Brad Setser challenges the notion that globalization has turned to “slowbalization”. But what are the characteristics of globalization? 
Slobalization!?
Trump Flashback
Dangerous Myths of Deglobalization
Last week, a Bloomberg columnist piled on, concluding that “global trade and finance are fragmenting into rival and increasingly hostile blocs, one centered on China and extending into the global South and another around the United States and other Western countries.”
But there is a problem with the assumption that deglobalization is a fact on the ground: the data does not fully back it up. As evidence of continuing deglobalization, observers often cite phenomena such as the United States’ reluctance to establish new free-trade deals, the debilitation of the dispute-settlement system overseen by the World Trade Organization (WTO), the proliferation of new national measures restricting trade, and declines in both short- and long-term capital flows from their past peaks. The COVID-19 pandemic certainly did reveal that economic interdependence carries risks, and the efforts Russia has made since 2022 to use its natural gas pipelines to influence the G-7’s response to its invasion of Ukraine—as well as the many sanctions the G-7 has imposed to try to weaken Russia’s economy—have highlighted the vulnerabilities that can arise when countries trade across geopolitical divides. But a closer look at economic data shows that even though governments have increasingly adopted policies aimed at strengthening their own resilience, the world economy is still evolving to become more, not less, globalized in key ways—and more dependent on Chinese supply in particular.
Global trade surged during the pandemic, and the world’s trade with China accelerated rather than slowed. A pandemic-era shift toward goods and away from services partly accounts for the acceleration. But the growth in trade with China also reflects the fact that China is simply producing things—high-tech exports such as electric vehicles, wind turbines, solar panels, and vital electronic and battery components—at a price point few can match. Between 2019 and 2023, China’s manufacturing surplus rose by about a percentage point of global GDP; it is now far larger than the surpluses run by Germany and Japan, the world’s other manufacturing powerhouses.
The idea that the world’s economy is deglobalizing took hold after the 2016 election of U.S. President Donald Trump. In his rhetoric, Trump repudiated the post–World War II bipartisan consensus around the value of free trade. And he also made some genuine policy shifts: pulling out of the Trans-Pacific Partnership (TPP), renegotiating the North American Free Trade Agreement to tighten the rules of origin for the trade of automobiles, and introducing tariffs on roughly three-fifths of the trade between the United States and China.
But globalization has deep roots by now, and such bilateral trade policies did little to change its fundamental trajectory. New trade deals and tariff programs always get a lot of ink. In reality, the changes in tariff rates in modern free-trade deals tend to be small, as most tariffs are already low or zero. Countries lacking preferential access to the U.S. market can still do incredibly well with the WTO’s standard trade terms. In fact, U.S. imports from Southeast Asia have soared in the past half dozen years. The Southeast Asian members of the TPP increased their exports to the United States much more rapidly after Trump withdrew from the TPP than they had been able to before.
Chinese exports to the United States are down since the 2018 introduction of the Trump tariffs, as are China’s reported holdings of U.S. Treasury and government-backed agency bonds. But those indicators are poor measures of these two economies’ true interconnection. When considering the impact of the United States’ much-ballyhooed bilateral tariffs on Chinese products, it is important to look beyond U.S. data showing a fall in direct imports from China and pay more attention to data from China itself. Surprisingly, those data reveal a much smaller decline in direct trade with the United States and a steep rise in Chinese exports to countries that are now exporting more to the United States.
U.S. policymakers are rightly concerned that the world has become too reliant on China for supply, particularly with respect to clean energy and green technology. In a mid-May speech, Lael Brainard, the director of the U.S. National Economic Council, put it well: “China’s industrial capacity and its exports in certain sectors are now so large that they can undermine the viability of investments in the U.S. and other countries. … Markets need reliable demand signals and fair competition for the best firms and technologies to be able to innovate and invest in clean energy and other sectors. The Chinese government has made clear that China’s massive investments in electric vehicles, solar panels, and batteries are an intentional strategy to effectively capture these sectors.”
Those who worry about deglobalization also often assume that all forms of economic integration are healthy. But they are not: the surge in cross-border bank flows before the global financial crisis, for example, reflected an unhealthy level of leverage and risk in the world’s big banks. Today, too, an excessive amount of the world’s FDI flows merely reflect tax avoidance, not productive economic activity.
There is also an opposing risk: that if policymakers do not acknowledge the degree to which globalization persists, they will grossly underestimate the shocks that would stem from a fuller decoupling of Chinese and U.S. trade.
Deglobalization offers analysts a simple story to tell about changes to the global economy. But the reality is more complex: put plainly, it is impossible for a global economy characterized by a large U.S. deficit on one side and a large Chinese surplus on the other to truly fragment. The world needs to have a healthy debate about the drawbacks and benefits of economic integration. But that debate must start from a frank acknowledgment that many characteristics of the contemporary global economy still push toward more, not less, integration, and that addressing these factors will have real costs.
How Do We Measure Globalization?
I scarcely disagree with anything Setser said. But what is globalization and how do we measure it?
If Chinese exports are the measure of globalization then where are nowhere near a decline in globalization.
Without defining the term, here are a few things I associate with globalization: Free trade, global wages arbitrage, just-in-time manufacturing, reduced trade frictions, rising standards of living, belief that the next generation will be better off than you are, and disinflation.
What, if any of that, is happening now?
US Balance of Trade
To avoid US tariffs China exports to Mexico or Vietnam which then export to the US.
Is that a sign of globalization? Does that add anything but costs?
Consumer of Last Resort
The US is the word’s consumer of last resort. That is one thing that has not changed. And it is a direct result of having the world’s reserve currency fueled by Nixon ending the last piece of the gold standard.
If countries insist on export mercantilism, the US has three choices, all of them bad, but the least bad (judging by the option the US has chosen) is a ballooning deficit.
Pettis on the Ballooning Deficit
The Choice
Excess Savings?!
It’s hard to think of massive debt everyone funded by printed dollars (yuan, yen, euros) nearly everywhere, as “excess savings”.
I define savings as “Production – Consumption” and I struggle to define printing dollars or yuan as either “production” or “savings”.
However, I agree with Pettis that we do have a massive global imbalance, hyper-financialized as a direct result of the end of the gold standard and China’s (also Germany’s) explicit policies.
Germany is feeling the pain of reversal now. And China refuses to do anything to alleviate the imbalances.
Under a gold standard the US could not have these deficits without losing its gold or jacking up interest rates. Now, there are no global curbs in place.
As a result of China’s policy, Chinese consumers are subsidizing US consumers to the benefit of Chinese exporters, US (global) consumers, and the detriment of Chinese consumers and US businesses.
As Setser notes, and my chart shows as well, tariffs have not done a thing. All we have accomplished is to increase trade frictions to the melting point.
Trade Friction Melting Point
Pettis: “Surging US fiscal debt is needed mainly because the alternatives – surging US unemployment or surging household debt – are worse.”
That trio of alternatives led to terrible fiscal policy under every president, inept Fed policy, tariffs by Trump and Biden, nonsense like the Inflation Reduction Act, and calls for more military spending by both parties because hardly anybody remotely understands what’s going on or why.
Perverted Economics
I hesitate to call what’s happening now “globalization” because it has little to do with ideas we should associate with globalization.
Perverted economics is more like it.
The gold standard was an automatic brake on perverted economics. There are no brakes in place now.
Chip Wars, China’s Goal Is to Cut Out the US
On June 4, I noted Chip Wars, China’s Goal Is to Cut Out the US
The US is restricting China’s access to advanced microchips. The US will regret the move in one of two ways. China will become self-reliant or there will be a real war.
A reverse title is also true. The goal for the US is to Cut out China.
So far, neither the US not China has cut off chip access to the other, but Biden is desperately trying.
We need to hope he doesn’t succeed.
Computer Chip Sanctions Fail
On September 4, 2023, I noted US Sanctions Fail Again, China Now Produces Its Own Advanced Computer Chips
Trump and Biden both tried to cut off China’s supply of advanced microchips. The US wanted to knock Huawei out of the 5G market. Now, instead of China using US chips, it is producing its own chips.
China Bans iPhone Use for Government Officials
On September 7 2023, in response to US actions, I asked China Bans iPhone Use for Government Officials, Just a Start?
On February 18, 2024, I discussed How China Gets Around US Sanctions on Semiconductors
The US is far ahead of China on technology, but China is gaining ground faster than anyone thought.
The US wanted to restrict China’s access to 7nm chips but now it appears China is making its own 5bn chips, and the smaller the better.
When Trade Ends, Wars Start
One of the Three Reasons Japan Attacked Peal Harbor was the US cut off Japan’s access to oil and natural resources. War became inevitable. Japan chose to strike first.
The US and China are in a global trade war. And the EU is on the verge of joining that trade war, egged on by the US.
However, the end game is easy to spot. Either China will be successful at advanced chip production at a pace that satisfies China, or China will move to take Taiwan by force.
Is Globalization Fine and Dandy?
Globalization may not be “dead” but it’s increasingly perverted rather than alive and well.
The irony is people believe us trade deficits will result in the rise and dominance of a BRICS currency.
However, the yuan does not float, China does not want to have the global reserve currency because it is incompatible with export mercantilism, and fundamentally trade is between individuals not nations (what individual wants a BRIC rather than a dollar or euro?)
For discussion, please see What Would it Take for a BRIC-Based Currency to Succeed?
Yet every month we hear more silliness about US deficits leading to a rise of a BRICS currency.
The current path is unsustainable. But I have no idea how long it can or will continue. No one else does either.
Greetings from China, where readers here are confused by the common prescription that consumers need to consume more. They already do. On a PPP basis, China has been far ahead of the US for a long time, and it’s because everything just costs so much less here.
Go to a Chinese person’s house–not the bottom 25% or so, but everyone else. And you’ll see new everything. New furniture, new car, new electronics and toys and kitchen appliances and gadgets of all kinds. Phone bills are $4 per month. Electricity runs about $15. Meals in restaurants are a fifth compared to back home, and so restaurants are full. Jet travel in-country is under a hundred dollars, hotel stays in nice places under $25 per night–so there is a lot of that too.
We’re asking the Chinese to spend more, but they already are. Their lifestyle today is a real-life fantasy compared to where they were 30 years ago, and they already have houses full of new stuff.
It’s fair to say globalization has peaked
The E-$ dethroned the U.S. $. The FX market is a black market. Since August 1971, the $ was no longer a fixed target, it became a moving target. However, the Gold Standard, the last legal link to gold (prior to the “gold cover” bill of March 19, 1968), was fictional, the economic tie tenuous, and its protection was a myth.
Thanks Mish. I enjoyed this post much. 🙂
“the efforts Russia has (sic) made since 2022 to use its natural gas pipelines” Nuts! It seems axiomatic that US directly or directed or funded the destruction of the Nordstream pipelines of over 25% of 2021 and onward of Europe gas. To be replaced largely by US LNG. Russia is bad enough. But don’t cover up the fools in the Beltway and Brussels.
Recently read Pettis’ book, Trade Wars are Class Wars.
Very thought provoking
A currency is what one will accept in exchange for real goods. Given the rapidly downward trajectory of US power and reputation abroad, the US dollar may soon come to have the same luster (or lack thereof) as the Shekel. To use the vernacular, the dollar is being “enshittified” by a failed U.S. foreign policy, one that now antagonizes the world.
In the future, what one accepts may have more to do with global political alignments and sympathies than faith and trust in the unit itself. Also, U.S. sanctions and threats (e.g. theft of a nation’s reserves) erodes the essential faith that a reserve currency must have. The Global South may decide “enough is enough” with U.S. sanctions, intimidation, proxy wars, and its support for Genocide. I can see the dollar becoming victim of a global BDS movement. This will accelerate adoption of a true — politically untainted— unit of economic exchange. As an American, I might start offering BRICs myself just to make a political statement as I fundamentally disagree with our goals and means (reliance on military force). The BRIC may evolve (over perhaps decades) to become like Keynes’ bancor–a fungible and universal unit of exchange composed of a stable basket of currencies.
For those living in India, Russia or China a BRIC could become a unit of pride and dollars a unit of shame. It may become fashionable to use BRICs in parallel with the national currency for cash transactions (where cash is still used). Even in countries that have strict rules against cash (like India) consumers may have Rupee credit cards and BRIC credit cards.
The time is coming when merchants overseas will say–when offered a dollar for gold, diamonds or advanced computer chips– sorry, as a matter of conscience, we DO NOT accept dollars because of your country’s policies.
“Pettis: “Surging US fiscal debt is needed mainly because the alternatives – surging US unemployment or surging household debt – are worse.”
Surging unemployment is not at all needed. Just a decline in final demand for imports. The two are only interchangeable in silly, simplistic post Keynes models. .
A major sanity check imposed by a Gold standard, is that it makes it much harder to prop up leeching classes: People in a position to demand lots; despite producing nothing.
In The West; these leeching classes are largely where all final demand is coming from by now. Not from gainful employment. The leeches either don’t work at all; “living off of ‘assets’ The Fed stole for them”; or are solely engaged in make-work, pretending they are somehow not idle despite producing nothing of value even remotely competitively.
Simply getting rid of the ability of the leeches to live off of wealth stolen from others; would simultaneously lower demand for imports; increase US labor competitiveness massively (after all; productive Americans are the ones robbed, hence saddled with the cost) to fund the leeches); and increase the US pool of productive labor (the leeches would have to get a job; if The Fed stopped robbing others in order to allow the imbeciles to believe they can “live off my assets.”)
So: You’d simultaneously have much more competitive US producers, who would hence demand more labor (who could work for cheaper, freed from the burden of supporting a giant superstructure of deadweight leeches on their backs); AND lower total demand. No “surging US unemployment or surging household debt” needed. Just a long overdue, Mellon adviced liquidation of labor, stocks, farmers, real estate….; hence purging the rottenness out of the system. Such that high costs of living and high living would come down. … and enterprising people could pick up the wrecks from less competent people who The Fed by now has handed it all, entirely unearned, to.
Trumps tariffs….. i had no idea he was yhe only one behind starting the trade war? (sarcasm)
reminder, both parties wanted tariffs.
reminder that the democrats wanted larger tariffs and not the small ones Trump impoaed in 2018.
reminder that fertilizer scarcitystarted when two of the largest potash mines in canada, flooded and remain flooded to this day. fertilizer pricea did not go up after this event. upsetting russia and China. hence the trade war begun with reducing exports of potash from first by russia in 2019, followed by china in february 2020. covid came. then russia went from 50% exprot restrictions to 100% in 2021. china followed Russia’s lead. china began stoxk puling commodities grains and minerals in 2021 anticipating long term trade war…..
An important third state apart from globalization/de-globalization is “stalling out.” I would reckon that is where we currently are. And like a shark, if globalization stalls out or stops swimming, it’s in trouble.
Wars, pandemics, and sanction-happy idiot politicians mean re-shoring and maintaining some redundant industries in country are must-haves. That will work against any future globalization. The real threat is China, Russia, Iran, and the BRICS finally divorcing themselves completely from the Western legal, economic and financial systems. That may be coming soon to a theater near you.
good point!
there is a lag effect here. global trade will not stop immediately. the people making the goods (in china, by american companies) are only contjnuing because demand remains high. imooaing higher tariffs? would translate to a slow shift of finding manufacturering in other countries. Vietnam for instance or what we are aeeing in Mexico and Brazil currently. this shoft will be over a few more years.
i suspect, the globalization (aka buying from china, will continue to alow) in the coming 24 months. eapecially if Europe follows the Americans
“As a result of China’s policy, Chinese consumers are subsidizing US consumers to the benefit of Chinese exporters, US (global) consumers, and the detriment of Chinese consumers and US businesses.”
Equal and opposite economic reaction. Watched the Vandenberg Starlink launch last nite. The rocket moved in the opposite direction of the exhaust plume. The contrail after sunset, during dusk, is the most spectacular part, considering my distance from the launch point.
Actually we do know. We have eight years. Look up Martin Armstrong’s economic confidence model and research Martin Armstrong.
We have, and the man is a charlatan.
Only idiots would follow convicted felon Martin Armstrong. Of course, there are a couple of those idiots who post here.
Foreign trade may be between individuals, or, more accurately, between companies, but capital flows are controlled by nations. Such individuals may be able to choose the currency used in pricing the trade, but it’s often nations that decide which currency will be used or credited to the parties’ accounts.
You do not want to put all of your eggs into 1 basket, or at least into China. I know for a fact that there are numerous US firms that have the majority of their production being manufactured in China. The #1 fear is a breakout of war between China and the US (or US proxies) and the inability to get product out of China.
I had read an article from a west coast law firm that specializes in helping US firms extricate their manufacturing out of China and back to either the US, Mexico, or other SE Asian countries. The lawyer said that all of this has to be done on the sly and U.S. clients are told that they are lucky if they can garner 50% of the value of their assets currently within China.
Just watched some videos on China. They portray a China which has rising social unrest. Reason being lot of chicanery when it comes to getting paid.
How does China produce so cheaply compared to everyone else?
Are they just that much better or is something else going on instead?.
Apparently getting paid for work performed has become problematic and people of China have this notion that if they worked they are entitled to being paid.
Protest frequencies are rising.
The idea that China can produce below the cost basis of everyone else, transport those goods around the globe and still beat domestically produced goods in the marketplace is not without a cost extracted from the workers of China.
Ongoing Globalization is not an assured thing when all the input costs have risen so strongly in manufacturing.
The simplest question is who is absorbing costs associated with inflationary impacts on production.
Goliath was felled by a stone in a sling. Would not be betting so blindly on sustainablity
of globalized trade.
“How does China produce so cheaply compared to everyone else?”
Freer, more capitalistic, countries will always find more efficient, lower cost ways to do things; than totalitarian countries where all potentially productive enterprise is forced to not only fork over to, but also to pay attention to, illiterate idiot five year planners at some PE Fund.
Mish, there is a screaming question in my mind and I am unable to put a finger on HOW BIG A PERCENTAGE of PHARMACEUTICALS are flowing in from China. I read that China EXPORTS those goods to India who in turn exports some of those drugs to us.
But, the overriding question is this: CAN CHINA KILL AMERICANS BY BANNING the EXPORTS of Drugs to America?
The history of mankind is the pursuit of Cheap Labor.
From slavery to indentured servitude to child labor and now Outsourcing from Western democracies, where the Labor and Environmental laws make manufacturing more expensive, to countries with weak currencies and/or authoritarian govts.
China has forced labor manufacturing. China has no Unions as they are outlawed. China’s Labor laws are far weaker than in the West. China’s Environmental record today is poor. China has no elections and the people do not have freedom of speech or freedom to assemble so short of revolution it is pretty much impossible for the Chinese to do what Westerners did with regards to the Labor movement and Environmental laws to clean up our rivers etc back in the 70’s.
Wage arbitrage is alive and well right now and in case you haven’t noticed over the last 30 yrs or so since we signed NAFTA and Free Trade with China life for the avg American has become FAR worse economically.
You forgot the last 200 years of history. When we harnessed the energy in coal, oil and natural gas. One barrel of oil contains the equivalent energy to 25000 hours of physical labor. This largely eliminated the need for most manual labor and helped to end slavery in most of the world.
A barrel of oil sells for $80, yet it contains $25000 of labor (at $1 per hour) or $250,000 of labor (at $10 per hour).
That is the biggest reason that unskilled manual labor is worth so little. Wage arbitrage is a side product of this.
papa dave, its 90 work hours in a barrel of oil. and the value of such should be around $900 on average for most wetern economies.
when min wage increases nationally or producticity falls in a nation (USA) the value of the oil goes up. $900 was the value gicen to a barrel of oil in thevmid 1990s and only recently has it been shiftinf upwards. now. thanks to lackbof producticity in our aociety as well as min wage increases.
unfortunately, carbon taxe soke purpose was meant to add a troll under the bridge tax on a barrel of oil. this plan has been in place since the 1950s. (agreed upon by gokden phoenix nations) and to this day, the same member countries are puahing for even higher carbon taxes.
China’s low labor has more to do with currency manipulation. the chinese currency remains pegged and is not free floating. and likely will always remain thos way, long after America has its kinetic war with China or Russia. chona will always find a way to cheat the system…..
Nope.
A barrel of oil contains 5.8 million British Thermal Units of energy in a typical 42-gallon barrel. A human in peak physical condition is capable of putting out 750 BTU per hour of work (we will ignore that a human can’t maintain this pace). That translates to a barrel of oil doing 7,733 hours of optimal human labor.
Very few humans are jn “peak” physical condition.
As such, many will site 25000 hours, or 12.5 years of “normal” human labor in each barrel.
https://www.texasmonthly.com/articles/sneak-peak/#:~:text=Hagens%3A%20Oil%20is%20the%20lifeblood,is%2012.5%20years%20of%20work.
Outsourcing isn’t a function of harnessing hydrocarbon energy. If that were true then we would have outsourced to the 3rd world well over a hundred yrs ago and Detroit would have never become MoTown.
Outsourcing is a function of globalization and the pursuit of Cheap Labor.
China doesn’t outlaw labor unions b/c of hydrocarbons.
China doesn’t have elections, but that’s not b/c of hydrocarbons.
China has weal Labor and Environmental laws, but that’s not b/c of hydrocarbons.
We had cheap oil and coal etc in the 50’s and 60’s and the American family had a small home that they owned and one breadwinner in the family.
Globalization has not improved the lives of folks in the Rust Belt.
The UC Berzerkely folks, back in the day, believed the solution was for the US to exit industries where the country was not competitive (e.g., Japan-autos) and focus on higher technologies where the rest of the world lagged. But what happens when the rest of the world catches up?
This is the global story of the last few centuries, and the US in particular. Someone develops a competitive advantage and then others catch up. The advantage is always temporary.
Attempting to retain your advantage through tariffs, trade barriers etc is a losing proposition.
We are on an economic hamster wheel. We must continue to run faster. Which means we need to continue to be the leader in new and emerging areas. We did that in manufacturing, steel, farming, computers, internet, software, pharmaceuticals, entertainment, sports, etc. But as others catch up we need to develop new areas of advantage. Space and AI are two of those newer areas.
The folks in the rust belt will remain screwed if they are waiting for the 1950s to return. Because it isn’t going to happen. If you want to have a decent standard of living you need to participate in the new growth areas rather than sit on your butt and complain about being left out. Though that appears to be what they are doing.
spot on!
tarriffs do not help with innovation.
catching up is possible if and only if america is willing to adopt the new technology and inveat. 5g network for example. however in the rust belt? loaing unions in automobiles ? is a part that is key to competitivenesa in the aito industry. yet the big three continue to lay off, off shore or shut plants. foreign automobile plants aeem to adopt and shift. why cannot thevbig three?
Mish,
Excellent article, as usual.
In fact, it contains 5 to 10 major points that each deserve a post of their own (people can speed through sentence/paragraph sized bits of info and miss their significance…a dedicated post makes people slow down and reasonable repetition helps clarification/understanding).
Also, sometimes breaking out aggregate stats is enlightening.
In dollar terms at least Chinese exports to the US tend to be concentrated in 4 to 6 major areas – examining those closely is worthwhile (“chips” are a major one – but an aggregate in itself…the chip-tied end products may be more significant).
Ditto for breaking down the detailed composition of US worldwide imports (albeit that almost every category is bad).
We focus on China (appropriately) but autos and crude oil (still) are major trade deficit contributors and they (so far) originate outside of China.
Thanks!
The Pandemic was great for Chinese exports. A US funded bioweapon released in China, then the world. The draconian responses showed where real power is. Because it was a form of warfare. Only in war could you release a never before administered antidote in the form of mRNA across entire populations by diktat. Chip tool purchases were front loaded to get ahead of sanctions. Chinese demographics are at the heart of all of it for the CCP. AI and Robots to care for the elderly? Then they need their own chips. A war over Taiwan? Ditto. Its a sticky wicket.
“The US economy must absorb an enormous amount of savings””.
This is a clean, aseptic way to speak about the question.
Dictatorships around the world steal trillions of dollars. Tyrants speak against the west, but they want their sons and their money in USA, Switzerland and Ibiza in summer.
That big amount of money NEVER will be invested in their countries, where a coup d’etat or a revolution can occur. Big asset management firms in the west are drowning with cash from Iran, Russia, China, etc.
Although you make a valiant attempt at probing to the underlying reality, this piece is the only one you’ve written that is a mixed bag. Just a couple of thoughts.
You’re almost alone in quoting Pettis as a serious economist — he did, previously, have a column at the Financial Times, and a post at Tsinghua. Both seemingly no longer the case. What does it mean to say that the US is “forced to absorb half the excess savings of the rest of the world”? Does that UST are issued out of the benevolence of the US?
Your previous articles on the chip conflict were useful but not understanding technological innovation is limiting. If the US started with all the “technology”, where is this advantage manifested? Innovation in technology (patentable that is) takes place at a granular level. China became the manufacturing powerhouse it is by licensing western technology. Once licensing is no longer possible, it must necessarily self-develop, which is occurring at a rate alarming to the west (although it must have a short memory, because Japan did the same).
Your political thoughts reflect your agreement with the standard concensus in the west which is not much more than supporting militarism and foreign engagements.
There is much else that is dubious which can’t be addressed here but I think if you are wearing an economist’s cap, what is the flaw with Ricardo’s argument that countries should trade according to their comparative advantages?
To take one example, China is often accused of controlling world drug production — which isn’t true because all major drugs not out of patent protection (ie the really expensive drugs) cannot be produced without license. China produces the key precursors (ie APIs). Western and Japanese pharma don’t bother with these low profit margin items — but they could certainly produce on their own or buy elsewhere.
You seriously underestimate the effect of China manufactures on containing global inflation, past, present and in the future (EVs). And your comment on how China represses its own consumer market is quite uninformed — perhaps you need to tune into such channels as Inside China Business on YT or actually take a trip yourself. Most of my professional Chinese colleagues admit to having very few things to buy (the exception being real estate). With healthcare, education and public transportion (including high speed rail) being provided at nominal cost, typical Chinese middle class disposable income is much higher than the US without even factoring the far lower costs. Their array of choice in technology products (computers, phones, EVs etc) is bewildering. As is their choice of fashion goods, unprocessed foods, gold bars and coins, etc.
What’s the size of the Chinese middle class? 300MM out of 1.3 billion? 100MM CCP affiliated? Hmmm. Let’s start there. What’s going on with a billion living under the yoke. The trains run on time? Pettis is not a serious economist? Shirley you jest. Pettis was an emerging markets bond trader and has spent a long time in China. You would do well to read him. Or perhaps Marx was a serious economist?
“Shirley” you jest.
https://foreignpolicy.com/2011/09/07/an-exorbitant-burden/
It’s a function of accounting math that the US is forced to absorb excess savings from other countries.
I see — the argument is from accounting, is it?
Little wonder there is so little understanding of essentials.
( ) try opening a “western”/american fast food franchise OUTSIDE of the USA.
( ) look at the insurance rates @ international shipping.
( ) honestly measure the relevance+credibility of “global” institutions like the UN.
globalization is as much cultural as economic.
end of debate.
globalization is over (and reversing).
Clearly you have not spent much time outside the US. I live in 2 countries ( Australia and Egypt) and have been to most of the major US originated chains in both. Most of their local managers are local, the chains are all franchised to either local or regional investors, their supplies are mostly local as well ( I once toured through the plant that supplies the Pattie’s in Australia and my nephew manufactures the serviettes in Egypt for a fast food chain there). So very little of any fast food chains internationally are any more dependant on globalisation than their local ( non US or non western) competitors.
Also the ingredients in those franchises are probably better than you get in the US such as the cola using real sugar rather than corn syrup plus far less GMO crap
I lived outside the US for 15 years… and australia doesn’t count. australia = USA-lite.
“western” retail outside the west peaked a long time ago. “western” retail is now a negative cultural target.
there are fewer western food outlets in Egypt now than 10 years ago. that’s a fact. the west’s cultural influence around the globe is waning… the economics is naturally contracting along with it.
your anecdotal discussion is pedantic. globalization seemed unstoppable just 15 years ago. now, globalization is obviously & relentlessly receding.
Other countries became very good at imitating American fast-food chains at an early date offering similar food but often with a local taste in mind. The imitations are better than the originals in more cases than I would like to admit.
Not counting the US, global trade has declined since the pandemic in 2019. There are many reasons for this, other than the pandemic.
Some of the reasons are: an increase in supply chain disruptions such as the panama canal and red sea, increases in tariffs, Russia’s invasion of Ukraine, the conflict between Israel and Hamas, etc
The longer term trend will still favor globalization as companies in a competitive world, will always work to lower their costs.
the low-cost, friction-free, secure environment that facilitated globalization no longer exists… and it isn’t coming back.
higher risks, less security, higher costs, diminishing cooperation…
globalization requires tailwind… it cannot operate/survive vs. headwind.
We refuse to eat Burger King (and the rest) both here an in Portugal, our winter home. But, we have German friends who LOVE BK. There is one in our Town and another nearby in Faro…..which is our local AIRPORT for the Algarve.
As the future unfolds a currency is only good if you can exchange it for something materially useful or a service of value, The USA is losing because it cannot make a worthwhile exchange in goods or services. Tariffs will not reverse this. Only competition at the world level with excellent goods or services will make us prosperous. Think accordingly.
I totally agree. America needs to be GREAT AGAIN, and unfortunately, Trump’s choice are Tariffs which contribute to inflation. Biden is idea-free, so we have two parties: “One that has NO ideas and the other has STUPID IDEAS.” We end up on in the middle with NO GOOD IDEAS.
Yes. There are no good choices. You can get inflation or inflation. At some point but unpredictable when, I think the dam breaks on debt. I think the more likely scenario is we get some sort of emergency and rates get cut quite a bit again in order for the US government to extend and pretend. I think it going to unstable this way for another 9 years as we jawbone rates between current rates and 0.