Last night on “The Newshour with Jim Lehrer” on PBS, they did a piece about the effects that the falling dollar and the credit squeeze are having on the economy. Included in the discussion panel was economist Kenneth Rogoff of Harvard University. He commented about our $800 billion dollar trade deficit and observed that “… we need to export more and import less.” It’s refreshing to hear an economist acknowledge this truth, as opposed to those who try to paper over the problems with the U.S.’ approach to globalization and trade in their free trade cheer-leading campaign. However, I believe he’s a bit off the mark in also asserting that “… Americans have been living beyond their means for too long.” His solution is that Americans need to save more and spend less. While there’s some element of truth to that, this “solution” would hurt the American economy just as much as it would slow imports, by also slowing the purchase of American goods.
What we really need is an understanding that free trade with over-populated nations is a sure-fire loser because, in return for access to our market, they can only offer us a market stunted by over-crowding. What’s needed is a tariff structure indexed to population density.