One-Way Globalization

I think there’s something that Robert Samuelson doesn’t recognize in his lament over the death of globalization in the Washington Post today:

One fateful question for 2013 is this: What happens to globalization? For decades, growing volumes of cross-border trade and money flows have fueled strong economic growth. But something remarkable is happening; trade and international money flows are slowing and, in some cases, declining. David Smick, the perceptive editor of the International Economy magazine, calls the retreat “deglobalization.” What’s unclear is whether this heralds prolonged economic stagnation and rising nationalism or, optimistically, makes the world economy more stable and politically acceptable.

It’s that globalization as we have known it for the last thirty years has been a very lopsided proposition. Countries like China and India have abandoned their official policies of autarky, economic self-sufficiency, with one of partial autarky in which they’re exporting a lot but not importing much. Other than oil and the machinery for their factories, a process which will almost certainly come to an end soon, much to their vendor countries’, i.e. Germany’s, dismay. There’s a simple equation:

Foreign trade + currency manipulation + export subsidies + import barriers = unsustainable condition

Anything that’s unsustainable won’t be sustained and far from being a mark of deglobalization an increase in manufacturing in the United States is merely an indication that what was happening was unsustainable all along. What will China or India do? Return to their previous policies of autarky? Only if they want even more of their people to starve than already are.

The solution to the problems created by the phony baloney globalization we’ve experienced over the last couple of decades isn’t less foreign trade but genuine globalization. China needs to drop its export subsidies and trade barriers and import more. We’ve got to consume less and export more. As long as our main export is financial instruments income inequality here will grow and our real economy will languish.

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