Stop Me Before I Vote Again

I've always had a great admiration for Dani Rodrik, but hell, did it recently get tested. Here comes Dani pulling behind him a massive stinker -- eggs on me, eh?

MYTH OF RISING PROTECTIONISM

"... the international trade regime has passed its greatest test since the Great Depression with flying colors."

Ugh! But hey, so far he's right -- despite the global contraction there's been no wave of illusory job-generating, trade-war-triggering, anti-cross-border trade restrictions and penalties, at least among the developed core nations of the earth's marketplaces.

But those flying colors seem to make cosmopolite and emerging south world fan Dr Rodrik very happy indeed. I can't share his enthusiasm.

Okay, nothing wrong per se with this:

"When everyone raises trade barriers, the volume of trade collapses. No one wins"

But where's the rest of the story? where's the feasible compensatory macro policy, Dani boy? This is where my man makes his deft turn toward the limited liability dark side, by cleverly misappropriating the words of the founder and demigod of compensatory macro policy itself, Lord Keynes of Bloomsbury:

"As Keynes recognized, trade restrictions can protect or generate employment during economic recessions.

But what may be desirable under extreme conditions for a single country can be highly detrimental to the world economy."

It's a misappropriation because keynes was not in the least a true believer in open trade in an era of predominantly industrial development, nor particularly interested in the welfare of Dani's beloved emerging economies. And it's also clever because the foxy bastard introduces lord K only to silence him pre-emptively.

Dan fails to note the present triumphant first world policy elite has only half heartedly (at best) implemented the slumptime universal national RX prescribed by the great fairy prince of hard-times improvident budgeteering.

We all know Keynes offered another way to restore production to a contracted "developed" economy, right? Besides beggar-thy-neighbor with higher and more comprehensive border walls, Keynes offered a brighter sunnier recovery by massive add-on spending in situ by the various creditworthy national gubmints -- funded entirely from the limitless borrowings that fiat moeny affords every legitimate and healthy state sovereign. By implication, Dani salutes the blind rump of Keynes, as embodied in the automatics of "the welfare state"

"Modern industrial societies now have a wide array of social protections ― unemployment compensation, adjustment assistance, and other labor-market tools, as well as health insurance and family support ― that mitigate demand for cruder forms of protection"

But my dearest Dr Rodrik, though these automatics both ameliorate and contain any deep contraction -- why must we suffer a protracted doldrums at all? Why use Keynes to deliver us from the pending vortex only to becalm us in the Sargasso?

Maybe in Dani's next op-ed, rather than another hoorah for "the planetary social market system", he oughta debunk the myth of necessary misery.

Why must the developed world creep along at, what, 2/3 of capacity? You already know the answer: so the trans-nat outfits get their preferred pathway -- one that maintains a "strong imperial dollar"

See, "we" can rebalance global trade simply by slowing import demand here at home. And "we" do that by simply slowing household income recovery.

One cut cures all -- a few years of quiet time where we Norte midget amigos just can't buy imports, 'cause we're payless jobwise and 'nyet, buster' creditwise -- in short, on our calvinist backsides.

This great stagmnation rut is corporate kool precisely because it's NOT recovery and rebalancing by forex driven import substitution. That might be a societywide "better" pathway for reasons numerous enough for several more posts, but not to put too fine a point on all this (and Dani, I submit, is fully aware of this) -- "wage widgets of America, hear this: the job lamp is not lit."

Though it's crystal clear a planned and programed dollar drop might be combined with a rapid return to high production through, what else, the skillful use of -- Keynesian macro(*)! -- it's just not gonna happen. Not a preferred option in policy circles. Till further notice, all you bo-peeps get this straight: there'll be no recovery -- for you!

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(*) Which by routes both circuitous and profoundly un-miraculous might also cut the special interest protectionists and anti-immigrants right off at the knees.