Great essay Warwick - goes to the heart of the dilemmas facing 'the west' today.
Essentially rich & powerful nations have got to accept that prosperous 'productive trade' is unachievable unless overall transactions advance domestic national welfare of both the exporter and importer.
The essential problem panning out for 'the west' is that global trade has been pacticed by the powerful as just a further means of callous wealth extraction from the vulnerable powerless. Ravenously extractive global capital movement has long eclipsed real trade settlement volumes which currently compose somewhere in the range of 1.5% to 10% of total annual foreign exchange volumes.
Info from an AI query - " [Keynes Bancor] Symmetrical Adjustment Mechanism:
1- Countries with trade deficits would be encouraged to adjust by devaluing their currency or stimulating exports.
2- Crucially, countries with trade surpluses would also be required to adjust by either expanding imports, revaluing their currency, or investing surplus funds internationally.
Incentives to Limit Surpluses: Keynes proposed charging interest [5%] on excessive surplus balances held in the ICU [International Clearing Union] accounts. This was to discourage countries from hoarding surpluses and to incentivize them to take steps to reduce their surpluses...
3-Shared Responsibility:
Keynes emphasized that both deficit and surplus countries bore responsibility for correcting imbalances, promoting a cooperative and fair system..."
In fact China has consistently, annually re-invested a significant portion of its annual trade surplus into foreign nations in the form of the BRI - developing remote port & transport facilities to assist expansion of foreign import & export volumes.
I suggest that China (without explicit direction) has more than met Keynes criteria 2 & 3 above.
Contrast & compare with the US/IMF/World Bank's parasitic manipulation of global finance & trade since the 1900's.
Again from AI query;
"..China Belt and Road Initiative (BRI) infrastructure investments:
Total BRI infrastructure investments from 2013 to 2022 are estimated around $679 billion [USD] in cumulative terms.
This implies an average annual BRI investment of roughly $60-70 billion.
Estimation of Annual Percentage: If we take a rough average trade surplus over the last decade to be around $500 billion annually (a conservative estimate given growth), and average annual BRI investments at about $65 billion:
Percentage of trade surplus re-invested in BRI=65bn/500bn = ~ approx 13%
Interpretation:
Approximately 13% of China’s external trade surplus per year might be invested in BRI infrastructure projects abroad..."
China's trade surplus re-investment rate of 13% is significantly more than that (5%) proposed by Keynes and it promises to greatly expand many developing nations capacity to both import & export.
IMHO China has proved to be a very astute macroeconomic operator - it has learned lessons well from observing the west's blatantly extractive economic/trade debacle.
China is playing the long game - it will be still going strong after 'the west's' hegemonic self-demolition smoke clears.
Yes! "explicit direction of capital" - follow the money!
The U.S. could, but does not, create its currency ex nihil - it is by law tied to issuing an equivalent amount of debt - thus, their huge national debt. The have sucked in the savings of the world while due to no actual productivity, are not able to pay the interest.
Yes, there can be no case for tariffs - goverments should let go of trade. I pity a trade lawyer, trying to keep up with the exponential increase in trade "agreements."
That is a great sentence: "It is politics by other means, shifting blame while protecting domestic rentier interests and avoiding the harder work of orchestrating capital toward long-term productive ends."
This one here is the big problem: "Directed capital allocation is the core governor. It ensures that credit and investment — whether domestically generated or attracted from abroad — flow into activities that expand productive potential, improve energetic efficiency and strengthen systemic resilience."
The oligarch class in USA will ALWAYS demand liquidity flows uphill - to them, not to productive uses. This you answer with this sentence: "The “problem” of the US trade position is, at root, one of domestic politics and coalition interests revolving around latter-day rentiers. It isn’t a problem of Chinese household savings."
and: "Rejecting free(ish) trade is a lazy cop-out when the hard work of bringing finance capital to heel is what’s required."
- to which I say, good luck with that! However, America must choose - do this or endure long-term poverty.
Now here is my main concern for China at this time. No, I do not want to see an answer to this, it is strictly an internal matter, and other nations seem to be too stupid to see the problem, so let them suffer. China must figure out how to adjust its ports to accommodate sea-level rise, or find themselves trapped.
Great essay Warwick - goes to the heart of the dilemmas facing 'the west' today.
Essentially rich & powerful nations have got to accept that prosperous 'productive trade' is unachievable unless overall transactions advance domestic national welfare of both the exporter and importer.
The essential problem panning out for 'the west' is that global trade has been pacticed by the powerful as just a further means of callous wealth extraction from the vulnerable powerless. Ravenously extractive global capital movement has long eclipsed real trade settlement volumes which currently compose somewhere in the range of 1.5% to 10% of total annual foreign exchange volumes.
Info from an AI query - " [Keynes Bancor] Symmetrical Adjustment Mechanism:
1- Countries with trade deficits would be encouraged to adjust by devaluing their currency or stimulating exports.
2- Crucially, countries with trade surpluses would also be required to adjust by either expanding imports, revaluing their currency, or investing surplus funds internationally.
Incentives to Limit Surpluses: Keynes proposed charging interest [5%] on excessive surplus balances held in the ICU [International Clearing Union] accounts. This was to discourage countries from hoarding surpluses and to incentivize them to take steps to reduce their surpluses...
3-Shared Responsibility:
Keynes emphasized that both deficit and surplus countries bore responsibility for correcting imbalances, promoting a cooperative and fair system..."
In fact China has consistently, annually re-invested a significant portion of its annual trade surplus into foreign nations in the form of the BRI - developing remote port & transport facilities to assist expansion of foreign import & export volumes.
I suggest that China (without explicit direction) has more than met Keynes criteria 2 & 3 above.
Contrast & compare with the US/IMF/World Bank's parasitic manipulation of global finance & trade since the 1900's.
Again from AI query;
"..China Belt and Road Initiative (BRI) infrastructure investments:
Total BRI infrastructure investments from 2013 to 2022 are estimated around $679 billion [USD] in cumulative terms.
This implies an average annual BRI investment of roughly $60-70 billion.
Estimation of Annual Percentage: If we take a rough average trade surplus over the last decade to be around $500 billion annually (a conservative estimate given growth), and average annual BRI investments at about $65 billion:
Percentage of trade surplus re-invested in BRI=65bn/500bn = ~ approx 13%
Interpretation:
Approximately 13% of China’s external trade surplus per year might be invested in BRI infrastructure projects abroad..."
China's trade surplus re-investment rate of 13% is significantly more than that (5%) proposed by Keynes and it promises to greatly expand many developing nations capacity to both import & export.
IMHO China has proved to be a very astute macroeconomic operator - it has learned lessons well from observing the west's blatantly extractive economic/trade debacle.
China is playing the long game - it will be still going strong after 'the west's' hegemonic self-demolition smoke clears.
Yes! "explicit direction of capital" - follow the money!
The U.S. could, but does not, create its currency ex nihil - it is by law tied to issuing an equivalent amount of debt - thus, their huge national debt. The have sucked in the savings of the world while due to no actual productivity, are not able to pay the interest.
Yes, there can be no case for tariffs - goverments should let go of trade. I pity a trade lawyer, trying to keep up with the exponential increase in trade "agreements."
That is a great sentence: "It is politics by other means, shifting blame while protecting domestic rentier interests and avoiding the harder work of orchestrating capital toward long-term productive ends."
This one here is the big problem: "Directed capital allocation is the core governor. It ensures that credit and investment — whether domestically generated or attracted from abroad — flow into activities that expand productive potential, improve energetic efficiency and strengthen systemic resilience."
The oligarch class in USA will ALWAYS demand liquidity flows uphill - to them, not to productive uses. This you answer with this sentence: "The “problem” of the US trade position is, at root, one of domestic politics and coalition interests revolving around latter-day rentiers. It isn’t a problem of Chinese household savings."
and: "Rejecting free(ish) trade is a lazy cop-out when the hard work of bringing finance capital to heel is what’s required."
- to which I say, good luck with that! However, America must choose - do this or endure long-term poverty.
Now here is my main concern for China at this time. No, I do not want to see an answer to this, it is strictly an internal matter, and other nations seem to be too stupid to see the problem, so let them suffer. China must figure out how to adjust its ports to accommodate sea-level rise, or find themselves trapped.
If the main concern is that China must build or rebuild some of their infrastructure, I'm confident they will succeed.
Check this out. I'd really like to hear your opinion. can only be accessed via a computer https://herosaver.org
An excellent analysis, thank you.