Monday, June 7, 2010

Good News People Won't Like

We'll see if this is just more wishful thinking from those hoping that the Chinese will do the heavy lifting in addressing our trade balance but the NY Times has an article today about the possibility of the cost of Chinese manufacturing rising as the Chinese focus on addressing some social issues and raising domestic consumption. I've been hearing this for about two years now, at least since the last major land reform in 2008, and haven't heard much on there being a real shift in the trade balance. We'll see.

This should be good news for everyone but, even assuming this is true, I doubt most people will see far past more expensive DVD players. Also, while rising wages in China will definitely help with global rebalancing, I am very sceptical that it will be perceptible for anyone not actively paying attention to our trade balances. We like to blame problems in our domestic economy on others but on the whole I doubt that the trade balance is doing much to impact employment or wage levels here. China moving in this direction will be great news (from an American perspective, this is also great news for the Chinese for different reasons) for domestic exporters and is a much needed global economic shift but I think the average American will be right in not noticing much other than that DVD players are more expensive. Of course, once the Chinese do this we won't have a scapegoat anymore and will have to start dealing with the larger structural problems in our domestic economy, such as oil dependence, if we want to reap some real benefits from slashing our trade deficit.

1 comment:

  1. The good news people really won't like is that we've all started to address imbalances that may take a very long time to resolve.