A lot of people talk with fear about economic growth in China. Two things, in particular, are consistently pointed to as evidence of the threat:
- China overtaking the U.S. in GDP
- The US having a trade deficit with China
Both are ridiculous things to worry about.
Let’s start with GDP first.
GDP is not a good measure of the wealth of a country in the first place, but even if you take that it is a perfect measure, you should only be afraid of the wealth of another country if that created some negative in your life.
If you lived in a town with 30,000 people and the town next to yours had 90,000 people and a higher total Gross Town Product, would that be an issue for you? Of course not. If life was better in that town, you might move there, but you wouldn’t worry about it making your life worse.
All across the US, there are massive disparities in the amount of GDP created by cities and states, but there are no fear campaigns about the threat California’s success poses to New York because when it is within a country, we can recognize that the wealth of others is not a threat to ourselves.
The same is true of a trade deficit.
No one is panicking about the trade deficit between states because at some level we understand that one group buying more physical goods than it sells, is not a threat. The island of Manhattan runs a massive trade deficit with the rest of America, but that is actually a good thing. It is the richest part of the country because the people there can focus on high-value tasks and leave manufacturing and agriculture to places where labor and land costs are much lower.
The absurdity of trade deficit worry is clear when you think about it at a personal level. In this great article on FEE.org proposes Trump follows his trade deficit logic to its final conclusion.
“If Trump is so against trade deficits, he should have a serious problem in his own household. Trump no doubt runs a huge trade deficit with his grocery store. He gives them piles of money when he buys food — no doubt top-priced cuisine — but the store never buys anything from him.
Maybe he should boycott it. Maybe we should all boycott our local grocery stores lest we be victims of a trade deficit. Maybe if elected president, Trump will slap a 30 percent “grocery tariff” on everything that those stores try to sell to us poor, exploited schleps until those stores start purchasing stuff from us.”
No one is worried about the trade deficits they run with communities, businesses, or states, so why are we worried about one with China?
When US dollars go to China and products and services that people want here come back, we are all better off. The fact that Chinese are buying fewer goods and services from the US doesn’t put us at risk, just like Walmart not buying anything from me personally doesn’t put me at risk.
People in China use the extra dollars to save, invest, or purchase goods from other countries, which likely eventually purchase goods from US firms.
The economic development of China is one of the greatest things happening in the world today. Almost a billion people have been able to work their way out of poverty and into a more comfortable, healthier, and longer life. This is not only good for humanity, but it is also great of America, Canada, and everywhere else. Chinese firms manufacture great products that make all of our lives better, and Chinese investment helps to develop businesses all over the world.
We should not be afraid of China; we should be celebrating it.
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