Mandel and Setser on intangible values

Here is their exchange.  An excerpt from Mandel:

It’s a truism among trade economists that whether you run a current
account deficit or a current account surplus matters less than what you
do with the money. In that vein, pessimists have accused the U.S.
economy of importing capital in order to fund consumption.

But according to my argument, that’s not true. We seem to be
importing capital in order to fund an enormous amount in investment in
intangibles, including knowledge, training, brand equity and the like.
Then U.S. companies are using those investments to maintain their
competitive position in the global economy.

It’s a virtuous circle, rather than a vicious one. What’s more, it
has the additional virtue of being consistent with the facts, including
the much faster productivity growth in the U.S., that darned
unwillingness of the dollar to drop, and the continued high rate of
return of U.S. companies overseas.


Mandel says---The official data show that the national savings rate has fallen from about 21% in the 1950s to about 15% in this decade--or about a 1 percentage point a decade. However, over the same period, unmeasured investments in business intangibles were rising from 4% to about 9% of GDP. If we add those into both the investment and the savings side of the economy, most of the official decline in savings disappears. Remember: The national savings numbers are among the least reliable numbers that the government publishes, because they are a residual.

All he is saying is that savings would have fallen from 25% to 16% rather then from 21% to 15%.
If you add the additional savings-investments to both sides of the equation it still leaves you with the same imbalance that is financed by foreign capital inflows and the same argument whether it is financing investments or consumption.

American corporations buy cheap labor force abroad and sell competitive products at premium prices worldwide. Thus, American equities are attractive as the companies show sound profit margins. As a result, the US trade balance and current account look miserably, but still, it's the Americans who profit most.

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