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by TheBlack_knight
5664 days ago
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The problem is not a BOP deficit, the problem is how we are financing the import of cheap goods from China, and that is in fact cheap money from China. We are currently caught in a sort of circular flow of cheap trade with China and even cheaper money to finance this. We can guarantee that we stay on top of the vertical stack by continuing to innovate by designing and commercializing new products. This is what Joseph A. Schumpeter called creative destruction. How can we stay ahead of other countries in this endeavor? I do not know. Economic theory tells us that national boarders and countries have no significance in economic growth. If we have open countries that allow trade and the movement of capital all countries and people should benefit from new innovation regardless of whether it is made in the USA or in Pakistan. This question was answered nearly 200 years ago by David Ricardo and others. Obviously countries are not completely open to trade, however the trend is toward higher levels of international openness. One need only look at the succes of Singapore. Others will follow slowly. The us vs. them mentality will not get us to the land of milk and honey. |
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