The US has run a massive trade deficit for over 30 years. In recent times, there has been a growing chorus of commentators who seek to place the blame on our trading partners, most notably China, just as in an earlier time others had targeted Japan and Germany. It is said that the problem stems not from our reduced international competitiveness, but rather from the manipulation of exchange rates by our more successful trading partners.
This claim is not based on any direct evidence, but rather on an inference derived from standard international trade theory, which predicts that free trade will automatically lead to balanced trade. From this particular theoretical perspective, our large and persistent large trade deficit must be rooted in some obstacles to free trade. The large surpluses of our trading partners such as China then make them natural candidates for our opprobrium. Of course, if the standard theory is incorrect, this line of inference collapses. I wish to argue that the standard theory is wrong, on both theoretical and empirical grounds, and that free trade does not automatically eliminate trade imbalances. On the contrary, free trade reflects international competitiveness, and persistent trade deficits are symptoms of persistent competitive weakness.
This week The New School’s Schwartz Center for Economic Policy Analysis (SCEPA) hosted three New School economists to discuss the economic and political fallout of the government shut down and the possibility of a default. Professors Teresa Ghilarducci, Rick McGahey and Christian Proaño discussed possible scenarios in case the United States would default on its debt, and the political economy of both the shutdown and the debt ceiling crisis. …
Every era defines its heroes. Ours is currently fixated on the innovating entrepreneur, creating something new that everyone must have. This type breaks the mold, striking out alone, even leaving school to do so. He (and he is usually a he) is designated as brilliant, sometimes charismatic, sometimes argumentative, often solitary in his vision, though gathering a team to put his vision into practice. His skills are more technical than poetic, more digital than prosodic. Neither poetry, nor prose is, by definition, entrepreneurial.
It’s important to have such innovators, but they are not necessarily heroic and they are not good role models for the millions of people already in the labor market looking desperately for work in an era of job contraction. Nor are they a good role model for the thousands of high school and college graduates entering the labor market each year.