Population Density Factor in Trade Intensifies in 2012

My apologies for taking so long to publish this data.  Trade data for 2012 was published by the government almost a year ago.  But it’s no small task to take hundreds of end use codes for nearly 200 countries and sift out the data for manufactured goods.  (It’s one of the reasons I haven’t posted as much lately – trying to finish this project, not to mention some personal projects here at home.)  The data for 2013 was released on March 1st, and I’ve already gotten a good start there. 

With that said, here’s the chart that summarizes this data, updated through 2012:  Deficits Above & Below Median Pop Density.  This chart shows America’s balance of trade in manufactured goods in 2012, split between those nations with population densities above the global median, and those nations below the global median.  (Because we’re using the median, that means that there are exactly the same number of nations on either side of the chart.)  If population density was not a factor in trade, then one would expect the balance of trade with both groups to be about the same. 

But exactly the opposite is true.  The effect of population density is enormous and undeniable.  In 2012, with the more densely populated half of nations, the U.S. experienced a trade deficit in manufactured goods of $624 billion, an increase of $47 billion over 2011, and the worst deficit since I began tracking this data in 2005.  Aside from 2009, when the global recession cut overall global trade, this figure has worsened every year. 

By contrast, in 2012 the U.S. enjoyed a surplus of trade in manufactured goods of $136 billion with the half of nations below the global median population density, a reduction of $17 billion from 2011.  This surplus appears to be leveling off. 

The net trade deficit in manufactured goods rose in 2012 to $488 billion, an increase of $64 billion over 2011, and an increase of $111 billion since 2009, the year that President Obama took office, elected in large part to fulfill his promise of reducing America’s trade deficit.

It’s impossible to overestimate the importance of this data.  It’s absolute, undeniable proof that population density is the biggest factor in driving our trade deficit, in the loss of U.S. manufacuring jobs, in the growth of our national debt, in the slow decline in our standard of living and, indeed, in virtually all of the ills that plague our economy. 

For those new to this site and unacquainted with the inverse relationship between population density and per capita consumption, a brief explanation is in order.  When two nations grossly disparate in population density attempt to trade freely with each other, the work of manufacturing is spread more or less evenly across the combined labor force.  But the disparity in per capita consumption created by the disparity in population density remains.  The result is an almost inevitable shift in manufacturing jobs toward the more densely populated nation and a corresponding trade deficit and loss of jobs for the less densely populated nation.  It’s easiest to understand if you consider the extreme – trade with a nation so densely populated that their per capita consumption is nearly zero.  In such a case, spreading the work of manufacturing evenly across the labor force will shift nearly all manufacturing jobs to that nation, while the other nation gains no corresponding market for its products.  The trade deficit exists not because the more densely populated nation manufactures and exports too much, but because it consumes too little.

We’ll look more deeply into the population density effect on U.S. trade in 2012 in upcoming posts over the next few days and weeks.  And we’ll examine whether the other factors often blamed for our trade deficit – cheap labor and currency valuations – really played any role at all.  In the meantime, my work of compiling the 2013 data is underway.  Stay tuned.

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