THE ALLURE OF A WEAKER CURRENCY:
That’s a trade-off people generally seem happy to make. When a falling currency gooses exports, this is generally thought of as a good thing, even though the necessary corollary is a reduction in domestic purchasing power.
Why is this the case? One possibility that you frequently hear is that people are fallaciously comparing nations to households. If you sell more labor or stuff to people outside the household than you consume, then you’re in good economic shape, so that must be true of your country, too, right?
Maybe so. But I think there’s another reason that we want to export more than we import, and that has to do with the importance of work.
As I’ve written before, work is central to our lives — so central that, in a modern industrialized democracy, being persistently unemployed is about the worst thing that can happen to you short of death or dismemberment. Government unemployment benefits can take care of the financial pressure, but people who have been out of work for a long time are still very unhappy even in countries with generous unemployment programs. Not having a job denies you a sense of purpose and structure to your life. It’s not surprising, then, that the public supports stronger employment, even at the cost of some purchasing power.
If so, that has lessons for other policy areas.