USA : Trade deficit with China grow by nearly 12% in 2007

Professor Don Boudreaux, chairman of George Mason University’s Economics Department, wrote “If Trade Surpluses Are So Great, the 1930s Should Have Been a Booming Decade” (www.cafehayek.com). According to data he found at the National Bureau of Economic Research’s “Macrohistory Database”, it turns out that the U.S. ran a trade surplus in nine of the 10 years of the Great Depression, with 1936 being the lone exception.

During those 10 years, we had a significant trade surplus, with exports totaling $26.05 billion and imports totaling only $21.13 billion. So what do trade surpluses during a depression and trade deficits during an economic boom prove, considering we’ve had trade deficits for most of our history? Professor Boudreaux says they prove absolutely nothing. Economies are far too complex to draw simplistic causal connections between trade deficits and surpluses and economic welfare and growth.

Boudreaux is correct that "Economies are far too complex to draw simplistic causal connections between trade deficits and surpluses and economic welfare and growth". One therefore wonders why he carefully cherry-picked the years of the Great Depression to imply that the trade surpluses may have played a role in it. According to series 196 on page 884 to 885 of the Historical Statistics of the United States, Colonial Times to 1970, the U.S. ran a merchandise trade surplus for all of the 77 years from 1894 through 1970 (it shows a relatively small surplus of 33 million dollars for 1936). Of those 77 years, Boudreaux chose to focus in on the ten years of the Great Depression, failing to make any mention that these were simply ten years of a 77-year streak. An honest oversight? You be the judge.

In fact, the 6 SMALLEST trade surpluses from 1911 to 1970 occurred from 1931 to 1937 (excluding 1934). Hence, the Great Depression occurred during the smallest surpluses of this period. Of course, this in no way proves that a lessening of the surplus caused the Great Depression. But it does suggest that a more accurate title for Boudreaux's article would have been “If Cutting the Trade Surplus Is So Great, the 1930s Should Have Been a Booming Decade”.

Another point is that every major war of the past 150 to 160 years has been won by the country with the stronger manufacturing base.

Correct.

If China subsidizes its industries to the point that it drives American manufacturers out of business, China will have a major strategic advantage.

Reasonable extrapolation, and obviously what the Chicoms themselves believe. And the history backs it up.

If they ever press that advantage, America will suffer. All of the wonderful things that the "free market" has given you won't matter much when the Chinese can point a gun at you and force you to give up your bank account and possessions.

Sometimes the obvious has to be spelled out to the phoney free marketeers...who would not know what a free market is, nor what maintains it.

Just as you may be frightened by the idea of conservatives not understanding economics, I'm more frightened by the idea of so-called conservatives failing to understand history.

Amen.

Congressman Hunter is so ignorant.

Not from what I have seen. Donald Rumsfeld was blown away by Duncan's comprehensive, and 'encyclopedic' knowledge of our manufacturing base...and its crisis.

I lose respect for him when he talks about trade.

Trade requires that someone do the manufacturing. You have lost all respect because you don't know about manufacturing. If you knew about manufacturing...you would respect him more than all the other candidates put together.

You all need to read Basic Economics by Thomas Sowell.

You haven't shown by anything you've said that you have read him, wherein he is actually hoist by his own ideological petard when he attempts to conflate moral virtue of the two sides, which when properly read notes: ...free markets ... and their adherents are those "who have not been able to accept the humbling thought that their own presumably superior wisdom and virtue might be superfluous, if not damaging" .

In fact, the 6 SMALLEST trade surpluses from 1911 to 1970 occurred from 1931 to 1937 (excluding 1934). Hence, the Great Depression occurred during the smallest surpluses of this period.

BUMP!

This is the kind of careful historical perspective ...which unfortunately is lost on a great many apologists for the U.S. manufacturing "diaspora" that is ongoing.

Particularly, I'm sad to say, certain "scholars" at Cato ...

This is the kind of careful historical perspective ...which unfortunately is lost on a great many apologists for the U.S. manufacturing "diaspora" that is ongoing.

Particularly, I'm sad to say, certain "scholars" at Cato ...

Agreed. I've long thought that the term "think tank" is something of an oxymoron. Some of them do good research but far too many of their studies are adversely affected by their political leanings. Hence, I use them to find sources but always recheck their analyses. It would seem like the chairman of George Mason University’s Economics Department would have been able to obtain trade data for a longer period, providing some historical perspective. The following graph shows trade data since 1800, all of it available on the web:

Following are the sources for the data:

U.S. International Transactions Accounts Data, Bureau of Economic Analysis (1960-2005)
Historical Statistics of the United States, Colonial Times to 1970 (1800-1959)
Current-dollar and real GDP (1929-2005)
Nominal GDP (1800-1928)

As can be seen from the data at the second link, the U.S. ran a trade surplus for all but three of the 95 years from 1876 through 1970 and the surpluses during the Great Depression were among the lowest of this period.

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