Trade Deficit

To burry one's head in the sands and say all is well in this best of all possible nations is part of the political correct thinking that got us were in the first place. Tha June trade deficit, just announced comes I at 44.5 billion dollars on imports of 227.7 billion and exports of 183.2 billion. Annualized that amounts to a growing half a trillion a year. What has that got to do with the economy you ask? The media continues to insist the deficit is made up by the cheaper superior imported goods and services, but the evidence says otherwise. China's military buildup, investment banking and multinational corporations are the only beneficiaries of the deficit, not the American people. Every purchase of an imported product or service subtracts from our GDP. The GDP is the better measure of our economy, not the stock market. Economists still argue over supply side versus demand side economics. In our depressed state, the only supply and demand are China and sad shoppers at Walmart.

Free trade has some benefits: it stabilizes relations between quarlsom neighbors and it increases efficiency in a free market among more or less equal trading partners. The theory first advanced by Adam Smith in his "Wealth of Nations," compared balance of trade as a producer of wealth with Smith's theory of free trade. Published in 1776 when colonialism provided abundant cheap resources and plunder, free trade thrived between large and small colonial empires with positive results for the empires, not so much for the colonies, one of the reasons we sought our own independence. 

On the other hand, today's free trade has become a means for multinationals to exploit cheap foreign labor moving US manufacturing, the only source of wealth in Adam Smith's world, to the cheapest and most receptive foreign environment, taking American jobs and the revenue from sales with them, a new form of colonialism in which we are the exploited.

Unfortunately, both political parties support the continuation of this failed experiment, the Democrats out of a sense of Utopian idealism and the Republicans out of a sense that unbridled self interest in everything economic, unregulated and privatized, results in the higher order of good, strengthened by the struggle between communism and freedom. Paradoxically both polarized political doctrines combine to perpetuate this unsustainable fantasy that the trade deficit is overall a good thing. 

Furthermore, politics as usual now swallows up the true reality articulated by both contrarian candidates -- in the primaries -- while economists still argue over supply side economics. The American people are screaming for a solution; they see problem, the well paid politicians, and media do not. Tariffs would impose an immediate solution, raining in the multinationals and the continuing loss of wealth but with unstabilizing consequences, necessitating greater security measures and a massive rebuilding of both infrastructure, manufacturing and business.

If Ireland can do it, so can we. Ireland reports a 26% growth in GDP with a big trade surplus.