YOU ARE HERE: LAT HomeCollections

We've Blamed Them for the Trade Deficit Long Enough

September 21, 1986|ROBERT B. REICH | Robert B. Reich, a professor of political economy and management at Harvard's John F. Kennedy School of Government, is the author of "Tales of a New America" to be published next spring.

Casting blame is one of the most convenient of cognitive acts, for it absolves one of all responsibility. Psychologists tell us that people often try to avoid facing unpleasant truths about themselves by attributing their problems to others. This ruse may work for a time, but eventually the unattended problems grow worse (and you may risk losing all your friends in the meantime).

So, too, with nations. Only here, the avoidance can be dangerous as well as foolish, and the repercussions worldwide.

America's trade deficit continues to grow. Last year it ballooned to $150 billion, and this year it will be even higher. Why? What is the problem?

At first we blamed them --the Japanese, in particular--for not allowing our goods in. We complained that they erected tariffs against our products, and burdened them with niggling regulations. No wonder trade is so imbalanced, we said. Take down your walls and everything will be OK.

But it turned out that Japan had few tariffs and regulations. The Reagan Administration sent over a delegation to investigate, and all they could find were a few rules barring tobacco, baseball bats and other exotica, which the Japanese dutifully rescinded. Meanwhile, we installed quotas on automobiles, motorcycles, steel and a range of consumer electronics.

Then we blamed them --the Japanese, in particular--for keeping their currency too low relative to the dollar. We complained that they artificially restrained it, so that everything we sold them was priced too high and what they sold us, too low. No wonder trade is imbalanced, we said. Let the yen rise against the dollar and everything will be OK.

But it turned out that even when the currencies see-sawed in the opposite direction, not much changed. The dollar has plummeted by more than 30% against the yen, yet the trade deficit continues to grow.

Then, most recently, we blamed them --the Japanese, in particular--for not spending more of their income and saving less. We complained that they keep their interest rates too high and their budget deficits too low, that they live in small houses and don't fill them up with large American gadgets. No wonder trade is so imbalanced, we said. Pump up your demand, spend more of what you earn and everything will be OK.

They promised to try. But the Japanese live on a small, crowded island without much room for all the things we would like to sell them, and their population is aging so fast that they'd like to save their money for when they get old.

It is possible, of course, that the fault still lies with them --the Japanese, in particular. But perhaps it is time that we also took a hard look at ourselves.

American productivity has been inching forward much more slowly than our appetites. Last year the average American worker produced almost no more than he or she did the year before. It's impossible to enjoy greater wealth without greater productivity, unless you're willing to sink ever deeper into debt.

Most Americans continue to live well, but we're living beyond our means. How can we expect otherwise when we fail to invest in our future? Almost one-third of our children don't finish high school and one-fifth of them never learn to read beyond fourth-grade level. Our top executives spend more time worrying about who they will acquire next (or who's trying to acquire them) than about what they will produce next. Military needs sap our budget and preoccupy our scientists and engineers. The gap between the highest- and lowest-paid workers is so large, and job security so tenuous, that most feel no loyalty to their employers. There are only two choices for people who live beyond their means. Either we start living within our means, or we improve our means. We are doing neither. No wonder trade is so imbalanced, we should say. We are just going deeper into debt--and all the while blaming them for our troubles.

Los Angeles Times Articles