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Economics

O verdadeiro inimigo da economia mundial é geopolítica, não protecionismo

Sep 6, 2023 Dani Rodrik

CAMBRIDGE - “A era do livre comércio parece ter chegado ao fim. Como a economia mundial se sairá com o protecionismo?”

Essa é uma das perguntas mais comuns que eu ouço hoje em dia. Contudo, a distinção entre livre comércio e protecionismo (como aquela entre mercados e o Estado, ou entre mercantilismo e liberalismo) não é particularmente útil para entender a economia global. Não só isso é uma representação equivocada da história recente; também explica mal as transições de política econômica atuais e as condições necessárias para uma economia global saudável.

“Livre comércio” conjura uma imagem de governos recuando para permitir que os mercados determinem por si sós os resultados econômicos. Porém, qualquer economia de mercado requer normas e regulamentações - padrões de produtos; controles sobre conduta comercial anticompetitiva; salvaguardas para consumidores, trabalhistas e ambientais; funções de credor de último recurso e estabilidade financeira - em geral promulgadas e implementadas pelos governos.

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0 Comments on this paragraph, 10 Comments on this article

Andrés Cárdenas O´Farrill Sep 18, 2023

I fully agree Prof. Were China and the US unable to solve their geopolitical issues, we will end up having real trouble... more than those that we already have.
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Mirek Fatyga Sep 18, 2023

One observation that is missing from Prof Rodrik's essay are economic consequences of XXth century population growth. Simply put, until the industrial civilization develops alternatives to scarce resources, there is not enough growth or ongoing prosperity to go around. The globalization movement outsourced production to countries where labor would work for food, by western standards. To keep consumer markets going, western countries replaced income with debt. This worked initially, but ultimately led to financial crisis and concentration of wealth as the economy filled with debt, much of it unpayable.

On shoring of production may help some people, but it cannot solve the basic, underlying problem of scarcity. If too much is on shored, inflation will ensue. There is only so much oil that can be realistically produced, to use just one example.

Economists need to start talking about global scarcity and the reaction of economic systems to this scarcity if they are to remain relevant. You can't analyze the economic system by leaving out the most important constraints.

If one wanted to extend North American consumption of oil per capita to 8 billion people, world oil production would have to increase by ~600%. To the EU level by ~300%. This is just one scarce resource.
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Paul TIFFANY Sep 14, 2023

As expected, insightful commentary from Prof. Rodrik. However, his conclusion needs a bit of a re-think I believe. He advocates cooperation between the US and PRC regarding trade issues, a worthy goal indeed. But how does one cooperate when the two sides have fundamentally opposed perspectives on the issue-- the role of the state in the economy, the rights of private enterprise (and the owners of private property) vis-a-vis SOEs, the efficacy of trade-based rules and how and when such rules should be applied (or abrogated), and the ultimate social and political ends that each side believes trade should prioritize. President Xi's abiding belief that the US is doomed-- his incontrovertable ideological assumption that the US (and its allies) are now in late-stage capitalism territory-- prevents him from any serious attempt to find a reasonable middle ground between the two parties on the issue of trade. All in all, it appears to me that the cooperation Dr. Rodrik envisions is a bridge too far in this particular case.
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Janos Nagy Sep 14, 2023

There were never a freemarket economic globally but a favoritism the opposite of protectionism
Favoritism destroyed government's finances and increased debt and deficits that can't be fixed in a few years if it can be fixed at all.
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Dawood Mamoon Sep 14, 2023

Dear Professor, Rodrik,

As usual a great article. I shall make effort of my own to bring to fore the important message you present in your article. How accurate would that be is that Geo Politics is the enemy of the global economy and this is a very factual statement but Geo Politics is rather the symptom and apparent cause is abandonment of free markets by US that has gained so much from Neo Classical Economics and with Bretton Wood institutions, free market ideology with local interpretations has hugely benefitted the global economy with regions like East Asia and Asia Pacific and countries like China and India making the economic development story carved out of free markets a phenomenal success.

Now for your or my potential PhD student can do some great research on finding how independent has Geopolitics been from Globalization (adhering to Free Markets). The second research question can be how independent business competitiveness is from political stability in a nation state is. An entirely new economics literature can emerge that can analyze geopolitics across nation states and politics within nation states with their representative measures of Market Economy (globalization being a good measure of free international markets across nation-states).

Though the empirical measurements define an entirely different methodology across nations and within nations much in the similar was across and within country inequality is measured there is a relationship between across and within country measurements of politics and market freedom captured by power politics.

For example, US has gained global power and geopolitical clout partly because US economy and its business conglomerates are global leaders. Here the time period is post 1950 because the surge of independent states emerged after colonialism and its material exploitation that cause many Western countries to economically progress.

Coming back to the topic, if we assume that across countries geopolitics is the symptom that is affecting global economy more than the cause that is protectionism to for example build a robust industrial sector in US as evident from President Biden's recent tweets. If we understand the depth of your argument with this framework, then so brilliantly one may conclude that global leaders can refrain from geopolitical outcomes that divides the world and rather achieve such geopolitical outcomes that are favorable to world peace for example.

This would then mean certain adjustments to international politics and diplomacy. The ingredients are already there and maybe we need to make United Nations more effective that primarily accepts independence of nation states. Then there are international arrangements like BRICS, G20 or SAARC that assumes closer relationships with countries due to strategic, economic or political cooperation.

Your brilliant article then explicitly suggests that the nations states and especially the global leaders like US, China and India are miss representing geopolitics and need to correct their course and direction. The world and international institutions of governance thereby need to promote higher levels of practiced national sovereignty. I understand that the national sovereignty of Taiwan and Honk Kong is under threat. But both these regional powerhouses have more common culture with China then the US. Having said that, I accept it is not that simple to hone Geopolitics towards reconciliation between US and China. But China and US are two countries that don't live in historical grievance with each other whereas historical grievance is one of the most significant causes of international conflict. During the times of hyper globalization, China actually benefitted hugely from US outsourcing. Similarly, US imported cheap Chinese products even for its defense sector.

In regions like Latin America, historical grievance prevents many Latino countries to have cordial relationship with the US. In South Asia it is historical grievance that prevent Pakistan and India to implement a peace deal. Same is true in case of Israel and Philistine. In this multipolar world, it is only Europe that has overcome historical grievance and no number of books written would be enough to explain European achievement post World War 2.

Where there is a will there is a way. Following the European model and no history of historical grievance, I think it is really not a unsurmountable challenge for US and China to have a very cordial relationship despite China being a communist state and US being a democracy. Yes, there is increased level of competition between both and mostly is of economic nature or that is where the Chinese are focusing on. But there is whole world open for both US and China to cooperate as well.

Your article puts a foundational effort towards this possibility. I suggest that your new PhD student should write a thesis on this very theme identifying all the links by which new road to positive diplomacy is carved through understanding global and local dynamics of Geopolitics under competing economic paradigm. I am sure such research by your PhD student would be one of those early effort that would help redefine geopolitics and economics and would be a seminal work of 21st century.
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Joe Ryan Sep 13, 2023

Rather than geopolitics vs. protectionism, the issue is cooperation vs. noncooperation.

You can raise tariffs in the WTO framework, even above your bound rates. You just do it in a cooperative way through the WTO's procedures. You recognize that you are removing "concessions" that you previously made and you negotiate the adjustments that other members may make: removing their own concessions of equal value to yours.

What the U.S. Government has done instead is to do it in the noncooperative way. It has claimed that its tariff hikes don't go back on concessions but rather that the WTO framework allows unilateral, noncooperative action under "national security" and "public morals" provisions. The WTO has given the USG more benefit of the doubt than it deserves in evaluating these excuses as if they were serious, although of course it has found that the USG was misinterpreting the agreements. Beneath this formality, no one doubts that the USG was simply lying.

So, protectionism is hardly to be seen as being an alternative to geopolitics. Rather, it is enjoying a resurgence as a noncooperative form of geopolitics. Ironically, this rejuvenates the potential of the WTO's multilateral trade negotiation role, which is now needed again! The real question is whether we will go forward cooperatively through the institutions or tear the institutions down.

Prof. Rodrik makes a better point in observing that the proliferation of "regional" (or preferential) agreements between small groups of countries has had less to do with reducing barriers to commerce than with trying to get other countries to adopt the USG's preferred regulatory standards.

And Prof. Rodrik is right that the preferential agreements haven't been "neutral" as between the interests of the public and "big businesses" (actually, the interests of the small fraction of the population that controls those businesses). This has been shown most strikingly by the case that became multilateral: the ill-fated TRIPS agreement, the disaster that keeps on giving.

He errs, however, in identifying this with the cooperative, multilateral spirit. Rather, it has been characterized by the use of big-power leverage beyond what is possible in the multilateral forum.
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Francois Lategan Sep 13, 2023

Of course, the geopolitics coin also has two sides. The other side being occupied by the poorer nations of the world. The restructuring currently taking place in the power balance of the world could either benefit this new positioning or lead to utter dire poverty with very few options for survival. Promises to poor countries do not always come with the necessary financial backup and the bigger nations are stepping back.
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Oscar Ugarteche Sep 10, 2023

Some aspects of the US macro economy must be straightened out, such as the fiscal and external deficits resulting from domestic decisions which are no one else's fault. Blaming China for the US external deficit is similar to blaming Mexico for the American abuse of drugs, Japan for invading the US with Japanese goods in 1985, or France and Germany in 1970 for their surpluses. Once and for all, the US must make itself responsible for its level of credit-based overconsumption. China developed. That is what development economics teaches. The problem seems to be precisely that. It is also creating a parallel financial world to the Western one that stopped being a means for trade and investment and became a US political end weaponizing the dollar. No one to blame if, in 2008, the PBoC opened yuan swap lines with 32 developing countries while the FED concentrated on the rich 11 countries (including Mexico and Brazil).
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Barry Rosenfeld Sep 10, 2023

Thank you, Prof. Rodrick, for a perceptive and honest reading of what was wrong with the period of hyperglobalization. The old Roman precept, cui bono, is the only rule of thumb to use in an allegedly "rule-based" system: who makes the rules and for whose benefit.

The only notion missing from Rodrick's appraisal, understandable as it is space limited, is the tie between the winners and losers of the policy-induced globalization experienced since really the Reagan administration - and continued by all US administrations since then - is the relationship between hyperglobalization as experienced and the breakdown of trust in government and the chasm that has developed in the US political system and who benefits from this.
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Robert Wolff Sep 8, 2023

The problem as seen by the world majority is neither protectionism nor geopolitical rivalries, but the moral breach by moneyed elites against those who are in servitude to them.

Those who control the World Money System, especially in the West and most especially in America, have overstepped the moral boundaries of those who are controlled by IT.

The result is a violent human upheaval against the rule of money -- not only worldwide but also from within America domestique by Americans in servitude to IT -- and those who own IT and use IT for their own power and aggrandizement.

The worldwide human demand for the downfall of those immoral Western Elites who control the world money system is based on the fundamental human moral principle of freedom from servitude to those elites who determine "Who gets What for Doing What?".

It ain't funny, McGee!

https://drive.google.com/file/d/1-OpYLBbxqRVv9ReCTyWg9HOmYI0w-gWX/view?usp=drive_link
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O verdadeiro inimigo da economia mundial é geopolítica, não protecionismo

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