Most of you are likely familiar with UK/Harvard historian Niall Ferguson. Here is a connection to an interview with him tonight on CBC Radio, and here is the intro:
"The events of the past week reinforce the views of my next guest who believes China may soon be the world's dominant economy. Niall Ferguson is a historian at Harvard University who specializes in financial and economic history . He's the author of many books, most recently, Civilization. We reached Niall Ferguson in Baishan, China."
If you link to the interview you'll also notice a link to an interview with Clyde Prestowitz, a rather conservative American I admire, who speaks to US foreign policy. Happy listening.
OCTO Posted:
ReplyDeleteEdge, Your Post is Jinxed
I tried posting this comment under your article at the Public Beach, Economic clarity for a refreshing change, but Blogger won't accept it.
So I am posting here instead:
Some very quick thoughts on Keynes. The fundamentals of Keynesian economics remain sound; however the application has not kept pace with the times. The so-called accelerator effect of a stimulus works best when the nation's economy is essentially a closed-loop system, meaning all increases in money supply remain within our borders.
But we no longer live inside a closed-loop system due to globalization. Consumer goods that used to be made domestically are now made overseas, and any increase in consumer spending is more likely to benefit foreign producers and workers than domestic ones, thus breaking the chain of the accelerator effect.
Another overlooked breaker-of-the-accelerator chain is energy. With each passing year, we become more and more dependent on imports compared with 40+ years ago when domestic production kept pace with domestic demand. The demand curve overtook the supply curve in 1967 and, soon thereafter, the world's largest creditor nation turned itself into a debtor nation.
Although I have not yet read the Prestowitz interview, but my own opinion is that post WWII military and foreign policy objectives have deprived us of a true economic policy. In our contest with the Communist bear, we have literally given away the store in our effort to win friends and influence allies. What some folks call "American Exceptionalism" has devolved into a terminal case of national co-dependency, rendering us poorer and more emotionally unstable with each passing year.
For a Keynesian-style stimulus to work today, it must target those sectors of the economy that remain inside the closed loop, meaning those sectors where stimulus funds will not hemorrhage beyond our borders. Examples of investments that tend to stay at home: Unemployment compensation, infrastructure investment, and alternative energy R&D to reduce foreign dependence ... the kinds of programs rejected by Republicans.
BTW, China may emerge as the dominant economy in the near-term but will quickly be overshadowed by another emerging economy - India, which has the advantages of a soon-to-be larger population, English proficiency, and the world's largest democracy.
I replied:
ReplyDeleteAbsolutely agree with you completely. Ferguson also points out the importance of properly applied Keynsianism and its dependence on closed economic systems. You're right on the money.
And right about India, too, and we can see from Hillary Clinton's most recent comments on China and India, the American agenda is now turning to India. This has, as you point out, much to do with the vast human resources, but also India's long standing tension between itself and China, and its more recent tension with Pakistan. These tensions run along the Middle Eastern oil fault-lines, with the ever-unpredictable spoiler, Russia, minding the northern borders of this region and Israel and Europe to the west.
This is the energy powder-keg that will likely ignite into WW3, should the economic-energy crisis continue to deepen, and Chinese arrogance and militarism continue to rise...
(Earlier today, I tried every which way to post a comment here. Nothing worked. Even tried rebooting the Pyouter several times. All of a sudden ...)
ReplyDeleteToday, the stock posted a gain, the foreclosure rate has eased, plus a slight improvement in unemployment figures. Amidst these positive signs is the killer indicator (no news organization except the Beeb even bothered to report it): Trade Deficit Widens to $53 billion as Exports Fall. It means more capital taking flight from the U.S. economy ... on top of the $ trillions removed by the Republicans through debt reduction. With consumer confidence taking a big hit, it is harder to see any uptick on the horizon. Double dip, anyone?
"Chinese arrogance and militarism continue to rise ..."
ReplyDeletePerhaps not. Current anger directed at China is motivated by jealousy. China is on a roll while we are taking it on the chin; and we have no one to blame but ourselves. Historically, even imperial China has never been adventurist, more often isolationist. With newfound wealth and dependency on foreign markets, it is hard to see China asserting itself more than one would normally expect from a rising economic power.
True, China's history doesn't bolster that theory. But the unstable India-Pakistan-Middle East card coupled with dwindling oil reserves (which China and the US desperately need) is still in play...and the US or Pakistan could pull the trigger first.
ReplyDelete"the US or Pakistan could pull the trigger first. "
ReplyDeleteWouldn't be the first time for us.