Thursday, November 3, 2016

An Open Letter to Peter Thiel

Mr. Peter Thiel

Mr. Thiel:

Attempting to justify Trump’s and his followers’ hostility to free trade you write that “[t]he sheer size of the US trade deficit shows that something has gone badly wrong.  The most developed country in the world should be exporting capital to less developed countries; instead, the United States is importing more than $500 billion dollars every year.”

I’ve some questions for you.  Because a U.S. trade deficit means that America is a net recipient of global investment funds, doesn’t this reality signal that America, compared to other countries, remains a relatively attractive place to invest?  Of course it does.  So what leads you to conclude from this reality that “something has gone badly wrong”?  If people eagerly invest in successful companies such as PayPal, do you conclude about PayPal that “something has gone badly wrong”?  Further, do you believe that PayPal is weakened and ‘distorted’ by such investments?

And can you explain why I and other Americans should be disturbed that global investors continue to find America an attractive destination for their funds, and why we should be bothered or embarrassed that so few of us invest in developing countries – countries that are still “developing” precisely because they are beset with policies, institutions, and attitudes that discourage investment and are inimical to economic growth?

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

The above originally appeared in Cafe Hayek.


  1. This is not a sign of strength and it is not sustainable:

    "A country that does not generate savings sufficient to finance its own investment needs must attract surplus foreign savings in the form of a capital inflow. Such a country records negative net foreign
    asset purchases, or equivalently, is a net borrower from
    the world."

    You and other Americans should be concerned when you realize that not only are you dependent on foreign lending to sustain your consumption but your sustained excess import of foreign production exports wealth and employment to other countries.

  2. He has completely missed Thiel's point. He should be asking where the 500 billion yearly came from to 'invest' in America in the first place.