Mississippi, Vietnam and human decency

Economic illiteracy supports or encourages a lack of human decency. Think about the American government towards the Vietnamese.

The average Vietnamese produces a value of $15,194 per year, i.e. gross domestic product per capita, which means he earns that amount of income. The corresponding figure for the United States is $81,665, more than five times as much. Vietnamese are poor. (My GDP per capita comparisons are in international dollars at purchasing power parity, or PPP, and come from the World Development Indicators from the World Bank. Purchasing power parities are intended to adjust for the lower price of non-traded goods available in poorer countries: land, housing and many services. Other prices are equalized by trading which, if allowed, arbitrages price differences above transportation and transaction costs. Adjustments for PPPs increase poorer countries’ GDP compared to U.S. GDP.)

I would like to add that the Vietnamese – the individuals living in Vietnam – have had a tragic history, if only in the past century. They have been exploited by their governments, especially in the North. Those in the South experienced an American-led war against communism, although it would also have been no fun to have been victims of Russian, Chinese, and North Vietnamese communism before. The South was eventually abandoned by the US government and all Vietnamese have been living under communism ever since, although the regime is now softer than before. Their government has allowed a degree of entrepreneurship and free enterprise, which has allowed the poor Vietnamese to escape abject poverty.

There are three ways to become rich or richer. You can plunder the rich, as long as they stay rich. You can plunder the poor, a specialty of collectivism called communism. Or you can trade with the rich or the poor. The third way is how Americans – individual Americans – in general became wealthy. Thirty percent of the income of the growing Vietnamese comes from selling goods to Americans, rich or not. More recently, the Vietnamese have benefited from the US trade war with the Chinese (whose GDP per capita is $24,558), whose exports to Americans have been partially replaced by Vietnamese exports, legal or illegal. We shouldn’t put too much emphasis on the illegal part: in their time (I’m thinking of the trade embargo of 1808-1909) Americans were also good smugglers. Many still are. Smuggling means trying to avoid trade barriers set up by the government between individuals.

A GDP per capita of $15,194 does not mean abject poverty, but it is still poverty by the standards of the rich world. It places Vietnam in the World Bank’s lower middle-income country category (from four categories: low income, lower middle income, upper middle income, high income). Use longer Madison Project GDP per capita series (estimates in constant dollars but without PPP) show that Vietnam is now about where the United States was at the end of the 19th century, although the lack of a PPP adjustment exaggerates the difference. Like China and many poor countries, Vietnam moved into the lower middle-income bracket not because it had a liberal government, which it never had, but because its people were allowed to participate partially in world trade. The first available year in the World Bank’s GDP per capita series shows that Vietnam’s GDP per capita was then only 5% of the US level (and about the same as in China). Opening the door to international trade to the people of poor countries had a huge impact on reducing their poverty. It is not that Americans have become poorer, on the contrary, but that the inhabitants of these poor countries have become much less poor.

As for the lack of human decency and shame, think about this (A. Anantha Lakshmi, “Vietnam’s largest import partner is China, while the US is its main export destination,” Financial timesNovember 16, 2024):

Although Trump did not mention Vietnam during the recent presidential election campaign, he called the country “almost the worst abuser of anyone” in 2019.

“Vietnam is taking advantage of us even worse than China,” he told Fox Business.

These quotes and their underlying foundations are remarkable. Why would the government want to ban people who earn $82,000 a year from trading, or impose tariffs that limit their ability to trade, while people earn $15,000? The economically illiterate excuse is the trade deficit, where these people make $15,000. To be sure, Americans and their middlemen, who are not forced to import goods from a country 8,000 miles away, have also benefited. Otherwise they wouldn’t have done it. For example, an engineer benefits from trading with his butcher, and the butcher benefits too: otherwise they wouldn’t trade. Economic theory confirmed by experience shows that a trade deficit between a group of people called Americans or engineers and another group called Vietnamese or butchers has no meaning other than to benefit individuals in the two groups.

Of course, all trade and competition disrupts some producers, but without it there is no increase in prosperity and progress. In the grand scheme of things, “protecting” some people from the trafficking of others will generally not help the former, and certainly not their children, because in such a perverse system their own ability to kill other people will be limited. to protect.

Why would some Americans trade with some Vietnamese? Why do the poor and the rich trade together? The poor are less productive; that is why they are poor. The rich are more productive; that is why they are rich. ‘Productive’ means producing something that some consumers (or producers of other goods) want, at a competitive price. The poor produce things that rich consumers (or intermediate producers) cannot find elsewhere at comparable prices. The rich produce things that poor consumers (or efficient producers) cannot find elsewhere at comparable prices. Each group of producers – made up of individuals, remember – has a comparative advantage. Imagine that you are forbidden to trade with people who are poorer than you, such as your garbage collector; or imagine that you are prohibited from trading with people wealthier than you, such as your doctor or many owners and executives of car manufacturers.

But what about the rich or richer individuals who are dislocated because their fellow citizens trade with poor or poorer producers? Take Mississippi, the poorest state in the Union. Their GDP per capita is estimated at $51,546 (current 2023 dollars, no PPP), which is less than two-thirds the level for the entire country. The interesting point here is that Mississippi is poor compared to all other US states. This is evident from data from the Bureau of Labor Statisticsthe average weekly wage in Mississippi in 2023 is $930, 45% lower than the average weekly wage of $1,680 in California. If we could reliably measure this through constant customs and police surveillance at the borders, Mississippi certainly has a large trade deficit with California, but who cares? Not Mississippians who import iPhones from California (where most of the value of iPhones are produced).

If there is no problem with Mississippi’s trade deficit with California, what is the problem with its trade deficit with Vietnam? Is it true that the Vietnamese were not born in Mississippi? That they didn’t move to Mississippi? Californians sell computers to Mississippians at lower prices than computers that could be made locally in Mississippi. Or is the problem that some powerful American corporations (and their unions) are being outcompeted, abused and exploited by relatively unproductive and poor people living 8,000 miles away?

The Christian God should not be proud of humanity, and not just because of its economic illiteracy.

******************************