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According to historian Robert Merry, William McKinley "came to believe that “if you want to sell abroad, you got to buy from abroad.”"
This is something many academic economists have trouble understanding.
https://www.wsj.com/politics/policy/trump-economic-vision-policy-plan-e570b32b?mod=hp_lead_pos1
According to historian Robert Merry, William McKinley "came to believe that “if you want to sell abroad, you got to buy from abroad.”"
This is something many academic economists have trouble understanding.
https://www.wsj.com/politics/policy/trump-economic-vision-policy-plan-e570b32b?mod=hp_lead_pos1
Comments
There are two important points here. First, the purpose of maximizing exports should not be to maximize trade surpluses but rather to maximize the welfare of residents by maximizing imports. Trade surpluses benefit government and businesses at the expense of households.
Second, a global trading system only maximizes global output when countries export in order to import. This is what allows countries to shift production into sectors in which they have a global comparative advantage in order to import products in which they don't.
Note the difference between comparative advantage and competitive advantage. The former can only be expressed in the exchange of goods, and so requires broadly balanced trade. The latter occurs when household income is not allowed to keep pace with...
productivity growth, so that the economy's "competitive" production is achieved at the cost of suppressing domestic demand. A domestic imbalance between supply and demand can only be sustained if it is externalized in the form of persistent trade surpluses.
Of course if all countries want to sell abroad but not buy from abroad, the global trading system cannot survive. Global exports, after all, cannot exceed global imports. Some economies can export more than they import only if other economies are willing to accommodate...
them by absorbing the former's demand imbalances, either through either higher unemployment, as Joan Robinson argued in the 1930s, or (more likely once countries exchanged the gold standard for independent monetary policy) in the form of higher household and fiscal debt.
Europe and perused protective trade policies to become an industrial power. Then it need run surplus to pay back European debts. After that, it became tools to state power in 1920-30.