Ideal Taxes Association

Raymond Richman       -       Jesse Richman       -       Howard Richman

 Richmans' Trade and Taxes Blog



Summers says everything is fine in our China relationship
Howard Richman, 2/9/2010

Just before China announced plans to slap tariffs of 43.1%-105.4% on American chicken parts, President Obama's chief economic advisor Lawrence Summers told Judy Woodruff that everything was fine in our China relationship. Business Week reported:

Summers downplayed friction between the U.S. and China, including charges that a recent computer attack targeting Google Inc. came from China. The relationship between the two nations is resilient enough to withstand occasional dust-ups, he said.

But nothing has been fine in our economic relationship with China for the entire decade of the 2000s. Over that decade China engaged in massive currency interventions in the dollar-yuan market so it could minimize imports and maximize exports. Many of the other Asian countries did the same. As a result, the U.S. lost 5.7 million manufacturing jobs, as compared to just 0.5 million lost during the previous decade.

Unfortunately, Summers is a slow learner. So far, his education has cost the United States over a million manufacturing jobs and has cost the Democratic Party two Gubernatorial seats and a Senate seat. During the next three years, his education will probably cost his boss's party the Presidency, the House and the Senate.

But there is still hope that he can learn. His statements at the annual summit of world economic leaders in Davos Switzerland at the end of January show some progress. The Financial Times had two reports about his comments. One was from Martin Wolf:

Lawrence Summers, Mr Obama’s principal economic adviser, also stressed that “what we are seeing in the US and perhaps in other places, is a statistical recovery and a human recession”. In his view, the combination of high unemployment with “mercantilist policies” in parts of the world makes it hard to defend liberal trade politically or perhaps even intellectually. Unless the recovery proves far stronger than expected, high unemployment will persist in western countries, with all the political dangers it brings.

The other from Gideon Rachman:

Mr Summers was careful to say that the US remains committed to open trade and can gain from globalisation. But he also pointed out that Paul Samuelson, a famous economist (and uncle of Mr Summers), had argued that the case for free trade might not apply when countries were trading with nations that were pursuing mercantilist policies. The reference to China did not need to be spelled out.

In time, Summers may even pay attention to what his Nobel Prize winning uncle used to argue. Or he might read the chapter about mercantilism in John Maynard Keynes magnum opus, The General Theory of Employment Interest and Money, in which Keynes related how he started his economics career as the free-trade ideologue that Summers still is. And then how he looked closely at the real world and discovered that mercantilism produces prosperity in the mercantilist countries and persistent depression in the victim countries. He concluded:

(A) favorable balance, provided it is not too large, will prove extremely stimulating; whilst an unfavorable balance may soon produce a state of persistent depression. (p. 338)

Currently, the United States and Europe are experiencing the state of persistent depression, predicted by Keynes. Yet Summers tells Judy Woodruff that everything is fine.




  • Richmans' Blog    RSS
  • Our New Book - Balanced Trade
  • Buy Trading Away Our Future
  • Read Trading Away Our Future
  • Richmans' Commentaries
  • ITA Working Papers
  • ITA on Facebook
  • Contact Us

    Archive
    Mar 2017
    Feb 2017
    Jan 2017
    Dec 2016
    Nov 2016
    Oct 2016
    Sep 2016
    Aug 2016
    Jul 2016
    Jun 2016
    May 2016
    Apr 2016
    Mar 2016
    Feb 2016
    Jan 2016
    Dec 2015
    Nov 2015
    Oct 2015
    Sep 2015
    Aug 2015
    Jul 2015
    Jun 2015
    May 2015
    Apr 2015
    Mar 2015
    Feb 2015
    Jan 2015
    Dec 2014
    Nov 2014
    Oct 2014
    Sep 2014
    Aug 2014
    Jul 2014
    Jun 2014
    May 2014
    Apr 2014
    Mar 2014
    Feb 2014
    Jan 2014
    Dec 2013
    Nov 2013
    Oct 2013
    Sep 2013
    Aug 2013
    Jul 2013
    Jun 2013
    May 2013
    Apr 2013
    Mar 2013
    Feb 2013
    Jan 2013
    Dec 2012
    Nov 2012
    Oct 2012
    Sep 2012
    Aug 2012
    Jul 2012
    Jun 2012
    May 2012
    Apr 2012
    Mar 2012
    Feb 2012
    Jan 2012
    Dec 2011
    November 2011
    October 2011
    September 2011
    August 2011
    July 2011
    June 2011
    May 2011
    April 2011
    March 2011
    February 2011
    January 2011
    December 2010
    November 2010
    October 2010
    September 2010
    August 2010
    July 2010
    June 2010
    May 2010
    April 2010
    March 2010
    February 2010

    January 2010

    Categories:
    Book Reviews
    Capital Gains Taxation
    Corporate Income Tax
    Consumption Taxes
    Economy - Long Term
    Economy - Short Term
    Environmental Regulation
    Real Estate Taxation
    Trade

    Miscellaneous

    Outside Links:

  • American Economic Alert
  • American Jobs Alliance
  • Angry Bear Blog
  • Economy in Crisis
  • Econbrowser
  • Emmanuel Goldstein's Blog
  • Levy Economics Institute
  • McKeever Institute
  • Michael Pettis Blog
  • Naked Capitalism
  • Natural Born Conservative
  • Science & Public Policy Inst.
  • TradeReform.org
  • Votersway Blog
  • Watt's Up With That


    Wikipedia:

  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]