Wednesday, March 25, 2009

The cost of picking exports – or imports

Many in NZ have been brought up with the notion that exports are per se good, the more of the them we produce the better off we are and imports are not… in fact they are bad news.

Notice then… that the two countries presently looking like suffering the most in the current environment are Germany and Japan – the two countries which rely most in the world on exports. In simple terms their customers are not buying – and won’t until their incomes rise again.

Most economists have long said that there is nothing inherently good or bad about exports or imports – what is good is to deploy your comparative advantage – doing what you do best – which for most involves imports in some areas and exports in others and changes.

Policies favouring one at the expense of the other are equally misguided.

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