Saturday, October 4, 2014

Why has the U.S. had a trade deficit almost every year since the early 1970's?

There are lots of reasons for this.  I would say that the
most important one is simply that the United States is a very rich country and rich
countries tend to import a lot of goods.


The United States
is one of the richest countries in the world.  Because of this, people in the US demand
high wages for their jobs.  They are not willing or able to work for low wages.  This
means that other countries can outcompete US workers in low-skilled jobs.  It makes much
more sense for a TV company to build TVs in a place where the workers don't get paid
much than to build them here in the US.


The fact that the
US is rich also means that we are able to buy lots of stuff.  Simply put, when you have
a lot of money, you can afford to buy a lot of stuff from the low-wage
countries.


So the major reason we have a trade deficit is
that our wealth makes us A) able to buy a lot and B) a bad place to have manufacturing
so the things we buy need to be made overseas.

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