Thomas Piketty: ‘The US’s unprecedented financial fragility explains Trump’s aggressiveness’
How did your country report this? Share your view in the comments.
Diverging Reports Breakdown
Thomas Piketty: ‘The US’s unprecedented financial fragility explains Trump’s aggressiveness’
World Inequality Lab recently published a historical study on global trade and financial imbalances since 1800. In general, the idea of spontaneously balanced and harmonious free trade does not stand up to scrutiny. dominant powers abuse their position to impose terms of trade that favor them, at the expense of poorer countries. It is time for Europe to shake off its complacency and join forces with democracies of the Global South to rebuild the commercial and financial system in support of a different model of development.
Several conclusions are clear. In general, the idea of spontaneously balanced and harmonious free trade does not stand up to scrutiny. Since 1800, there have been massive and persistent imbalances, and a repeated tendency by dominant powers to abuse their position to impose terms of trade that favor them, at the expense of poorer countries.
What is new about the current crisis is that the United States has been losing its grip on global power and now finds itself in a situation of unprecedented financial fragility. That explains the aggressiveness of the Trump administration. However, giving in to demands, as the Europeans have just done on military budgets (which are largely transfers to the US defense industry) or on multinational taxation, is the worst possible strategy. It is time for Europe to shake off its complacency and join forces with democracies of the Global South to rebuild the commercial and financial system in support of a different model of development.
Permanent trade deficit
First, let us remember that trade flows have never been higher than they are today. Total exports (and imports) now amount to around 30% of global gross domestic product (GDP), with 7% for raw materials (agricultural, mining and fossil fuels), 16% for manufactured goods and 7% for services (tourism, transport, consulting, etc). By comparison, trade flows were about 7% of global GDP in 1800, 15% in 1914 and 12% in 1970 (of which 4% was for raw materials, 5% for manufactured goods and 3% for services). The increase observed since 1970 has been dizzying across all sectors – with a material footprint and environmental damage that we are only beginning to realize. It is often pointed out that world trade has stabilized as a percentage of global GDP since the 2008 crisis. This is true, provided one specifies that it is a stabilization at the highest level ever recorded in history.
You have 58.03% of this article left to read. The rest is for subscribers only.