Chapter FiveChapter Five

Trade and MoneyTrade and Money

International Relations, International Relations, Brief EditionBrief Edition

Joshua S. GoldsteinJoshua S. Goldstein

Figure 5.1: Joint and Individual BenefitsAny deal struck, such as a point A, yields certain benefits to each actor (dotted lines). Joint benefits are maximized at the Pareto-optimal frontier, but the distribution of those benefits, as between points B and C (both of which are better than A for both actors), is a matter for bargaining. Liberalism is more concernedwith joint benefits, mercantilism more with the relative distribution.

Figure 5.2: Balance of Trade

Figure 5.3: U.S. Financial Position, 1970-2002For decades, the United States has imported more than it exported (the current account balance or trade deficit), and its government has spent more than its income (the budget deficit). The budget deficit leaves behind a large national debt, and the trade deficit remains especially large.