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Last updated at: (Beijing Time) Tuesday, February 03, 2004

Trade deficit originates in US extravagance

Recently, the question of US trade deficit with China has become the focus of concern. The United States does have unfavorable balance of trade with China, but what is the reason? And what does it imply?


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Recently, the question of US trade deficit with China has become the focus of concern. The United States does have unfavorable balance of trade with China, but what is the reason? And what does it imply?

According to statistics from the US Department of Commerce, US trade deficit with China stood at US$103 billion in 2002. In the opinion of some research institutions, if things develop in accordance with the trends of recent years, US trade deficit with China would reach US$330 billion in five years.

Theoretically speaking, when a country observes the balance of international payments, it does not calculate countries one by one in separate ways, the linchpin lies in the overall situation of its trade with the entire external world. Given this, the essence of US trade deficit with China is US overall trade deficit with the outside world. In fact, in the one hundred years' time after its founding in 1776, the United States had suffered consistent trade deficits. Beginning from 1876, America witnessed trade surplus for the first time, and this situation continued through to 1970. Commodity trade deficit again emerged in the United States as of 1971 and in the ensuing 30-plus years, trade deficit all along assumed a trend of sustained expansions.

Trade deficit is the result of the counting of balance of payments. According to the accounting principle of the balance between income and expenditure, a country must have the means of payment if what it buys in the world market surpasses what it sells. Historically, various countries usually make up this difference with gold or silver. But in today's world, the United States possesses a kind of privilege, which enables it to pay around US$400 billion worth of trade gap annually with US dollars it issued. But this kind of privilege is only a necessary condition allowing the incessant expansion of US trade deficit, its ample conditions lie in the aspect of demand, i.e., the unlimited pursuit of extravagance.

Extravagance is a relative concept, exquisite product, splendid house, elegant environment, and even sport, art and the vanity of nationals can all be listed in the category of extravagance, so long as the level of consumption surpasses the level of output. From the perspective of sociology, consumption is the aim of production, consumption and luxury are the real objectives which people are pursuing. The essence of trade deficit is that the total value of a country's consumption surpasses the gross value of its production. That is to say, the American society as a whole has long been in a state of extravagance either in quantity, or in quality or in both. In history, what any hegemonic country, or core country pursues is by no means the maximum welfare for the whole world, but rather is extravagance for its ruling clique and all its nationals, the United States is no exception.

German economist Werner Sombart once pointed out that the most striking feature of capitalism is that it is not for the basic satisfaction of needs, it is a system driven by the desire to acquire limitless wealth, a system featuring exchange and money, the concentration and cycle of wealth and reasonable calculation, its development knows no bounds. Britain became the world factory in the middle of the 19th century and was a productive society. Later, the country gradually changed toward a nonproductive society. Today, Britain's manufacturing industry has long been lagging behind that of the United States, Germany and Japan. The United States was also the world factory 20-30 years after the conclusion of World War II. Over the past 30-plus years after the 1970s, the process of US change from a productive society to a nonproductive society has been visibly speeded. Today, America's advantageous position in the world economy has switched over to the fields of circulation and finance. In the future, perhaps the United States may use service trade surplus to offset its commodity trade deficit, but the United States can in no way shake off its dependence on foreign commodities. Extravagance has gone deep into the bone marrow of US society, the real objective of the US government's foreign policy can only be how to maintain and further raise the extravagance level of the US society as a whole for the longest possible period of time.

(The author Su Jingxiang is a research fellow with the Institute of China Modern International Relations)

By People's Daily Online


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