More exports = more jobs

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In the wake of the Obama’s State of the Union, many commentators are lamenting Obama’s goal of export growth. Some, like Megan McArdle, point out that this is the same goal as all other countries and impossible for all to meet.

Either SOMEONE is throwing a hail mary here or Martian and Venusian Aggregate Demand have gone parabolic in the last quarter.

Now it may be that Obama and his economic team don’t understand some principle of accounting but if you think about the statement, it is far from inconsistent with what economists believe.

Every single country in the world can simultaneously grow their exports. They did so in the past. Why? Because at the same time, their imports grew as well. So what you saw was more trade and part of that is more exports — by definition. And, by the way, most of us believe that more trade = more jobs. So there is nothing inconsistent about the US and every other country having that goal. We may argue over the policies that might get us there — export promotion versus liberalisation of trade barriers — but there is nothing wrong with the goal.

What commentators are getting confused about is that they assume more exports means a trade surplus and what is true is that not every country can have a trade surplus.

2 Responses to "More exports = more jobs"
  1. The problem with Obama’s speech was not the goal of increasing US exports. Indeed, that is a critical element in unwinding global imbalances and putting the US on a more balanced growth part. The problem was the mercantilist rhetoric that permeated the speech. Everything was about competition as though economic growth were a race that only one country can win. Growth (in production, exports, jobs, etc) is not a zero sum game!!

  2. Of course the world currently runs a substantial current account deficit with itself.  It’s due to “undocumented flows” – trans-border transactions that thoughtfully relieve the taxman of his burden by not being brought to his notice.

    The real problems are if everyone pursues an export strategy by competitive devaluation, a la 1930s.  We seem to be drifting perilously close to that at the moment.

    I agree with LO here – the speech’s rhetoric was mercantilist, and if believed could set up such a competition.  I prefer to believe that Obama is being cynical rather than dumb, but its a dangerous game.

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