1/11 Adam Tooze suggests that "If your aim is restoring the...
Michael Pettis@michaelxpettis
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Oct 09, 2024
~2 min read
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1/11
Adam Tooze suggests that "If your aim is restoring the competitive position of US industry, a large dollar devaluation would do more than a sprinkling of industrial subsidies."
@adam_tooze
ft.com/content/225cd9… via @ft
Adam Tooze suggests that "If your aim is restoring the competitive position of US industry, a large dollar devaluation would do more than a sprinkling of industrial subsidies."
@adam_tooze
ft.com/content/225cd9… via @ft
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2/11
He's right, in the sense that the relative decline of US manufacturing over the past several decades was a partial (and substantial) consequence of the special role the US economy plays in absorbing global savings imbalances.
He's right, in the sense that the relative decline of US manufacturing over the past several decades was a partial (and substantial) consequence of the special role the US economy plays in absorbing global savings imbalances.
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3/11
This role means, as I explain in a recent Carnegie piece, that the US economy is driven (in a fairly automatic way) by the obverse of industrial policies implemented abroad that boost manufacturing sectors at the expense of domestic consumption.
carnegieendowment.org/china-financia…
This role means, as I explain in a recent Carnegie piece, that the US economy is driven (in a fairly automatic way) by the obverse of industrial policies implemented abroad that boost manufacturing sectors at the expense of domestic consumption.
carnegieendowment.org/china-financia…
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4/11
Just as these industrial policies abroad usually work by forcing transfers from domestic households that subsidize manufacturing (and repress domestic demand, so leading to persistent trade surpluses), they have the obverse impact on US consumption and manufacturing.
Just as these industrial policies abroad usually work by forcing transfers from domestic households that subsidize manufacturing (and repress domestic demand, so leading to persistent trade surpluses), they have the obverse impact on US consumption and manufacturing.
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5/11
That is why any policy – and "a large dollar devaluation" is just one of many such policies – that reverses these transfers will work to strengthen US manufacturing. And while this will come at the expense of overall US consumption (relative to...
That is why any policy – and "a large dollar devaluation" is just one of many such policies – that reverses these transfers will work to strengthen US manufacturing. And while this will come at the expense of overall US consumption (relative to...
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6/11
GDP, that is), if the right measures are implemented these transfers will also allow US producers to grab a larger share of American demand, and by expanding both business investment and raising wages, can result in growth for both US consumption and US GDP.
GDP, that is), if the right measures are implemented these transfers will also allow US producers to grab a larger share of American demand, and by expanding both business investment and raising wages, can result in growth for both US consumption and US GDP.
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7/11
The problem, as Tooze notes, is that "for such a radical policy to see the light of day would require producer interests to dethrone Wall Street — nothing short of a revolution."
The problem, as Tooze notes, is that "for such a radical policy to see the light of day would require producer interests to dethrone Wall Street — nothing short of a revolution."
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8/11
But that revolution may be happening for structural reasons that I think Tooze might be ignoring. Nearly 20 years ago Dani Rodrik argued that countries faced a trilemma in which they could choose two of the following: deeper global economic integration, national economic...
But that revolution may be happening for structural reasons that I think Tooze might be ignoring. Nearly 20 years ago Dani Rodrik argued that countries faced a trilemma in which they could choose two of the following: deeper global economic integration, national economic...
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9/11
sovereignty, and democracy. It seems that after decades of globalization, the world seems unwilling to accept the costs of a further reduction in economic sovereignty, which in turn implies that the US and other democracies must either deglobalize or accept "less democracy".
sovereignty, and democracy. It seems that after decades of globalization, the world seems unwilling to accept the costs of a further reduction in economic sovereignty, which in turn implies that the US and other democracies must either deglobalize or accept "less democracy".
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10/11
The cynical response might be that we seem to be moving towards the latter, but I see the polarization of politics in recent years as the way democracies have always adjusted. My bet is that one way or another, we will move towards less globalization.
The cynical response might be that we seem to be moving towards the latter, but I see the polarization of politics in recent years as the way democracies have always adjusted. My bet is that one way or another, we will move towards less globalization.
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11/11
There are many ways this can happen, of course, but it implies that rather than position ourselves "for" or "against" globalization, Americans (and others) should be thinking about what kind of adjustment we want and what the costs will be.
There are many ways this can happen, of course, but it implies that rather than position ourselves "for" or "against" globalization, Americans (and others) should be thinking about what kind of adjustment we want and what the costs will be.
