While balance of payments deficits are an important part of what economists study, and the statistics statisticians keep, does the notion of a balance of payments, or even of imports and exports, make economic sense?
In order to calculate a balance of payments, one must essentially take some arbitrary line in the sand and determine trade beyond that line to be an import or an export. But what fundamental economic difference is there in a trade between people in Brussels and Antwerp (both a part of Belgium), or Brussels and Paris? There are political implications to be sure, since the governments of these countries have seen it fit to impose various restrictions on such trade, but can we imagine the concept of a balance of payments existing on a free market, with no such political restrictions?
When we remove the arbitrary nature of government borders and apply the terms consistently, every time you buy a product from outside your city, you’re importing. Every time you sell to someone living in a town near yours, you’re exporting.
Yet you don’t see any headlines exclaiming in panic that, “The balance of payments deficit between New York City and Boston is at an all time high!” I don’t think such statistics even exist, because government statisticians haven’t deemed it useful to collect them.
Taken to its logical conclusion, every time any division of labor occurs, even when it is between yourself and a neighbor, there ought to be a balance of payments. You’re not really trading your potatoes for your neighbor’s onions anymore, you’re now exporting your potatoes to your neighbor, and importing their onions.
All this idea of a balance of payments does is arbitrarily draw a line where division of labor becomes something to account for in the “national books”. But the idea of a balance of payments is only relevant to the ruling class of a nation state.
The notion of imports and exports and a concomitant balance of payments is thus unnecessary, superfluous, redundant. These are collectivistic political terms used to color economic transactions. They are there to classify a certain group of otherwise normal transactions as within the realm of political manipulation (tariffs, quotas, regulations), and to foster ideas of zealous nationalism – so important for a government to retain control over its people.