In his latest example of economic illiteracy/lunacy and anti-trade nitwitery, Ian Fletcher claims
that: "Our trade deficit helps Guangdong, Seoul, Yokohama, even Munich – but not Gary, Indiana, Fontana, California, and the other badlands of America’s industrial decline."
Don Boudreaux injects a dose of economic sanity
into the debate by reminding Fletcher that "Such a claim reveals its author to be unaware that another name for “U.S. trade deficit
” is “U.S. capital-account surplus
” – that is, inflows of investment funds into America that supply (directly or indirectly) financing for more capital creation in America."
The chart above shows just how significant those foreign capital inflows into the U.S. economy really are, using BEA data
on "direct investment" by foreigners. Foreigners are also buying government Treasury securities and other private U.S. securities (stocks, bonds, bank CDs, etc.), but the chart above is showing just the capital inflows into American companies
in industries including manufacturing (auto plants from investments by Toyota, Honda, BMW, the carbon steel processing plant Thyssen Krupp in Alabama that Jetbeagle mentions in the comments, etc.), retail trade (IKEA), publishing, telecommunications, finance and insurance, real estate, engineering, mining, utilities, computer systems, construction, hotels, health care, transportation, etc. (see BEA website here
for more information).
: As a direct consequence of our trade deficit, foreigners have invested almost $3.5 trillion directly into the U.S. economy since 1960 in American companies, with about half of that investment occurring in the last decade. Those trillions of dollars of investments in U.S. companies HAVE generated HUGE benefits for the American economy, and are responsible for millions of U.S. jobs for Americans working at Toyota, Honda, BMW, IKEA, etc. In 2008 (latest year available), foreigners owned almost $12 trillion of total corporate assets in the U.S., and those foreign-owned companies generated almost $3.5 trillion in sales, spent almost $200 billion on property, plant and equipment and employed 5.593 million Americans (data here