The big news of the day is Treasury Secretary Geithner's call for the Group of 20 economically powerful countries to, as the New York Times put it, "keep their current-account balance — whether a surplus or a deficit — below 4 percent of gross domestic product."
More from the Times article: "The German economy minister, Rainer Brüderle, told reporters that the proposal could be viewed as a reversion to 'planned economy thinking.'"
The German has got that right. After all, one of the problems with Mr. Geithner's proposal is that trade deficits and surpluses are to a significant degree the result of individual decisions, freely made, to purchase goods made elsewhere. A government target or control on the overall trade account could wind up interfering in those decisions.
Another problem is that, in an era of a globally interconnected economy, it isn't always so clear-cut what's an import and what's an export. How about an Apple tablet computer designed and sold by a California-based American company but built in China by a Taiwan-based supplier? How about a South Carolina-built BMW automobile?
To the degree that governments can control these matters, they can do so by creating incentives and policies that encourage entrepreneurs to dream up things that people around the world will want to buy. Mr. Geithner could be an advocate for low taxes, limited regulation, the rule of law, property rights, and a stable currency here in America. Instead he wants to set up some kind of global arrangement with the other economies where they all agree no one will succeed or fail too much.
The whole episode is illuminating, because it shows the top-down way that Mr. Geithner and his boss, the president, conceive of the economy.
