Warren Moslers 7 Seven Deadly Frauds of Economic Policy #5

Deadly Innocent Fraud #5: The trade deficit is an unsustainable imbalance that takes away jobs and output. Facts: Imports are real benefits and exports are real costs. Trade deficits directly improve our standard of living. Jobs are lost because taxes are too high for a given level of government spending, not because of imports. By now you might suspect that, once again, the mainstream has it all backwards, including the trade issue. To get on track with the trade issue, always remember this: In economics, it’s better to receive than to give. Therefore, as taught in 1st year economics classes: Imports are real benefits. Exports are real costs. Hopefully if everyone has grasped the fundamentals of MMT so far, Warren Mosler’s arguments won’t need any further explanation. It is difficult to disagree with them per se but the advocates of  MMT may lose many of those who should be friends and allies if they are pressed  in too insensitive a fashion. At the time of writing, 300 Qantas workers are reported to be about to lose their jobs in Melbourne. Due to the strength of the A$ it makes sense for Qantas to service their planes overseas rather than in Australia which is likely to turn out be the real, if not the stated, reason given by Qantas management. IMO . It is a typical case of an imported product replacing a local product. It is doubtful  Qantas workers will be too receptive to an argument of  “Imports are real benefits. Exports are real costs”. They may well be real benefits to Australia as a whole in terms of increased profits to Qantas and even in lower fares for Qantas passengers. Increased government spending could help find extra jobs for Qantas workers but they might be forgiven for thinking that to be extremely unlikely in the current political climate. The new jobs may well be less skilled and less well paid if if they are created. WM seems to be aware of potential problems in pushing this argument too far. Later in his book he allows that “Industries with Strategic Purpose” shouldn’t be totally exposed to the mechanisms of a free market. The example given is the US Steel industry. Steel would not be the only strategic industry. Just about any industry can be considered to be strategic, to a greater or lesser extent, even the operation of a commercial airline. So some care is probably in order  with this argument, and maybe extra thought too on just what constitutes a ‘strategic industry’.

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