Economists often rigidly demarcate goods from assets. Trade is considered balanced only when the goods trade nets to zero, implying that Riccardo’s model of comparative advantage only applies to trade in widgets.A more flexible framing may say that trade is always balanced because distinguishing goods from assets requires too many value judgments and, as such, comparative advantage applies to everything.
Thus, it is perfectly normal for asset-rich America to develop expertise in finance, law, marketing and consulting – all the skills necessary to package assets for sale.
And it is perfectly normal for labor-rich China to develop expertise in manufacturing to exchange for those assets. While it is certainly possible to impede this trade – someone can force our island conquistadors to trade coconuts for supplies – it will exact a cost.
Seems to me that this is the basic idea or thesis to the article.
That the theory of comparative advantage, the Americans over the decades put it into practice slightly differently.
Instead of digging up raw materials and selling that in exchange for finished goods aka consumer goods ect, the Americans purchased those finished goods by selling pieces of American assets. Those would be dollar assets, such as US stocks, US Treasury bonds, and real estate.
(Note that since that happened, the selling of American assets in exchange for finished goods because America off-shored those factories, that did actually happen, that in turn created strong special interest groups, like the 1% et al.)
Globalization done this way, 1) enriched the 1%, and 2) screwed over the factory worker in America, and 3) this rigging of the system is highly entrenched and very difficult to change.
Point 3) that this system is very difficult to change is the conclusion of this article.
In my opinion, I think I will toss 2 cheap cents onto the traditional view, which is basically Marxist in nature.
Capitalism is not static, it is always changing and evolving. That the financialization of US capitalism happened, is not something we should be shocked at. That was the development of US capitalism after the Cold War, and the factory worker was one of the losers. (Note that China went onto it own version of capitalism, but that is another story altogether.)
Since the first China shock, what they call it today, made the US factory worker a loser, the winners were the 1% in America. Well, there we have it. The proletariat and the bourgeois. There we go, the classic Chairman Mao class struggle.
IIRC during the Cultural Revolution or before that, Mao Zedong was talking about endless class struggle. Last two paragraphs of the article, its conclusion, sums it up.
Reversing globalization would involve a massive derating of US asset prices as sales to foreign buyers are artificially restricted. Effects on GDP could theoretically be contained but the wealthy would have to become poorer in hopes of bringing low-income folks back into the middle class as investment bankers become process engineers and Uber drivers become factory workers.
For a political economy that couldn’t figure out a mechanism to pay-them-off as globalization created immense riches, how likely is it that the immensely rich will willingly stomach becoming significantly poorer?
Chairman Mao wanted endless class struggle. And that has arrived, in America.
Ke, ke, ke.
