Growing trade deficit is selling the nation out from under us (2003) [pdf]

Is it better standard of living to be in a small apartment in the city working an office job or is it better standard of living being in a more rural area working manual jobs. (I honestly don't know, personally, I prefer to do thinking work)

He uses the analogy of a farm owner selling bits of their farm to fund their trade deficit.

But in the real world, it's not zero sum like this. The pie isn't fixed to the size of the farm. New companies serving new needs can be created.

If you're a poor country wanting to escape poverty, you want FDI to be high because you realize it's not zero sum.

Yeah, foreigners now own 20% of your stock market due to negative net investment, but it's now 1.5x as big so your slice increased in size to 0.8*1.5 > 1 and everyone is happy.

Given this, I struggle to understand if his argument still has merit.

He has a point about national debt but it's not a new one.

> Prior to 20th-century monetarist theory, the 19th-century economist and philosopher Frédéric Bastiat expressed the idea that trade deficits actually were a manifestation of profit, rather than a loss. He proposed as an example to suppose that he, a Frenchman, exported French wine and imported British coal, turning a profit.

> He supposed he was in France and sent a cask of wine which was worth 50 francs to England. The customhouse would record an export of 50 francs.

> If in England, the wine sold for 70 francs (or the pound equivalent), which he then used to buy coal, which he imported into France (the customhouse would record an import of 70 francs), and was found to be worth 90 francs in France, he would have made a profit of 40 francs.

> But the customhouse would say that the value of imports exceeded that of exports and was trade deficit of 20 against the ledger of France. This is not true for the current account[, which] would be in surplus.

( https://en.wikipedia.org/wiki/Balance_of_trade#Monetarist_th... )

A major fundamental flaw in the concept is the assumption that goods have a fixed value. In reality, their value changes according to where they are, which is the only reason it's possible to make a profit by moving them around.

Note that in the same example, if the French wine is bought by a wizard instead of a merchant, and he transmutes the wine into 50-francs-of-wine's worth of coal for export to England (the ways of wizards are mysterious), the customs house will record the value of the coal as 90 francs. It's only worth 50 francs when it's going the other way.

And if he does the same thing, transmuting the wine into coal within France, and then sells it in France, the econometric body will be happy that French GDP has increased by 90 francs, making the people of France richer.

Consider instead:

- Semiconductor low-end fabrication (Taiwan, Korea)

- Basic electronics: circuit boards, USB devices, .. (China)

- Auto parts (Mexico, China, Germany)

- Generic drugs (India, China)

The reality is that the US is not the ultimate global hegemon anymore and therefore offshoring industries cannot simply be viewed through an economic lens.