Arjun Jayadev- whose first degree is from London and whose Doctorate is from Amherst, is Professor of Economics at the School of Liberal Studies at Azim Premji University, Bangalore, and Senior Economist at the Institute for New Economic Thinking.
J. W. Mason is Assistant Professor of Economics at John Jay College, City University of New York. He is also a Fellow at the Roosevelt Institute. He has a PhD in Economics from the University of Massachusetts at Amherst.
Two hundred years ago, when Ricardo wrote down the first model of comparative advantage in terms of wool and wine, this vision had at least a superficial plausibility. Much trade then did involve primary products where differences in climate were decisive.
Differences in climate give rise to absolute advantage- not comparative advantage. Ricardo mentioned Portugal in connection with Wine at a time when England was producing Wine (as it is once again doing). Portugal too produced and still produces wool- indeed its Burel, a felt like fabric, has always been produced from the sheep with graze its highest mountain.
Ricardo was talking about the mutual advantage received by Portugal and England through a treaty which allowed each to specialize in an industry in which it had a comparative advantage- i.e. a lower opportunity cost ratio. There could still be 'intra-industry' trade in commodities within those industries where absolute or acquired advantage obtained. A Portuguese connoisseur might proudly serve his guests a unique English vintage while an English dandy may pay extra for Burel so as to stand out from the crowd.
But today most trade is in manufactured goods.
This was true before I was born. Incidentally, both wine and wool have to be processed. That's manufacturing.
In recent years, for example, the majority of Mexico’s exports to the United States have been vehicles, machinery and equipment, computers and auto parts; only about a tenth consisted of agricultural goods and oil, which depend on natural endowments.
Natural endowments give rise to absolute advantage. These cretins think that means the same thing as comparative advantage. Provided localized external economies of scope and scale obtain or if there can be 'reswitching' between techniques of different capital intensity, opportunity cost ratios will differ in an ideographic manner. It will make sense for low wage countries to export some capital intensive goods and vice versa.
However, that is not what is happening with a lot of US/Mexico trade. Comparative advantage is irrelevant where the technologically more advanced country (which has 'acquired advantage') takes over territory in the developing country (e.g. by colonialism, or else by leasing and sweating labor) and sets up turn-key operations on the basis of much lower wages and benefits payable. These types of 'Maquiladora' enterprises on the border or in 'Special Economic Zones' may be exempt from, or willfully disobedient to, the country's laws regards Workers rights. Consider the 'Han Young' case. Hyundai wouldn't let its workers unionize and simply fired them and moved the factory despite Mexican courts deciding the Company was in the wrong.
This has nothing to do with 'comparative advantage'. It is a capturing of 'surplus value' or 'economic rent' by a more or less corrupt and coercive process. It is the unfairness and illegality involved which Lefties should be banging on about. Telling stupid lies about Ricardo- a Radical who lived long ago and whose theory Marx modified- is counter productive.
Why are these two economists displaying their ignorance in such a blatant manner? Were they asleep during 'Trade theory 101'? Or, is their aggressive stupidity a signal of 'wokeness'?
The theory of comparative advantage is harder to apply to manufactured goods, since their production does not depend on specific geographic factors in the way that agriculture and other primary products do.
That theory is irrelevant here. It is obvious that Hyundai or whoever is keeping the high value adding activities for its own peeps back home while exploiting the fuck out of Mexico's workers so as to get access to affluent markets in the US and Canada under NAFTA.
Comparative advantage just means 'buy cheap, sell dear'. Prices on open markets reflect opportunity cost ratios. We use this principle all the time in our daily lives. A Mum may be superior to anyone else in looking after her kid. But she may hire a child minder if she can earn more at her job than the child minder charges. I recall that I once taught Econ to the daughter of a famous Economist. Daddy could have done a better job, but I was cheaper. Sadly, the girl slept with me. So did all the other girls in the class. The moment I started chanting 'when the supply curve intersects with the demand curve', all the girls fell sound asleep. The boys on the other hand had vivid day-dreams of adventures in exotic locations or far far away on the other side of the galaxy.
The problem gets worse when we observe that—despite some spectacular exceptions—the world is still divided between a wealthy, industrialized North and poorer, less industrialized South.
But we also observe that within every country and every district in that country and every neighborhood in that district that people are divided between who have have high productivity- i.e. the add more value with their factor input- and those who have little, no or negative productivity- i.e. the add little, no, or negative value. That's why some are rich and some are poor. Consider two billionaires who are brothers. One makes smart investments. The other makes shitty investments. At the end of the day, one bro may be paying the bills for the other bro.
It’s not clear how specialization according to comparative advantage is supposed to explain this persistent divide.
It is blindingly obvious. Specialize in doing smart stuff and you get ahead. Specialize in doing stupid shit and you fall behind.
How can the lasting division of the world into a minority of rich industrial countries and majority of less developed ones reflect a rational division of labor, unless there is some deep and unchanging difference between the human beings who make them up?
There is no 'deep and unchanging difference'. Some polities start doing more and more stupid shit. Look at Venezuela. Other countries keep doing smarter and smarter stuff. Look at South Korea. Back in the Seventies, I never dreamed I'd be watching South Korean tv serials on South Korean OLED TVs. It's like Trump said- how the fuck did a little country which was as poor as India 60 years ago suddenly become a leader in tech while also winning the Oscar for best movie and getting us all to dance 'gangnam style' at the Christmas party?
Meanwhile North Korea is pretty shitty despite having a thriving black and grey market.
At one point, the suggestion was that poorer countries simply suffered from a lack of capital; free financial flows, it was promised, would bring the distribution of labor and capital into balance and close the gap between rich and poor.
No. The suggestion was that smart peeps from rich countries would go to poor countries and set up industries there. The natives would be touchingly grateful. Also they'd become the right sort of Christian and have babies like crazy so that real wages would not rise but per unit labor cost would fall as technology improved.
The problem was that Countries like Mexico and then Russia and then China and then Cuba and so forth turned to the Left before discovering this was making them poorer and poorer. Mexico went for maquiladora almost four decades ago. Other countries made similar adjustments. Cuba was able to support itself by specializing in exporting services and pharma. But Venezuela shat the bad spectacularly.
Few of neoliberalism’s promises have failed more clearly than this one, as financial liberalization has generally seen capital flow “uphill,” from rich to poor.
These cretins live in a world where all sorts of abstractions are constantly making 'promises' which poor peeps are gullible enough to believe. Why? Were they sexually abused by Professors who made promises to them? Are they still being sodomized by random dudes who promise to equalize global income? If so, we must be support of these two Amherst bros whose every orifice is dripping with jizz.
The reason peeps in poor countries try to get their money out- and to resettle their kids in rich countries- is because they don't want to be robbed or taxed to death.
An earlier generation of neoliberals were more frank about where the international division of labor ultimately came from. As historian Quinn Slobodian’s notes in his magnificent book Globalists: The End of Empire and the Birth of Neoliberalism (2018), Röpke put it this way: “The rich countries of today are rich because,
lots of rich peeps live there and they compete with each other in doing smart things. Moreover, even Socialists and populists in those countries can't fuck up the Economy because the working class will tell them to go fuck themselves if they go too far down that road.
along with the necessary prerequisites of modern technology, they have a particular form of economic organization that responds to their spirit.”
Morishima, a Lefty, used the word spirit. It is Hegelian and therefore perfectly Marxian. But Hayekian open markets too are perfectly Marxist as is the notion that labour should be paid based on its contribution, not on the basis of need.
Industrialization in the South was impossible due to a “lack of punctuality, reliability, inclination to save and create.”
There is an underclass in every rich country which has these traits. They are kept alive on a social minimum. They themselves see that Socialist policies would involve them having to get a job and thus quietly vote Tory if they can remember to wake up in time.
Few contemporary advocates of free trade would justify the international division of labor in such naked biological or civilizational terms. (Nor did Ricardo.) But it’s hard to see how else to reconcile a comparative advantage story of trade with the persistent division of the world into rich and poor.
Few contemporary advocates of free masturbation would justify it in any terms whatsoever. Indeed, there are few such advocates. The plain fact is 'justifications' don't matter. Some virtue signalers pretend that they are concerned with equality and fraternity and other shit, but that is mere hypocrisy. Nobody actually gives a fuck.
More sophisticated mainstream accounts of international trade recognize that little of it looks like Ricardo’s story of Britain exporting cloth and Portugal exporting wine. According to the New Trade Theory, trade mainly results from a combination of increasing returns and imperfect competition. Production of goods is concentrated in certain countries not because they are they necessarily have any relative advantage in producing them, but simply because concentrating production at one site leads to lower costs than smaller scale production in many places.
This is 'acquired advantage'. But that advantage only came into being on the basis of opportunity cost ratios- i.e. what you could afford and what was profitable.
Production is concentrated where producers are concentrated. If producers stop producing, there is no fucking production. One reason they may stop producing is because it doesn't pay to do so. Peeps can get a job in Academia or with the Government or an NGO. But if everybody does that, then there is a crunch. Smart peeps run away.
This body of theory has some affinities with radical theories of underdevelopment; in one early paper Paul Krugman, who won his Nobel for work in this area, developed a model he described as “reminiscent of the Hobson-Lenin theory of imperialism.” But the shifting theoretical foundation of trade orthodoxy has had surprisingly little effect on its public pronouncements.
People stopped paying attention to Krugman after he started writing a column for the NYT. Come to think of it, fewer people are reading the NYT though they may occasionally read a 'woke' article simply so as to raise their blood pressure and to remind themselves why they voted for Trump.
This is where the first of our two alternatives to neoliberalism enters. This vision makes national development, rather than the international division of labor, the ultimate goal of trade.
Why can't Nigeria be like Norway? How is it that Scotland does not have a large class of subsistence farmers and goat herders? Why can't we just wave a magic wand and turn shops and factories and banks and offices into camels so everybody could have an equal number of camels which they could use to provide milk and meat and thus live happily after? Equally, why can't we turn camels into factories and banks and high tech labs?
This tradition draws on the historical record of catch-up industrialization in the United States, Germany, and East Asia.
All countries which are very good at International trade do a lot of Research and Development and innovation and marketing and capital accumulation and portfolio diversification. One reason for this is because these countries could educate and mobilize the entire population. Socialists got fucked over. True East Germany was a Communist country for a few decades. But its Trade Unionists and dissidents were fucked over by the Stasi. Its labor force was more, not less, biddable than elsewhere.
Its theoretical roots lie in the pragmatic and nationalist approach of Alexander Hamilton in the United States, Friedrich List in Germany, and the policymakers of the Meiji revolution in Japan.
They created a profit motive for the emergence of big industrial cartels which were able to fuck over populists and Socialists. The US beat the shit out of Commies. So did Japan and Germany. Pinkertons and other hired thugs did the beating in America. Nazis did it in Germany. In Japan, there were crazy guys busy killing 'Liberal' politicians. Soon, you didn't need authoritarianism coz the working class was whimpering and trying to lick the hand of Corporate interests.
It extends through twentieth-century anti-colonial economists such as Raul Prebisch in the South
who was useless coz the South aint like the North. Us guys like siestas.
and development economists such as Albert O. Hirschman in the North,
who finally admitted that Development Economics is worthless. All that matters is Tardean mimetics. Imitate what your richer neighbor is doing on the basis of buying cheap and selling dear.
to more contemporary heterodox thinkers like Alice Amsden,
who was too stupid to notice that the 'Development state' only worked well if there was an existential military threat. Countries which have or had conscription can have some top down development- because workers are initially obedient- provided they quickly privatize any initially state created trading entity so that losses don't accumulate. This avoids a fiscal crunch.
Ha-Joon Chang, and Anthony Thirlwall.
Whom only stupid academics teaching worthless shite bother with.
It also draws on more radical Marx-influenced ideas about underdevelopment and imperialism.
But it cashes out as racism. Krauts and Nips did well coz they were as racist as fuck- though only America was able to sustain segregation for a century- while non-racist countries which adopted a Left-Liberal approach- e.g. India in the Fifties- fucked up massively. Since the rise of China, many Indians have started to wonder if there's something wrong with us biologically. Perhaps only the 'caste' Hindu population is analogous to the 'Han' population with its Confucian values. Needless to say this is nonsense. Nations facing an existential threat have to quickly climb the value chain. Muslim Bangladesh has now overtaken India. That's a country which might be under two feet of water in a couple of decades. On present showing, Bangladesh will become the Holland of South Asia. Them Bengalis- unlike their cousins in India- be smart in ways that don't involve fucking over the economy.
In this vision, the economic world is composed not of abstract individuals but of social organisms—firms, industries, states—that require suitable conditions to maintain themselves and have the capacity to develop over time.
They develop over time by 'acquiring' advantages such that they have the lower opportunity cost ratio for producing higher value adding goods. If they choose instead to create a Socialist Utopia, they screw up.
The concept of development—borrowed originally from biology—
which borrowed it from the law which borrowed it from household management or economics as the Greeks called it
was the master metaphor for much mid-century thinking on the international economy. For development theorists like Walt Rostow, economies were like tadpoles growing in a pond; one might metamorphose earlier than another, but given the right conditions all would end up as similar frogs.
Screw Rostow. His book came out in 1960. Two years later the Chinese gave the Indians a black eye and so the newly independent countries of Africa and Asia chose the 'One Party' Political model. India, too, used 'free money' from the US to finance a shift to the Left. Rostow refused to apologize for supporting the Vietnam war. Thus his name became mud.
On this account, the central question about the international system is not whether it allows for optimal allocation of resources across borders but whether it provides a suitable environment for the survival and growth of these social organisms.
Nonsense! There were two 'international systems'. Then China broke with the USSR and there were three international systems. But Mao fucked up the Chinese economy with his stupid Cultural Revolution. Brezhnev's 'stabilization of the cadres'- i.e. not shooting the corrupt and incompetent- fucked up the Soviets. India's lurch to the Left was economically disastrous as were all the other Leftist experiments elsewhere. By the end of the Seventies, every 'Socialist' country had turned into a dollar worshipper. You could buy anything you liked in Moscow or Hanoi or Beijing in dollars. You could scarcely buy anything nice in the indigenous currency.
Does it promote or hold back the productive capacities of nations?
Socialism didn't just hold back the productive capacities of the nation, it took its pants down and fucked it in the ass.
Actually existing global capitalism, from this view, is very far from the efficient, self-equilibrating system of neoliberal fantasy.
Because of Socialist fantasies.
International competition is red in tooth and claw;
Whereas Socialism involves killing people who try to run away and locking up dissidents.
unmanaged, it is more likely to disrupt the development process of the weaker participants than to deliver mutual benefits.
Very true! I am trying to develop into the next Beyonce. Sadly, the globalized market for talented female singers of great beauty is disrupting my development process. That's why I don't have a record contract. It's not because I am a fat, elderly, South Indian man who is shit at singing.
If comparative advantage is a bad guide to how the greater part of trade is actually organized,
Comparative advantage is just a fancy way of saying 'buy low, sell high'. If you don't do it, you quickly run out of cash.
it is an even worse one to how it should be. Think again about Obstfeld’s warning against distorting the international division of labor. (“Distort” is one of the many keywords that allows a narrow theoretical point to masquerade as a fact about the real world, by conflating a term’s technical meaning with its everyday one.)
These Amherst bros have a narrow theoretical point, sho' nuff. That's why they are pedants rather than billionaire entrepreneurs.
Intentionally or otherwise, this language suggests that it’s the proper role of some countries to make cars and computers, and the role of others to make clothes and coffee beans, and nothing should be done to change this.
India tried. It was a largely agricultural country which decided to get free food from Amrika while pursuing technologically advanced industries. This failed spectacularly. There was a point where Indian pig iron sold at a higher price than Indian steel- in other words, the country was subsidizing negative value adding. Saudi Arabia, too, at one point was exporting wheat and water melons. Then it realized that it was depleting its acquifers too quickly.
The countries that specialize in higher education and software and pharmaceuticals should retain their monopolies, while the countries that specialize in plantation agriculture and sweatshop clothing should keep on doing that. Everybody should stay in their lane.
Thinks nobody at all. There was a time when guys in Silicon Valley noticed that a lot of the dudes who were doing the heavy lifting had names like Apu Narasinghapatanam. They thought that setting up campuses in India would be a good idea. Only later did they realize that most Indians are like me- i.e. stupid and lazy. The ones who aren't want to get the fuck away from India.
The anti-development program of neoliberal trade is not just a matter of excluding the “infant industry” protections that today’s developed countries relied on when they were industrializing.
India had plenty of such 'infants' who never grew up. Instead they were on tax-funded life support.
The regime enforces the international division of labor in ways that go well beyond what we normally think of as trade. The outstanding example is intellectual property (IP). The increasing weight of IP provisions in today’s “trade” agreements means they are no longer simply about setting rules for exchanges between countries. While the ideal of free trade closes off the possibility of transforming productive capabilities, IP rules prevent them from using even the capabilities they already have.
Who the fuck will enforce such rules? If a thing can be stolen it will be stolen. Good luck taking the matter to court. The case will drag on for thirty years.
They are also a reminder that the market power that the New Trade Theory takes as its starting point isn’t just a fact about the world but something that has to be actively created and maintained. More broadly, IP protections, like the neoliberal trade regime they are part of, don’t just reflect but actively enforce a global division of labor.
Very true! If you see an illiterate lady walking a mile while carrying a bucket of water, the reason for this aint the fact that she is poor and her country is poor. The fault is with 'neo-liberalism'. However, this is also true of Amherst bros who are forced to give beejays at Truck Stops so as to pay off their student loans.
The experience of India shows how consequential these agreements can be. In 1972 the nation banned product patents in pharmaceuticals.
Prior to 1995 every country was free to have its own patent laws. Why did India wait till 1970 to change the British era law? The answer was that the thing did not matter in the slightest. Socialist policies and Trade Union pressure meant that indigenous companies were making losses. Take India's first Pharma company set up by the great P.C Ray. It was loss making by the end of the Fifties and had to be Nationalized after being kept alive by the Government.
At the time, medicine prices in the country were among the highest in the world, but critics of the ban warned that the country would lose access to imported medicines.
How? Capitalism does not work that way. Indians could buy any amount of drugs anywhere and ship them wherever they pleased. The problem with India was that nobody had any money. Fuck getting hold of medicines, getting food was the big worry.
In the decades that followed, however, India established a vast indigenous generics manufacturing industry and reverse engineered most state-of-the-art medicines developed elsewhere.
India was able to sell these to Africa, MENA etc thanks to the Indian diaspora. In other words, it had a ready made distribution system. By the Seventies, corruption had become so intense that Socialism had lost its power to fuck the economy over. Look at the rise of the Ambanis. They were popular heroes precisely because they had shown they knew who to bribe and with how much.
Prices in the country dropped to among the lowest in the world, and by the turn of the century, Indian generic companies had become the largest supplier of affordable essential medicines outside the western world and the largest global supplier of generic medicines. Doctors Without Borders dubbed the country the “pharmacy of the developing world.”
Coz India has a comparative advantage in pharma.
Intellectual property protections—like the neoliberal trade regime they are part of—don’t just reflect but actively enforce a global division of labor.
India did sign up to TRIPs but that hasn't hurt Pharma any. These guys are talking nonsense.
The success of this industry was not predictable from standard narratives of export-oriented growth.
Fuck off! India had plenty of good chemists. Socialist policies fucked up Pharma for twenty years but then corruption set it free.
This was not a case of low wage led industrialization;
Yes it was. Indian Chemists earn a small fraction of what American Chemists do.
India did not have a comparative advantage in the labor, knowhow or raw material required for drug production.
Yes it did. Americans can earn plenty of money becoming plumbers or pastors or pot dealers rather than becoming Chemists. Indians are fucked unless they get high marks and a white collar job. But they still earn peanuts compared to Americans.
Instead, a combination of industrial policy, including early public investment, learning by doing as Indian pharmaceutical companies gained technical and technological expertise, a fortuitously large pool of scientists, and critically, no IP restrictions on the adoption of foreign technology combined to allow the country to become a low-cost producer.
But India had all these things in the Fifties! Sadly stupid socialist policies fucked up Industry.
In theory, countries specialize in the things they are best at making.
No. The Saudis are the best at riding camels. But they import camel jockeys from Bangladesh. Why? Coz that is cheaper and, because of endemic poverty, Bangladeshi kids are much much lighter. I notice that my local South Indian restaurant now employs Polish waiters. Why? Tamils have been in London long enough to have moved upwards educationally and occupationally. I must say, these young Polish people do an excellent job. They even pronounce 'morrecorrumbe' correctly. Sadly, they too are moving upward rapidly. Soon robots will be serving me my masala dosa.
In reality, what countries are good at depends on what they make—or are allowed to.
Sovereign countries can do as they please. If they are Socialist they can fuck up their own country.
India’s experience is far from unique. Ha-Joon Chang notes that historically, European and U.S. patent laws “accorded only very inadequate protection to the [intellectual property rights] of foreign entities.
So did India. The 1970 Act was meant to produce indigenous innovators. Foreigners who tried to use Indian courts to enforce their entitlements ran away screaming and shitting themselves incessantly. So did Indians. That's why a lot of Indians prefer to contract in third party jurisdictions or else simply don't bother with contracts.
In most countries, including Britain (before the 1852 reform), the Netherlands, Austria and France, the patenting of imported inventions by their nationals was often explicitly allowed.”
So, 'intellectual property' was theft- like Bakunin said. This only changed to the extent that countries with favorable regimes could offer domicile to high net worth individuals likely to subscribe to lucrative ancillary services.
More recent industrializers followed the same playbook—Japan and Korea made extensive use of “creative imitation” to promote a whole range of industries and to generate enormous opportunities for indigenous companies to develop technological capabilities.
So, Neo-Liberalism was about national sovereignty. It didn't impose any sort of global property regime.
To be clear, these projects were not alternatives to international trade; on the contrary, trade was an integral part of them. Journalist Joe Studwell makes the plausible case that the only meaningful oversight the Korean state could achieve over firms like Hyundai or Posco was by testing them in the global market; and in the absence of that, there was no way to consistently pressure them to devote their surpluses to productivity-boosting investment.
D'uh! The only way Mummy and Daddy can be sure sonny boy is studying rather than wanking is to look at his exam results. In theory, Socialist countries could look at output figures. But what is to stop apparatchiks fabricating them and then bribing the auditor? Money talks, bullshit walks. If you can sell your stuff for more money- chances are you are being productive, not incessantly wanking.
Sadly, Professors of Econ can go on bullshitting endlessly. If you ask why they haven't made loads of money if they really are so smart they can pretend they are Socialists and have a deep seated moral objection to getting rich.
This is a central irony of the neoliberal trade regime. On the one hand, the increasing importance of knowledge and organization relative to natural endowments has made it more realistic to imagine a system of trade yielding a global convergence to the material living standards and productivity enjoyed by today’s rich countries.
Fuck off! If very poor peeps have lots of babies while very rich peeps have only one or two kids and then spend a lot of money educating them then there is not going be any 'global convergence' or 'national convergence' or 'convergence within a neighborhood where some people are giving birth to crack-babies like crazy while the others have had their tubes tied and are going after a partnership at Goldman Sachs.
But at the same time that this possibility has developed at the level of production, the commitment to treat knowledge as private property—and to the global division of labor as the touchstone of trade policy—has closed it off at the level of politics.
Nonsense! Politics can always change the property regime. But so can lack of enforcement or a decision of the Bench.
Neoliberalism versus Macroeconomic Management
If the exclusion of development is one central concern for critics of the neoliberal model of trade,
But South Korea and Taiwan and China and even India have developed! Bangladesh has overtaken India because it got more rural girls into big factory dormitories.
the other is its claim that freely floating exchange rates are enough to balance payments between countries, without limiting their ability to pursue full employment or other domestic goals.
Nonsense! The natural rate of unemployment may rise for structural or sociological reasons.
On this front, the challenge for the neoliberal vision is not the division of the world into poor and rich countries, but rather the recurring currency crises of the neoliberal era—and the ways that domestic policies have been reoriented in response.
Currency crises are like stock market crashes. What is important is that there is a quick 'shake out' of the inefficient so that resources are better allocated
While the development frame offers an alternative long-term vision of the international economy,
No it doesn't. That's the problem. There was a time when it was thought that there could be a 'socialist division of labor' with barter on a bilateral basis. Then the Soviets realized they were being shafted. They preferred to sell their petrol on open markets rather than swap it for Cuban sugar and North Korean...urm.. kimchi?
this second line of criticism, drawing inspiration primarily from Keynes, focuses on the problems of the shorter term.
In the orthodox framework, there is no reason for trade to pose macroeconomic problems.
Because there are no 'macroeconomic' problems.
Whatever labor and other resources are withdrawn from areas where a country does not have comparative advantage
e.g. Saudi Arabia exporting water melons
will be fully employed in the areas where it does.
e.g. Saudi Arabia exporting terrorists. There can be a comparative advantage in doing useless, mischievous shite. These two Amherst bros could have done something useful with their lives. They gave up that opportunity in order to talk woke nonsense.
In modern terms, this means—as Obstfeld says—that a country’s GDP, employment, savings, and investment rates are determined solely by domestic factors; trade has no effect. As Paul Krugman put it in his 1993 essay “What Do Undergrads Need to Know about Trade?,” “The essential things to teach students are still the insights of Hume and Ricardo. . . . We need to teach them that trade deficits are self-correcting.”
Just as credit card debt is self correcting. Don't pay and sooner or later you don't got no stinkin' credit cards.
In particular, “employment is a macroeconomic issue, depending in the short run on aggregate demand and depending in the long run on the natural rate of unemployment,
i.e. lots of peeps preferring to have a siesta rather than get a job
with . . . policies like tariffs having little net effect.” This essay remains unsurpassed as a statement of the neoliberal credo on trade. Krugman’s own ideas about trade have evolved since then, but the profession’s have not.
Fuck the profession. The guys who know Trade get rich by it.
A second critique of neoliberal trade takes aim at the way it restricts national autonomy in the pursuit of domestic goals.
This critique is also a critique of money. My not having any restricts my ability to have plastic surgery so I can look like Beyonce. Fuck you money! Fuck you very much!
According to orthodox trade theory, the mechanism that makes deficits self-correcting, insulating growth and employment from trade, is a flexible exchange rate between currencies.
So, if I can't get any customers as a high price gigolo, I've got to give beejays at the Truck stop for 5 dollars a throw. Sad.
When a country’s trade balance moves toward deficit, or becomes uncompetitive in certain industries, its currency will depreciate, making other industries more competitive, thus absorbing the displaced labor and bringing the country back toward balanced trade. As countries gradually abandoned the postwar system of fixed exchange rates after the breakdown of the Bretton Woods system in the 1970s, this theory has come to bear more weight.
Bretton Woods required Americans not to own gold. It imposed Exchange Controls. Sadly, the Arabs rebelled and insisted on getting a much higher price for their oil. But American savers too wanted a better return. They wanted to own gold. Thus the 35 dollar an ounce rule was broken.
At the start of the floating-rate era, the hope was that smoothly adjusting exchange rates would free countries to pursue full employment without being constrained by the balance of trade.
Why would anybody want to 'pursue full employment'? Let work-shy losers become hobos or give beejays at truck stops the way God intended. Anyway, fucking over the Trade Unions was good fun.
Perhaps in a world where trade was the main economic link between countries, exchange rates would respond reliably to the trade balance. But at the same time fixed exchange rates were abandoned, so were controls on international financial transactions, and the volume of capital flows between nations soon came to dwarf trade flows.
Which is why savers started getting a good return. Also, Institutional Finance backed hedge fund moguls so as to disintermediate a bloated, 3 Martini lunch, managerial cadre and thus secured better shareholder value.
In the neoliberal vision, this was not supposed to be a problem.
So they said. Actually, they were chortling with glee at the notion that the Trade Unions would lose power and Lefty Academics would be left frothing at the mouth. By contrast, Evangelical pastors would build mega-churches and fly around in their own private jets.
In particular, free capital flows and floating exchange rates were supposed to work together to allow countries to combine deep international integration and pursuit of domestic economic goals.
Domestic economic goals were determined by whether peeps wanted siestas or jobs which enabled them to buy nice shiny shiny things.
According to “impossible trinity” or “trilemma” models introduced by Robert Mundell and Marcus Fleming, countries could have any two of floating exchange rates, capital controls, and control over their domestic interest rate—but not all three.
Actually, their choice was more narrow. Either they could be a corrupt, kleptocratic, shithole or they could give peeps an incentive to get jobs in the formal sector rather than have siestas or sell each other trinkets on the road side.
In the post–Bretton Woods era, they would give up capital controls, allowing financial transactions to take place freely across their borders. But by allowing their currencies to float, it was claimed, they could maintain control over their interest rates—and domestic economic policy more broadly—and thus maintain full employment and steady growth.
No. The interest rate would have to rise to squeeze out inflationary pressure. Then the Chinese turned into the workshop of the world and inflationary pressure abated.
The theoretical models that this assertion was based on were always unrealistic, resting on strong claims about the perfect adjustment of exchange rates to their equilibrium values. But at the start of the floating-rate era, it was hoped that they would work as a reasonable first approximation. In this case, smoothly adjusting exchange rates would free countries to pursue full employment without being constrained by the balance of trade.
High unemployment broke the back of the Trade Unions- unless they were sensible like in Germany- and this was wholly welcome to politicians who had come to loathe the very sight of a Trade Union boss.
These hopes have not been borne out. To be sure, countries with rising productivity and persistent surpluses, like Japan, have seen their currencies appreciate over time, while countries in the opposite position, like the UK, have seen theirs get weaker. But these shifts are far too slow and inconsistent to prevent major trade flows from spilling back into the domestic economy.
What does that mean? Decimation of local industry by cheap imports? But that would happen anyway unless you kept letting in more and more poor immigrants to do the dirty jobs and work themselves to death in sweat-shops.
The result—most dramatic in poor countries, but evident in rich ones as well—is that exchange rates are dominated by financial markets.
Markets are dominated by markets- big surprise.
And in contrast to the smooth functions in the models, real cross-border financial flows are dominated by fickle market sentiment, which changes in ways that have nothing to do with the supposed fundamentals.
Because the supposed fundamentals are merely suppositions.
When a currency is favored by the markets, it can remain unreasonably strong for long periods;
Beyonce is being favored by market. I am being disfavored. That is the only reason I'm not rich and famous like her.
alternatively, a sudden change of sentiment can cause its value to collapse overnight.
Very true. If Beyonce reveals that she has a dick and that she thinks Hitler was a nice guy, sentiment towards her will change dramatically.
Neither do trade flows respond to changes in exchange rate in the way that theory predicts. A staple of discussions of international trade is the “Marshall-Lerner condition,” which says that when a country’s currency devalues, or gets weaker, its trade balance should improve. But it is surprisingly difficult to find evidence that this is consistently true. As one survey of the empirical literature perplexedly acknowledges, “A typical finding in the empirical literature is that . . . that the Marshall-Lerner (ML) condition does not hold.
Because the sum of elasticities is less than one. Why? Technological change has become more rapid. We are not comparing like with like.
However, despite the evidence against the ML condition, the consensus is that real devaluations do improve the balance of trade.”
If it is 'devaluation' rather than depreciation, then it is likely that the Government is doing other stuff- e.g. restricting Public Sector imports or subsidizing Private sector exports- at the same time.
Unless a country’s currency reliably weakens when it runs a trade deficit, and its trade balance quickly improves in turn, there is no automatic mechanism to ensure that employment in a sector lost to trade will be made up by employment somewhere else.
There is no automatic mechanism which can change people. A 50 year old coal miner will find it difficult to earn a living as a lap dancer. Still, he may have fun trying.
Without reliable exchange rate adjustment, the logic that says trade must always leave a country better off as a whole no longer applies—and this is exactly what we observe.
No we don't. Stop buying stuff. Be self sufficient. Then die miserably of malnourishment. Trade made you better off.
Exchange rates may have the right relationship to trade in the very long term, but countries facing balance-of-payments crises cannot wait that long.
They run out of money very quickly if they try to prop up the currency. Soros made billions shorting the pound in 1992. But he failed when he tried to punish China. Why? Their exports are booming.
If direct restrictions on trade are ruled out, a country that has to close a trade deficit quickly—because foreign investors are no longer willing to finance it, say—has only one option: reducing domestic demand. Unlike exchange rates, domestic income (as measured by GDP) does have a reliable relationship with trade flows. Countries run trade surpluses in recessions and deficits in booms. So if you need to close a trade deficit quickly, a deep recession will get the job done.
But 'direct restrictions'- e.g Smoot-Hawley- turn a recession into a Great Depression.
This tool has been employed repeatedly over the past forty years in balance-of-payments crises all over the world, from Latin America in the 1980s to the Asian crisis of the 1990s and southern Europe in the past decade. Greece, for example, moved from a trade deficit of 12 percent of GDP in 2008 to essentially balanced trade five years later. Did its competitiveness improve? Not at all; Greek exports actually fell over this period. The trade deficit closed only because Greek imports fell by far more—almost half—thanks to a catastrophic depression.
Madoff's investors lost a lot of money. Why? They trusted a fraudster. Greece had been cooking the books. Its prosperity was a sham. That's why its people had to take a haircut. The story in Lebanon is even more heart breaking.
In the absence of a market mechanism to balance payments between countries,
The thing isn't absent any more than the market for Beyonce's services is absent. The reason I'm not getting paid as much as her is that I'm fat, ugly, old and can't sing or shake my booty worth a damn.
it might seem that we are left with only two alternatives: delinking from the global economy
I could go to a desert island and claim to be Beyonce. The monkeys will throw coconuts at me as I twerk. Coconuts could be considered a kind of money. I wish those monkeys didn't have such a good aim or if they didn't aim only at my nut sack.
entirely, or accepting that core domestic objectives like growth and employment will be hostage to the unpredictable whims of international financial markets.
Or monkeys throwing coconuts.
There is a third possibility, though: a more or less deliberate “surplus recycling mechanism” that generates payment flows back from surplus countries to deficit ones.
Beyonce could hire me to perform at her birthday party. Why does she not do so? Is it coz I iz bleck?
This term is associated with heterodox macroeconomist (and former Greek finance minister) Yanis Varoufakis, who argues persuasively that historically, periods of stable growth in the global economy have always depended on the existence of some such mechanism.
Uncle Sam should give Marshall Aid to Greece.
A broader group of economists in the Keynesian tradition—Lance Taylor or Jane D’Arista, for example—have argued for the need for some kind of deliberate structure to ensure payments balance between countries, one that does not put the whole burden of adjustment on the countries facing deficits.
Very true! Rich peeps should pay off my credit card debt.
An earlier generation of reform proposals focused on the idea of throwing “sand in the wheels” of cross-border financial flows with a tax on currency transactions, an idea first proposed by James Tobin in the 1970s.
This would have been a great way to disintermediate the formal banking system. America could have had a 'havala' system operated by drug gangs. Shame it decided not to go down that road. Pablo Escobar would have made a great President for Life of Los Estados Unidos.
In the wake of the global financial crisis of a decade ago, there was a revival of interest
does the authors mean 'bitcoin'? No. Don't be silly.
in a more comprehensive system to manage to cross-border payments.
Which would involve cavity searches by Federal agents.
Many of these proposals look back to the Bretton Woods arrangements (or to Keynes’s more ambitious proposals), but history offers a number of other examples. In the gold standard era, cooperation between central banks maintained payments balance without the need for catastrophic adjustments
Nonsense! The 'catastrophic adjustments' were Wars. Germany and Japan only went on Gold after extracting reparations from France and China respectively. They thought they could keep playing that game. But Uncle Sam fucked them up but good. Sad.
(in Western Europe, at least; in Latin America and elsewhere the experience was very different.) In the period after World War II, Marshall aid as well as the Bretton Woods institutions were meant to do this job; in practice, U.S. military aid also played a big part. In the European Union, the Common Agricultural Policy at one time served as a surplus recycling mechanism,
Europe, unlike England, had plenty of small farmers. Still, South Italy did benefit. However, conditionality for newer members was more stringent.
sending substantial payments to the less developed Western European countries. So did the free movement of labor within Europe, which generated large flows of remittances from North to South.
But the North gained more. These guys don't seem to know about 'surplus value'.
Critics of the euro who focus on the rigidity of the single currency as the root of Europe’s recent problems tend to ignore these mechanisms, exaggerating the role of flexible exchange rates in the earlier period of growth and convergence.
Germany went into the Euro undervalued (because of the cost of integrating the East). Those who went in overvalued paid the price.
Today, there is no formal surplus recycling mechanism.
There never was any such thing. There may have been 'Regional Policy'- e.g. the EU Social fund- but Regional Policy tends to fuck up.
But the U.S. trade deficit has performed a similar function, allowing countries elsewhere to accumulate foreign exchange reserves to protect themselves from turbulence in international capital markets.
The US attracts long term fdi coz peeps want to move there or get their kids settled there. That's why the balance of trade doesn't matter too much.
As Joerg Bibow has argued in several insightful articles, this “self-insurance” by middle-income countries in Asia and elsewhere can be seen as a kind of new Bretton Woods, allowing for controlled integration into the global economy that is consistent with domestic objectives for growth and employment.
This is just managed floating. What matters is that capital flight be balanced by f.d.i.- i.e. local entrepreneurs get their money out while global corporations move in. Soon the locals return to do high value adding services as well as 'disintegration'- i.e. supplying components to the industry. You start getting external economies. Endogenous growth could be round the corner.
The success of this system of self-insurance was visible in the global financial crisis of 2007–2009: countries like Korea and Thailand experienced financial outflows considerably larger than in the “Asian crisis” of 1997, but unlike the grinding depressions that followed that earlier crisis, their massive foreign exchange holdings allowed them to escape this one mostly unscathed.
The reason they had those reserves was because their currencies were undervalued. Also, their entrepreneurs had diversified their portfolios. Some of them owned English Soccer clubs and so forth.
Reserve accumulation, and the trade surpluses it requires, are sometimes seen by U.S. critics as a violation of market norms, a form of currency manipulation or mercantilism. But they are better seen as a defensive response to the absence of any global management of international payments.
They also put a premium on capital flight because the currency is undervalued.
There would be less need to run surpluses to accumulate foreign exchange reserves if countries took the more direct route of regulating financial flows across their borders with capital controls—
Cool! Guys in the relevant Ministry suddenly get to drive Lamborghinis! Actually, North Korea is a good model of this. The country survives on its black markets which also enrich the nomenklatura.
but that is something that the neoliberal consensus has strenuously ruled out.
Because voters would rebel. Greece, under Syriza, did have exchange controls. Banks were closed for 20 days and there were cash limits on withdrawals. This was not popular. Those nutters were kicked out.
The incompatibility of the neoliberal trade model with stable growth and employment is
analogous with the inability of the market to turn me into a bigger star than Beyonce. Stable growth means rising productivity. Stable employment means workers are becoming more and more productive. If they decide to do Econ instead of Accountancy so as to write shite for the Boston Review, productivity goes down.
most visible in crises, but it operates in normal times too. If faster growth leads to trade deficits, and if most countries cannot safely sustain large deficits, and if flexible exchange rates don’t solve the problem—well then, there is no choice but to keep growth slow enough that trade remains roughly balanced.
This is nonsense. If I become more productive- e.g. if I learned to write well- my Income would grow. True, I could invest in a Ponzi scheme and for a year or two it might look like my Income had grown, but there will be tears before bedtime.
Productivity based growth leads to a trade surplus. This can be invested in a diversified global portfolio.
This idea was formalized by the great post Keynesian economist
who was a shit as any post Keynesian economist who was not great at all and whom everybody avoided coz he smelled bad.
A. P. Thirlwall as “balance of payments constrained growth,” and over the past forty years, he and his followers have made a strong case that it sets the speed limit on growth in much of the world. For the United States, as issuer of the world’s reserve currency, trade is not a constraint on growth. But for much of the world, surrendering the right to manage trade flows may prevent them from achieving economic growth rates they would otherwise be capable of.
Thirwall's law is useless because current account equilibrium is not a requirement. A country is welcome to give money away or to invest it abroad.
Unlike the development critique, the Keynesian challenge to the neoliberal trade model is not concerned with which countries produce what, and the division between surplus and deficit countries does not correspond to the divide between North and South.
It is stupid shit.
But an important common thread between these two critiques of neoliberalism is their focus on the way that international integration limits political choices at the national level.
While lack of money or being as ugly as shit limits my choices at the individual level. Sad.
Before World War I, adherence to the gold standard served as a “seal of approval” for countries aspiring to join the club of civilized nations.
Fuck off! The Cannibal Isles would not have been part of that club even if they had gone on gold. Why? Eating peeps is wrong. But this was also true of conquered countries- like India. You aint civilized if furriners are telling you what to do.
More recently, the euro has been explicitly defended as an effort to impose uniform, liberal policies across Europe.
But that's not why Greece kept the Euro. They just didn't trust their own politicians not to debauch a restored drachma.
In general, it is striking how much classic defenses of free trade, from John Stuart Mill to Milton Friedman, focus not on economic benefits per se but on the ways free trade is supposed to promote good government.
Bastards! Why did they not argue that stuff they liked would lead to widespread incest? How is it that Biden is not promising to turn the US into a shithole?
In general, it is striking how much classic attacks on free trade focus not on economic benefits but the jobs of fucking over the people by ensuring the Government is an evil kleptocracy.
The idea that deeper trade and financial links were desirable in part precisely because they reduced the autonomy of national governments saw a revival in the 1980s.
But, the autonomy of national governments depended on fucking over the Trade Unions and the Lefties. In the UK, Ted Heath declared a state of Emergency. The head of the circle got naked and rolled around on the carpet of Number 10 screaming hysterically about a Communist plot. He had to be carted away to a psychiatric ward. In America, there was Jimmy Hoffa.
Thatcher and Reagan broke the power of the unions. Governments once again became sovereign. But this meant allowing smart peeps to get rich. This destroyed the incentive to side with the Left.
World Bank chief economist Anne Krueger played a critical role in discrediting the idea of state-led development, on the grounds that any movement away from free trade inevitably leads to poor governance.
In which country had 'state-led development' not turned out to be a nightmare? Even in England, voters hated British Leyland.
It was Krueger who popularized the idea of rent-seeking as the critical problem for industrial policy—the notion that in practice politicians will pursue policies that don’t create wealth, but merely redistribute it to political insiders.
She was preaching to the converted. Buchanan had been proved right and everybody knew it.
The value of free trade, from this perspective, is not just its direct economic benefits, but as much or more the limits it imposes on predatory governments. In both intent and effect, then, neoliberalism has closed off options for economic policy at the national level—both development in the Global South and Keynesian demand management everywhere.
But only because the Lefties had fucked up and everybody could see they had fucked up.
Neoliberalism Today
Is something silly pedants talk about to earn a small wage.
Ideologies, even dominant ones, do not always dictate developments in the real world.
As people who lived in Stalin's Russia or Mao's China could see with their own eyes. Indeed, that's why they kept trying to run away.
As in other areas, the history of international trade is
shit coz only stupid shitheads write it
subject to cross currents and eddies, with flows in one direction in one place and the other way elsewhere. It seems fair to say that through the end of the twentieth century the tide was running in the neoliberal direction. Under pressure from the IMF—but with cooperation from local elites—the developmental state has been rolled back around the world.
Because it was shit.
In the decade after the 1997 crisis, for instance, Korea dismantled many of the structures that had directed credit and limited the role of foreign finance—a shift documented in an important series of articles by James Crotty and Kang-Kook Lee.
What was the result? They surged ahead. Even North Korea tolerated black and grey markets and thus stopped starving to death.
But if the debt crises of the 1980s and 1990s were largely resolved in favor of the neoliberal model, the picture looks more mixed today.
Coz Xi is fucking over the entrepreneurs. Will he be satisfied if they bend the knee, or will he demand more? Only time will tell.
Over the past decade, national governments have been less deferential to the Washington consensus.
The term was invented by a guy who hated what it represented. This was a spectacular own goal.
While someone like Obstfeld may stick to the old pieties in public, during his tenure the IMF’s research department showed a new openness to alternative approaches, particularly around capital controls.
Why? The IMF accepts that Governments can publish fake accounts and thus swindle the markets in the short term. When the crunch comes, the IMF does not want to bail out the swindlers. Let them administer a haircut to their own people who will then turn against them and vote them out. However, Lebanon is an unusual case where there doesn't seem to be any government to boot out. Still, their banking system is haircutting the fuck out of their customers.
Ilene Grabel describes the current era as one of “productive incoherence”—
In other words, economists have stopped pretending they have any influence whatsoever. Shit happens. We don't care. We've got tenure.
a series of departures from the old vision that have opened space for new policies, without adding up to an alternative model. To the extent that tools like capital controls are seen as necessary but temporary distortions of an ideal liberal order, rather than natural elements of a different world economy, the ultimate goal is still to get rid of them.
Do you want your Government to stop you withdrawing more than a hundred dollars a day from your Bank? Would you be thrilled if they decided to confiscate your pension pot? If so- cool. If not- these guys are talking bollocks.
The commitment to a rules-based, decentralized order has also showed signs of fracture.
Nobody is still talking about 'rules-based' shit anymore. The thing is like so 1995.
A prime example is the growth of preferential trade agreements.
Which have always existed.
Once the floor for openness was established in 1995 by the World Trade Organization (WTO), the United States and its peers
The US has no peers. It is the big dog which can hump anybody's leg- except China and Putin's Russian and Iran and North Korea and India and Myanmar and...well, you get the gist.
started to move away from the constraints of multilateralism and push for bilateral treaties. In an echo of his boss’s infamous “you are either with us or against us” ultimatum, Robert Zoellick, the U.S. trade representative under George W. Bush, divided the world into “can-do” and “won’t-do” countries and promised to work exclusively with the former.
America turned out to be a 'won't-do' country- at least in Afghanistan.
While the WTO process has stalled, perhaps for good, there has been a proliferation of preferential trade agreements—over 700 according to a 2018 survey. These are bilateral and regional agreements that, in addition to offering favorable access for the signatories’ exports, typically include IP rules and other restrictions on domestic policy. These often go even further than the provisions of the WTO. For example, many allow for private arbitration so that firms can sue states for violations (whereas in the WTO, member states must bring disputes for arbitration) and cover areas well beyond those in traditional trade agreements (consumer protection laws, laws around public administration).
Yup. There's now a large literature on why self-binding agreements are mutually beneficial. Indians understand this. Retrospective taxation- Vodafone, Cairn Energy etc- and other such capricious acts have been very damaging to the country.
China, of course, is the great exception, having integrated into the world market on its own terms. On this basis alone, claims of enduring neoliberal hegemony need, at least, a large asterisk.
Then why keep banging on about it?
The weakening of the neoliberal consensus does not automatically mean vindication for either of the alternative perspectives we have sketched here, of course. On the matter of surplus recycling, it is one thing to make the intellectual case for a world financial authority that would reliably channel funds from surplus to deficit countries,
Why not reliably channel money from hard working peeps to drug addled bums?
while preserving space for the pursuit of full employment at the national level.
Make every drug addled bum a Vice President for Corporate Communications.
It’s another thing to imagine the political circumstances that could bring it into existence.
Still, it would be fun to try. I think it would involve widespread sodomy among legislators followed by everybody getting down on their knees and beseeching Lord Jesus Christ, as their personal Lord God and Savior, to enter their hearts coz their bums are very sore.
One may equally ask whether development is still viable or relevant as an alternative frame to neoliberalism.
Raise productivity. Do it now. That's all that matters. Markets can help but that's all they can do.
Many have doubts, on the left as well as in the mainstream. A recent article by Dissent editor Tim Barker, for example, heralds “The End of Development.”
The guy is retarded- that's true enough.
Export-led industrialization, in this view, is no longer a feasible route forward for countries of the South;
tell that to Bangladesh or Vietnam. They will laugh at you.
services, meanwhile, offer too few opportunities for productivity-boosting investment.
Tell that to Aziz Premji (for whose University one of these guys works). He will have second thoughts about hiring Amherst bros.
Other critics on the left worry that the goal of increased policy autonomy at the national level will bolster ethnic nationalisms—
But ethnic nationalism existed long before there was any fucking Liberalism. The Indian Liberal Party wanted the Brits to stay. It was Mahatma Gandhi, who hated markets and dressed up like a starving peasant, who kept telling Whitey to fuck off back where he came from.
a view that gets some support from European politics today, where the greatest hostility to the constraints of the euro system is found on the chauvinist right.
Syriza was left wing. If there are no lefties left, that isn't the fault of the right. It is the fault of stupid academics.
These concerns are well taken. The past certainly does not provide a simple blueprint for the future, and economies are not really frogs in a pond. But the outlook for development does not seem as bleak to us as it does to these critics. China, again, is a glaring counterexample to claims that the project of export-led industrialization has stalled out. And other countries, like Bangladesh, continue to make good use of this strategy.
We do not see how the project of development can be abandoned.
Abandon it because only shitheads talk about it. Let productivity rise by scrapping stupid Laws which are meant to protect peasants and proletarians and so forth.
More broadly, we do not see how the larger project of development can be abandoned. The problem of making a global economy consistent with meeting human needs is no less urgent today than in the past.
Why? Coz folks need to eat. What an amazing discovery!
National governments, for all their shortcomings, are the only place where the market is actually managed.
No. Treaties and Courts are all that is needed.
Welfare states, credit policy, regulation, taxation and income transfers, public goods of all sorts—all are provided by national governments.
Or not as the case may be.
We can imagine a world where supranational bodies performed these functions; fifteen years ago, the European Union might have seemed to prefigure it. But today, in every conflict between a national government and international markets or institutions, it’s the former that is on the side of public goods and regulation and the latter on the side of liberalization.
No. That's why the EU has beef with Ireland.
These considerations gain force when we think about the great problem of the twenty-first century: climate change. Far from making development obsolete, climate change gives it new urgency. Much like industrialization, decarbonization requires a rapid, far-reaching, coordinated reorganization of productive activity, a task that decentralized markets are particularly unsuited for.
How come South Korea is doing better than North Korea in this regard?
If governments in the North and South alike are going to rebuild their economies on a sustainable basis, they will need to use many of the same tools that were used to build new export sectors and shift labor and resources from agriculture to industry in the past.
This happened spontaneously in UK, US etc.
That means we will need an international order that leaves space for those tools to be used.
Cool. Make Comrade Xi Emperor of the Globe.
Paradoxical as it might seem, it may be the global crisis of climate change that decisively shifts the center of economic authority back toward national governments.
Till the voters rebel or, if there are no elections, then militias rebel, or if there are no militias, then corruption prevails.
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