ACCUMULATING PERIPHERALS


“Making things we can export” means making things they’re exporting now by mattsteinglass
January 16, 2009, 11:57 am
Filed under: Economics

A number of economic commentators I’ve read have said that, beyond the stimulus to escape the current recession, the US needs to start thinking about ending its massive trade deficits. This involves starting to make more things it can export, and ceasing to import so many things it can’t pay for except with debt purchased by China.

The thing is, this idea sounds pretty scary to people in places like Vietnam. Vietnam’s excellent GDP growth over the past 8 years — and all of its economic planning for the next 10 years — are predicated on becoming a massive exporter of cheap, low-value-added goods to the US, Europe and Japan. If the US stops sucking in that demand, or goes on a big campaign of what they used to call “import replacement” back in the ’60s, the market that’s supposed to fuel Vietnam’s growth dries up. (As for balancing the trade deficit by increasing exports, countries like Vietnam simply aren’t in a position to import much of what the US makes. They haven’t got the money yet.)

One way that’s important might be showing up in this figure from Paul Krugman:

“How did Bush do that?” asks Krugman. I would guess one answer would be that much of the job growth that wasn’t happening in the US was happening in China, India and Vietnam. The US’s staggering trade deficits meant that American GDP growth that would have translated into American employment growth in earlier eras was instead going to employ more Vietnamese shoe manufacturers, shipbuilders, and, lately, even computer programmers. As US import demand has dried up over the past few months, factory workers in Vietnam are already getting laid off. And if that US import demand doesn’t come back — whether because the US doesn’t redevelop its appetite for consumer goods, or because it somehow starts producing them itself (though how that happens without protectionism rather escapes me), it would seem Vietnam would have to seriously revisit its program for growing the economy.

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