Thursday, 12 March 2009

Minksyian Political Economy

Paul Mason is on sparkling form today. Here he is summarising Martin Woolf on the global trade imbalances:

"China produces, the west consumes; Asian people save, Anglo-Saxon people borrow and spend; Western governments are in debt, while Asia, Russia and the oil producing countries have run up surpluses; finally (and shockingly) the flow of investment from the west to the east is dwarfed by the flow of investment from developing countries to rich countries, with the added problem that Western investment in the East is highly profitable, but not the other way around."

And in his own words:

"...globalization has not really been globalization at all.

Far from the emergence of a harmonized and increasingly unified world economy it has produced a lopsided and malformed structure that is now falling apart. The low paid worker in Detroit cannot buy his new pair of trainers unless the low paid worker in Shenzhen a) makes them, b) deposits four out of ten yuan he earns in the factory into a global finance system that then c) lends the money to the Detroit trainer-buyer at virtually zero interest."

This is not sustainable - a re-balancing of world power and a different sharing out of economic prosperity is required. A different sharing out of prosperity not just between countries but also within countries, both North and South.

But there has been no war to clarify the underlying balance of power as there was before Bretton Woods. So the prospects of G20 saving us from an almighty economic fall look bleak: the world has changed but everyone wants to put Humpty-Dumpty together again as if nothing has happened. It is as if the Treaty of Versailles after World War I was mainly concerned with best terms for restoring the Austro-Hungarian Empire. & , to extend the analogy, there is no equivalent of the revolution in Russia: so there is no organised demonstration of an alternative.

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