Much has been made of Britain’s current account deficit, which is the amount by which our imports of goods and services exceed our exports. It is a situation that protectionists would love to “do something about”, such as resorting to tariffs in order to redress the gap. But protectionists overlook the fact that one of the main reasons for exporting is to be able to import, and it is clearly mistaken to think of exports as “good” and imports as “ bad”, especially as we cannot control the conduct of our trading partners.
This is just a natural extension of Say’s Law, which states that we produce in order to consume. Yes, I know that’s obvious – but it’s the very antithesis of Keynesian economics, which teaches that production can somehow, magically, be brought into being by stimulating demand, a dangerous myth I exposed in Part 2 of “Understanding Economics in one hour”, still available on Going Postal.