Feb 23, 2015

Die hard mercantilism

Protectionists wish to do to you in peacetime what your enemies wish to do to you in wartime.

A nicely written brief article by Bob McTeer.
In a few simple words he gives some goods hints about common misconceptions about the relation between import and GDP and about import vs export.

I think this kind of articles are still very useful, especially for non economists, since mercatilist ideas keep being around, with all their nonsense.

Here a few quotes: 

Exports add to GDP, but imports subtract from GDP.
Imports must, therefore be bad. Furthermore X > M is good while M > X is bad. Right? No, wrong. Imports are subtracted because the other spending components C, I, G, and even X all have import components [...]

Nevertheless, we tend to treat imports as some sort of negative or bad thing even though, when you think about it, imports are what we gain from international trade while exports are what we pay in international trade.

Henry George’s famous quote clarifies it best for me. If you are in a war, why does your enemy wish to close your ports? To prevent your exports or your imports? His quote was to the effect that “Protectionists wish to do to you in peacetime [limit you imports] what your enemies wish to do to you in wartime.”

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