Mississippi, Vietnam, and Human Decency

Economic illiteracy supports or encourages a lack of human decency. Consider the American government vis-à-vis the Vietnamese.

The average Vietnamese produces a value of $15,194 per year, that is, of GDP per capita, which means that he earns that amount in income. The corresponding figure for the United States is $81,665, over five times more. Vietnamese are poor. (My comparisons of GDP per capita are in international dollars at purchasing power parity, or PPP, and come from the World Bank’s World Development Indicators. Purchasing power parities are meant to correct for the lower price on non-traded goods available in poorer countries—land, lodging, and many services. Other prices are equalized by trade which, when permitted, arbitrages price differences over and above transport and transaction costs. Corrections for PPPs increase the GDP of poorer countries compared to US GDP.)

Let me add that the Vietnamese—the individuals living in Vietnam—have had a tragic history, if only in the last century. They have been exploited by their governments, notably in the North. Those in the South lived through an American-led war against communism, although being earlier victims of Russian, Chinese, and North Vietnamese communism would not have been fun either. The South was ultimately abandoned by the American government and all Vietnamese have since been living under communism, although the regime is softer now than it has been. Their government has allowed a measure of entrepreneurship and free enterprise under which the poor Vietnamese have been able to escape dire poverty.

There are three ways to get rich or richer. You can loot the rich, as long as they remain rich. You can loot the poor, a specialty of the brand of collectivism called communism. Or you can trade with the rich or the poor. The third way is how, in general, Americans—individual Americans—have become rich. Thirty percent of the growing Vietnamese’s incomes come from selling goods to Americans, rich or not. More recently, the Vietnamese have benefited from the American trade war with the Chinese (whose GDP per capita is $24,558), whose exports to Americans were partly replaced by Vietnamese exports, legally or illegally. We should not put too much focus on the illegal part: in their time (I am thinking of the 1808-1909 trade embargo), Americans were also good smugglers. Many still are. Smuggling means trying to avoid the government-raised obstacles to trade between individuals.

A GDP per capita of $15,194 does not mean dire poverty, but it is still poverty by the standards of the rich world. It places Vietnam in the World Bank’s category of lower middle income countries (among four categories: low income, lower middle income, upper middle income, high income). Using the longer Maddison Project series on GDP per capita (estimates in constant dollars but without PPP) suggests that Vietnam is now roughly where the United States was at the end of the 19th century, although the lack of PPP correction exaggerates the difference. Like China and many poor countries, Vietnam climbed to the lower middle income category not because it had a liberal government, which it has not had, but because its residents were partially allowed to participate in world trade. The first year available in the World Bank’s GDP per capita series shows that GDP per capita in Vietnam was then only 5% of the American level (and roughly the same as in China). Opening the door to international trade for poor countries’ residents had a momentous impact on the reduction of their poverty. It is not that Americans became poorer, quite the contrary, but that residents of these poor countries became much less poor.

Regarding the lack of human decency and shame, consider this (A. Anantha Lakshmi, “Vietnam’s Largest Import Partner Is China, while the US is its top export destination,” Financial Times, November 16, 2024):

While Trump did not mention Vietnam during the recent presidential election campaign, he called out the country in 2019 as “almost the single worst abuser of everybody”.

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

These quotes and their underlying foundations are remarkable. Why would the government of people earning $82,000 a year want to forbid the latter to trade, or to impose tariffs limiting their opportunities to trade, with people earning $15,000? The economic illiterate excuse is the trade deficit with these people earning $15,000. Certainly, Americans and their middlemen, who are not forced to import goods from a country 8,000 miles away, have also benefited. Otherwise, they would not have done it. An engineer, say, benefits from trading with his butcher, and the butcher benefits too: otherwise, they would not 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 other significance than that individuals in the two groups benefit.

Of course, any trade and any competition disrupts some producers, but there is no increase in wealth and progress without that. In the great scheme of things, “protecting” some people against the trades of others is not generally going to help the former, and certainly not their children, because in such a perverse system their own opportunities will be limited to protect still other people.

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

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

If there is no problem with Mississippi’s trade deficit with California, what’s the problem with the trade deficit with Vietnam? Is it that the Vietnamese have not been born in Mississippi? That they have not moved to Mississippi? Californians do sell to Mississippians computers at lower prices than the computers that could be made locally in Mississippi. Or is the problem that some mighty and crony American businesses (and their unions) are outcompeted, abused, and taken advantage of by relatively unproductive and poor people living 8,000 miles away?

The Christian God must not be proud of mankind, and not only because of its economic illiteracy.

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