It’s national election season again. As always happens in this season, in every developed country, the old battle horse of national competitiveness gets a new coat of shiny paint and is led out by its sparkle-strewn tether to support politicians misconceptions and mis-talks. There is a very widespread misconception that nourishes unreasonable thoughts and false notions on the economy.

Sorry but at this time, in this season, I feel a compulsion to resort to teaching, so, pay attention. There might be a quiz.

The misconception: Countries, (or “nation-states”) such as the US, Canada, Mexico, Belgium, or France don’t compete with each other like soccer teams, for example, compete against each other. In soccer, when one team wins a point, the other team loses a point. When the economy of one country picks up speed however, it is not (NOT) the case that the economy of another country (or of several countries) must slow down. The reverse is true. When the Mexican economy grows, some Mexicans are better able to buy American corn, or American video games, making some Americans richer than would be the case if the Mexican economy stagnated.

The confusion has three sources. The first source is simply ignoring that the producers of one country are also potential customers for the producers of all other countries. Those who compete with American workers, are often also buyers of American-made products. If they are not at the moment, the richer they become, the more likely they are to become buyers. One of the international functions of those who compete with American producers is thus to enrich American producers, perhaps different ones. The relationship may be more indirect. Foreign worker A competes with American worker B and he uses the money he gets from beating B to buy from American worker C. If I am C, my interests are not well lined up with those of my fellow American B. That’s a fact, no matter what politicians say in the language of football. However, if I am American worker C, in the long run, I am better off if fellow American worker B becomes richer than if he does not. For one thing, he will be able to support better equipments, such as schools, from which I will profit. Continue reading →