President Trump loves to play on American fears that we have been victimized by evil foreigners. He says we are the “laughing stock” of the world and the world’s “piggy bank” because of our persistent trade deficits.
But in truth, if any other country ran such large trade and fiscal deficits for so many decades, they would be in the same shape as Greece or Venezuela–the International Monetary Fund and lenders would be demanding severe government budget cuts, retired people would be losing their pensions, all construction would grind to a halt. We would be running out of toilet paper and daily necessities. We would be a basket case.
Instead, we are free to over-consume because our companies have located to much manufacturing in China and other low-cost destinations. That has helped keep inflation in check. The countries that trade with us reinvest what they earn either in U.S. government debt, which is spiralling out of control but doesn’t seem to matter. Those evil foreigners also invested $4 trillion last year in in the real American economy.
In fact, America has a special status because the dollar is pretty much the world’s reserve currency. Everyone wants to have at least some of their assets in dollars. So we are over-consuming and over-borrowing at the same time, a pretty neat trick.
We also are exploiting those immigrants. Every time I have gone deep into a research laboratory at Carnegie Mellon or the Massachusetts Institute of Technology, or in a private company such as Corning or IBM, I find very smart foreign researchers. Not everyone is foreign, of course, but there is a higher percentage of foreigners in our nation’s finest laboratories than one might expect.
I also have noticed that an unusually high percentage of the entrepreneurs who take new technologies and create businesses are foreigners.
And our way of life is sustained by wave after wave of immigrants who work in our meat processing plants, the restaurant industry, construction and our military. That also has helped keep down inflation.
In short, America has done a brilliant job of exploiting the international system for our own gain. The only people who have not benefited are the ones with high school educations working at dead-end repetitive jobs. They have not invested in up-skilling themselves or learning a foreign language. They think they clock can be turned back to the 20th century. Which is exactly what Trump seems to be trying to do with his tariffs and talk of trade wars being “easy to win.”
