What a Brightly Coloured Fish!

The all time favourite First World populist is trade deficit with the developing world. This is one of the stinkiest of red herrings. I am not speaking of the historic hypocrisy of deficits going the other way. The reality is that it is impossible for the developing world to buy more goods from the developed world as the result of discrepancy in wealth and therefore purchasing power. As economists keep reminding us that this is a global consumer society, it is the power of the consumers, i.e. purchasing power, that counts. In 2003, for example, the average per capita income was just about US$1100 for China and about US$38000 for the U.S. The anti-trade deficit advocates are saying that China, and other developing world, should spend as much in buying First World goods and the other way around. This is not only unrealistic but also ridiculous. Furthermore, I do not think First World people really want it to be balanced either. I do not want to have Third World purchasing power.