Export Fetishism

The idea of pairing austerity for the broad public with lending programs for small-and-medium enterprises is a bit odd. After all, the people are the customers for business, so if people don’t have any money, then firms won’t have any customers and there will be no good lending propositions.

The only way I can see to make any sense out of this conjunction of U.K. policy initiatives, which is similar in spirit to the idea that the U.S. needs austerity plus an end to “regulatory uncertainty,” is as an example of this odd export fetishism which is sweeping the world. The modern-day ideal, apparently, is that instead of a society producing goods and services in order than its population might consume more goods and services, we should look to foreign customers to rid us of the problem of idle workers and excess capacity. You could imagine two different countries competing for Brazilian customers, and it makes sense to think that the country that’s providing subsidized loans to its firms may get more of those customers. This is a fine idea as far as it goes, but for the millionth time, it’s not possible for all countries to raise their net exports simultaneously. If the world, as a whole, has the capacity to produce more goods and services than are currently being consumed, then the solution has to involve someone consuming more goods and services.

This is a fundamentally bizarre problem to be wrestling with. A country should want to export more in order to raise more funds with which to purchase imports. There’s a lot of stuff they can’t make in Finland. There’s no vineyards and no airplane industry. So if Finnish people want wine and airplanes, they need to make Angry Birds and lumber products to get the money with which to buy wine and airplanes. This genre of problem afflicts many countries and it’s quite serious. Nicaraguans would probably like all kinds of stuff that the average Nicaraguan currently can’t afford. Nicaragua either needs to learn to make that stuff domestically, or else to make stuff they sell to foreigners in exchange for the imports. That’s how you get richer. But in the US and UK the problem is that we don’t have customers for all the stuff we can make, leading to joblessness. The solution is for people to buy more stuff! That could be foreigners, but it could be Americans and Scots and English people. You just need to raise domestic demand. Hire people to make some stuff. Or give money to people and trust that they’ll buy what they want.