June 30, 2004

What we get paid for...

I was just reading this new piece by den Beste, which is about almost everything, but included this:

Which usually means the US, which has had a chronically high trade imbalance for a hell of a long time, causing some to predict that we're heading at high speed for a cliff.

I don't know. I don't think it's possible for us to maintain a huge trade deficit forever. But I'm not so sure that the situation is quite as straightforward as those doomsayers claim...

One of the things I found most interesting in Thomas PM Barnett's book The Pentagon's New Map was an explanation of why the US can get away with a chronic trade deficit. We cover it in the short term by borrowing—we exchange our "paper" for BMW's and DVD players and Barbie Dolls. But it seems to go on forever, a perpetual free ride, a VISA Card with no limit. Why no crash?

Barnett says the world is essentially paying us to be its policeman. If China "tests" missiles right next to Taiwan, Asia's economy doesn't come to a panicky halt. Because the US will just happen to "test" a Carrier Battle Group in the neighborhood soon after. Both China and Taiwan can keep their factories churning out widgets instead of guns because they know darn well we are not going to tolerate any foolishness. Both China and Taiwan are content to keep buying our debt, to keep piling up mountains of it, because any big US economic contraction might force them to build their own aircraft carriers. Much of the world gets to concentrate on trade because we are handling their defense burden.

Barnett says Globalization is a system that benefits the US more than any other nation, because it is a sort of rebuilding of the world in our image. It's an expansion to global size of the freedom and opportunity and "rule sets" we have in the US. The game of globalization is rigged in our favor, but we "pay" for that advantage by assuming many adult responsibilities and burdens.

I was glad to learn that we aren't running a scam....

Posted by John Weidner at June 30, 2004 9:16 AM
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