Choose

I wanted to call attention to this post by economist Dani Rodrik at Project Syndicate:

Lately, another trilemma has preoccupied me. This one is the disturbing possibility that it may be impossible simultaneously to combat climate change, boost the middle class in advanced economies, and reduce global poverty. Under current policy trajectories, any combination of two goals appears to come at the expense of the third.

He goes on to describe the conflicts in more detail. The Biden Administration has focused, at least nominally, on the first two. Dr. Rodrik observes:

This new focus on climate and the middle class is long overdue. But what US and European policymakers see as a necessary response to neoliberalism’s failures looks, to poor countries, like an assault on their development prospects. The recent crop of industrial policies and other regulations are often discriminatory and threaten to keep out manufactured goods from developing countries.

concluding:

Climate change is an existential threat. A large and stable middle class is the foundation of liberal democracies. And reducing global poverty is a moral imperative. It would be alarming if we had to abandon any of these three goals. Yet our current policy framework imposes, implicitly but forcefully, a trilemma that appears difficult to overcome. A successful post-neoliberal transition requires us to formulate new policies that put these trade-offs behind us.

I think that Dr. Rodrik understates the degree to which the three goals are in conflict. For example, as long as the U. S. middle class is the consumer of last resort for the entire world, developing economies require a strong U. S. middle class.

Choosing one goal over another is not a challenge at which American politicians excel. For example, maintaining U. S. global hegemony, blithely described as “primacy in every theater”, requires increased real defense spending. Continuing to spend money we do not have without increased aggregate product creates inflation. We must choose.