Ukrainians aren’t very interested in the preparations for the U.S. election, which will be held in November 2016. However, it’s worth paying attention.
After “Super Tuesday,” when 12 states voted all at once, Donald Trump has become the obvious favorite for the Republican nomination. It seems that the billionaire has gotten lucky in the primaries, and that soon we’ll see him running against Hillary Clinton. That is, of course, if she wins her own race for the Democratic nomination.
On Thursday, Trump gave a scorching critique of U.S. economic policy. According to him, it’s caused an increase in America’s trade deficit — currently $400 million a year — and has moved manufacturing jobs from the States to China and other countries.
For example, General Motors imports cars manufactured in China for sale in America, and in the past few months alone, American multinational giants have relocated one after another to Mexico. Trump, as a businessman, is certain that if America were a business this would mean it was losing money.
The Internet exploded with criticism from liberals. Ninety percent of the articles that have appeared on the Internet over the past hours accuse Trump of not understanding economics.
As we see, rhetoric about creating jobs isn’t “mainstream” even in free-market America, not to mention Ukraine. At the same time, the ire directed at Trump by politicians and experts doesn’t address his talk about the problem of high-tech job losses in America.
The idea is that potentially millions of jobs annually won’t be created in the future and that gradually, over the course of a decade, the U.S. will lose its superiority in a number of technological spheres to China. But that’s not the main thing. The world recognizes that a trade deficit is not only possible, but essential, for America and only America.
As respected experts, including those from the well-known “ultra-liberal” Cato Institute, where the famous Andrey Illarionov works, write: “If the Fed produces dollars and America gets material goods in exchange, it’s a good thing.” They even use an example that would be understandable for the average American voter.
“Imagine you had a magic wand that could turn any paper into money that everyone around you would accept as payment for goods. Then you would print out a few sheets of paper marked ‘One Million Dollars’ in the morning, and by evening you would have a luxury villa and several expensive cars. Is that really a bad thing?” one of the authors asks.
Of course, he explains, for that to work, those who are selling the goods need to accept the paper as currency.
If you had a magic wand, then nobody would be forcing them to; they’d do it of their own accord. In fact, nearly every country in the world voluntarily recognizes the dollar as the global currency in exchange for the chance to use the most stable unit of currency.
Therefore, the author notes triumphantly, $400 million a year is the price America pays for organizing a stable global financial system.
At the same time, China keeps changing its trade balance with the States to be more in its favor every year. It’s growing too quickly, and it’s begun to have problems with its expense levels as a result. However, according to American liberal experts, other countries don’t need to try to change anything; they just need to take advantage of the benefits provided by the country printing the global currency.
China has problems ahead. It has a huge amount of overhead, which only formally increases its GDP and creates employment. A consequence of this has been the creation of dead cities solely for the purpose of growing GDP. No one lives there and no factories operate there, despite millions of square meters of housing.
There are a number of other “horror stories” like this, which is why there’s no point in America changing anything. Since Trump is talking about the possibility of unilaterally raising tariffs and creating the tariff conditions for restoring U.S. production, one potential “horror story” is protectionism leading to increasing prices, inflation, and lack of trust between partners.
The next “horror story” is that trade policy isn’t needed in general, since it’s “contrary to economic theory.” If it’s contrary to practice, then damn the practice, the ultra-liberal dogmatists say, not only in Ukraine, but in America as well.
“Are you crazy? You want America to leave the World Trade Organization?” they ask. “There are mountains of restrictions on changes to trade conditions. Could we really find anything better?”
The third “horror story”: “Do you really want to make iPhones when only $7 of their price stays in China while the rest goes to the U.S.? Let the stupid Chinese and Mexicans build goods 10 times cheaper, and we’ll sell them here and pay 10 times higher salaries.”
It’s essential for Ukraine to track these overseas developments. In a heated political contest the speakers begin talking openly, and we get the opportunity to see things that are usually concealed under several layers of myth.
Conclusion #1
America can afford a trade deficit — whether $400 million or $600 million per year — since it’s payment to the countries of the world for supporting a global currency.
It’s America’s privilege as the “world’s only bank.” Switzerland can’t do it, even though it’s a well-known banking center. Its economy is too small to fulfill the other functions of a world bank besides printing a global currency.
Conclusion #2
Other countries need to struggle to balance their imports and exports.
You need a logical and pragmatic trade policy with each trade partner in order to do this. For every country except the U.S., Trump’s words are justified: a country, like a business, that has a negative trade balance is just losing money. Otherwise, it goes bankrupt.
Conclusion #3
The ability to print the global currency is an advantage every country should fight for.
Even Trump recognizes that nothing lasts forever, and that America’s status as the world’s currency producer is no exception. Ultimately, this distinction is achievable if one has two elements in their arsenal: a powerful economy and a powerful army.
The latter can’t exist without the former, which is why it is essential to have developed industrial production. America has the advantage for now, though China is working to change that.
It appears that Trump will be representing his party against the Democrats’ Hillary Clinton. So, the “Trump card” candidate from the conservative American business lobby will seriously contend with the representative of the liberal business lobby, even if only on the level of rhetoric and ideas.
It would be nice to see two positions take shape in Ukraine — the “ultra-liberal” dogmatists, as represented by the Yatsenyuk government and the new faces of the future “technocratic government,” and the conservative market capitalists — to try to dispel antiquated dogmas and myths.
“Do you really want to make iPhones when only $7 of their price stays in China while the rest goes to the U.S.? Let the stupid Chinese and Mexicans build goods 10 times cheaper, and we’ll sell them here and pay 10 times higher salaries.”
Problem is 95 percent of “the rest” goes to the one percent, and the people who get “10 times higher salaries” aren’t the people who have to work two (sometimes three) jobs to put bread on the table — and the former group constitutes only a fraction of the latter.
In other words, economic theory can’t travel to America’s tent cities, homeless shelters, flop houses, and parking lots where families live in their cars.