Doing Bastiat-style reductio ad absurdum arguments seems to get more difficult each day. A few week ago I tried to satirize the view that China was the Great Satan of international imbalances, pointing out that the combined current account surpluses of tiny Switzerland and Norway (population 13 million) is nearly half as large as China’s $289 billion CA surplus (population 1.35 billion.) Indeed a relatively small block of countries lying between Switzerland to the south and Norway to the north have a combined CA surplus of $397 billion, and a population of only 125 million.
So I was quite startled to see an article in the Swedish press with the following headline:
Sweden ‘threatens the global economy’: study
An American think tank has criticised Sweden for maintaining a constant current account surplus and urged the country to undertake measures to stimulate domestic demand.
“Sweden has not taken sufficient measures to reduce its current account surplus,” non-profit New America Foundation, a non-profit, non-partisan US-based think tank, wrote in a statement on Thursday.
“Its fiscal policy should be more expansionary; it should encourage currency appreciation; and it should open its domestic market to foreign goods.”
I’m worried to death that I have made some sort of terrible mistake. I know that I have a few Swedish readers; please tell me I haven’t accidentally cited a Swedish version of The Onion, so I can quickly erase this post.
Seriously, I actually respect the New American Foundation much more than the neo-mercantilists who obsess over China. At least they have the courage of their convictions, and at least they’ve bothered to look at the data. However I’m not quite sure about the charge that Sweden doesn’t have an open domestic market; doesn’t Sweden have relatively low trade barriers?