There is an interesting article here on how Trump is effectively bound to be outsmarted in his trade war with China.
America suffers from the same problem as Britain – it doesn’t make much anymore. So if the currency reduces in value there is no opportunity to increase exports because it there is nothing much to export. Like Britain, it simply ends up importing inflation.
Michael Hudson is quoted in the article as pointing out that another reason that America cannot compete in the world is because the system needs American workers to be paid more in order to afford healthcare, high housing prices, student loans and so on. State provision and state subsidy for these things helps a country to compete.Whoever knew? And all of these things (with the prominent exception of health) also apply to Britain.
‘Global’ Britain is , just like the US, impeded in its competitive endeavours by all these bankers lending us money at interest and bidding up house prices. Nobody ever suggests banks should show restraint in order that the country can compete on the ‘world stage’. But their actions are an essential part of keeping costs down. The state could direct banks’ money creation – indeed before Thatcher, used to. The state ends up being able to do things more efficiently than the market because of its scale and because it doesn’t waste resources on competition but instead is able to harnesses a common purpose.
Trump thinks that China is competing unfairly by giving subsidies and cheap loans to its corporations. He considers China is interfering in the free market, but China has understood its common purpose and it doesn’t believe in the ‘free’ market.
Indeed, China is not alone – this is from an FT editorial earlier this week, which clearly Trump has yet to read:
There is a great irony that while the US essentially invented modern industry policy, many there still view it as a dangerous subject. Under Alexander Hamilton, founder of America’s first national bank, politicians directed US industrialisation. Presidents including Kennedy also supported a state role in directing capital flows. But since Reagan, trickle-down and laissez-faire have ruled, despite evidence markets do not allocate capital to the most productive places.
Now to be fair, the state doesn’t necessarily do it any better, but China does, because it understands money is a tool and not a resource so it spends widely and generously and when things don’t work out the government picks up the tab. Companies don’t have to go bust because the government, since it owns most of the banks, doesn’t need to require repayment. Corporate lending is “a roundabout form of government-financed industrial policy.” Much of the decision making on where to allocate loans is also devolved locally.
China seems to have a deal with its population for economic material prosperity in return for severely constrained freedom of expression.
The US has a deal with its population for freedom of expression but constrained material prosperity for most.
It is not clear to me which is the better environment in which to bring up a family.
But it is clear that when China knows money is a tool and not a resource, Trump is on a hiding to nothing.