by our accounting view of the economy. So a simple idea like receiving more real stuff than we have to give up is completely lost on nearly everyone.
My simple way of understanding this is to realize that it is another case where change from gold standard to fiat turns thinking upside down.
Under gold, net exports bring in gold that allows investment in and expansion of the economy.
Under fiat, net imports are both a real gain and a demand leakage. Government deficits can make up for the demand leakage to allow investment in and expansion of the economy. Because this is not generally understood most people think net imports are a loss because they cause unemployment, which is a result of the decreased demand.
Would like to hear how the MMT crowd explains away the facts in the real world. Specifically the fact that imposing capital controls and telling the banking creditors – central bank money printing cartel to take a hike has been proven by far to provide the best result for average citizens.
Cost/benefit calculations are fine, if the same entity is experiencing both. However, most often, the benefits accrue to one party and the costs are borne by another and, in the case of public/private relations, it usually means that public assets are transfered into private pockets until the public cupboard is bare. The depletion of natural resources (and the consequent impoverishment of dependent populations) is not a happenstance. It is coerced, most often in the modern day, by legally depriving people of their access to sustenance under the umbrella of “property rights.” At the same time, the privatization of natural resources represents a bargain to strip people of their human rights. Some people’s property rights are secured by other people’s right to starve — the longer version of “no free lunch.”
I get the whole imports are benefits/exports are cost thing, but when we are considering this altogether with a JG program.. it seems like the trend (as we see in the US) for trade deficit countries is to lose jobs in decent paying sectors (IT, manufacturing, etc.) and then you would end up replacing them with $8-$10/hr government jobs.
While I agree the JG is a great idea, having people losing jobs where they made 50k/year to replace them with under 20k a year doesn’t sound all that great over the long run. Yes, they would gain skills over time and maybe could be trained for higher paying work, but the private sector is simply not going to need that many people to work. This is troubling when we look at the level of inequality we already have.
The framework of this discussion is transactions between states. In the case of the US, theoretically trade is between a US company or individual and some foreign entity which could be a state-owned firm. Nevertheless, imports and exports are not made between the states themselves. Why should some arbitrary, artificial, invisible border between two individuals who wish to make a voluntary exchange be regulated by the states? Private property rights fly out the window if the state can regulate to what extent a citizen can bring his own property into or out of the country. But then we know that private property rights are circumscribed into meaninglessness by the state.
“Imports are a benefit, exports are a cost. Is it clear now?”
Sometimes this is true, sometimes this is not true. If you buy food from the savages against the beads, the statement is absolutely true. If you buy food for guns, absolutely untrue. Tomorrow these guns will be taken against you. Nowadays, if you are replacing papers (subject to depreciation) against Chinese goods, claim is true. Not true, if you provide technology to China. Import and export can be seen only in mutual respect. It can be appreciated benefit of them if treated separately.
I think which It doesn’t matter what you actually import or export.
For real life you need real goods and services, so if you produce it internally it is enough for you. May be you will need of oil or other primary goods for your industry, so if you have to import it your export will pay for it.The USD is actually the currency reserve (so far), so other countries want to stock it and send you goods in place of it, with out spending… so the US could probably has more import than export, but as Dr Mosler says, it works same way for all other currencies: we will have trade balanced at worst. Export is a real cost, so why have you to spend? only for pay your real goods imported.
This is the truth of the accountant. It is extremely dangerous to think we can continue forever situation, we consume and produce others. We will lose the skills of producers and others will acquire these skills. At the moment they have nothing to learn from us, they will lose interest in the U.S. dollar and the U.S. Securities . Such a philosophy is a sure way to regression.
Let’s look at things from a different perspective. Import from China is not always a benefit, given poisonous, harmful to health, lower quality, less durable and disposable goods. The whole life of an American is based on Chinese goods are of inferior quality. Exaggeration to claim that the foreign trade deficit increases our standard of living. Chinese goods pop off our standard of living, as it is difficult to imagine a lower quality. Consumption of such goods is equal to the low standard of living. High standard of living is providing high quality goods.
Exaggeration to claim, and that China would not receive anything in exchange for their goods. Acquire knowledge, skills and technologies. And this is the path to world leadership.
It’s hard to deny that when someone gives you something and does not want anything in return, this is not a benefit. Each gift is a benefit. Today the Chinese are working for us and Chinese imports is a benefit for us. Tomorrow Chinese will become more powerful than us because become productive force, we will become the African country with people who can only consume but can not produce and will turn the pancake. We will start working on them. And again confirm the thesis that import is a benefit. The difference that this time will be a benefit for the Chinese. The big question is not whether imports are a benefit or gift, and net profit, it is obvious this is a trivial truth. The question is how to preserve a benefit only for America?
I personally have reservations even to this banal truth that free lunch is always a benefit. If you get diarrhea, is it a benefit?
Even larger reserves have to claim that foreign trade deficit raises the standard of life. This is uncritical attitude to what we consume. Standard of living can be increased by eating harmful foods that people get sick and degenerate nation. It is not a benefit lead that we get from a Chinese toys and what made our kids sick. America has reached historic levels of development, when we have to reassess the whole production and consumption model. What is needed is a new production and consumption patterns that will be required as a result of the awareness and growth of the Americans as a users with their own ideas, their own goals and their own or will.
Another argument which I do not agree that China receives nothing in exchange for their goods. Too naive to think that the Chinese did not take account what they get in return. It is naive to think that the Japanese did not take better account what they get in return after the Second World War. They get something that is very valuable to them. And probably the only way to get it to work for some time in America’s favor. The question is, what do we do when the time runs out?
No dispute in the fact that while China sends “real goods and services,” and we send nothing to China, China emerged as an economic and military power rapidly. At the same time, the U.S. weakens as an economic power, because you can not have a strong economy that produces nothing. A decline in the economy will inevitably lead to the decline of the U.S. as a military power. Economic and military power can not be based on consumption as we are strong in consumption.
What happens if China want to exchange their dollars for “real goods and services?” There are two options. One is China to buy whatever we let it. But this means that America should be much stronger than China economically, militarily and politically. The second option is China dictate what they want to buy from us. They will dictate if they feel strong enough. And then China will not buy cars, boats, real estate, and will purchase high-tech companies, technologies and resources. And the buyer will be the Chinese state. I do not want to imagine what will happen at the second option.
In this sense, the theory should be considered accurate only under certain conditions. True to some extent, not completely.
U.S. free lunch can continue only if that America remain a superpower. But America can not remain a superpower if only consumes without producing. I.e. You should seek some balance.
In MMT noticed contradiction. According to the theory after 30 years American workers have to be productive enough to allow them to produce enough goods and services to support pensioners. And why no mention of Chinese imports, which currently is a benefit to America? Perhaps the author is not sure that after 30 years a benefit that America still has it. But more important is another. How not produce offspring will rely on workers after 30 years to be very productive?