Mosler refers to individuals who understand MMT as being "in paradigm", which those who do not as "out of paradigm".....
...this whole notion of exporting countries, such as China, damaging labor markets in the US is completely out-of-paradigm. The MMT argument goes, that if China wants to trade real goods and services for US$, then the US Gov needs to run higher deficits to satisfy the Chinese demand for US$ while maintaining full employment at domestically. Any domestic labor market weakness is due to insufficient spending (as always) and not actions by the exporter. The terms of trade, in this case, are firmly in favor of the importer as deficit spending is easy, while the exporter needs to forgo the real output of their labor.Winterspeak
Why MMT is still important
6 comments:
Agree entirely. That comment about changing your mind and finding the proof that you don't need to seems to apply more and more every day.
The actual risk is when China switches back to a domestic focus and the rest of the world is left short of real output - along with the skills to produce it.
All because policy restricted access to the one thing they can produce with ease - monetary flow.
Well they have a funny way of demonstrating consumption:
http://www.wsj.com/articles/why-chinese-steel-exports-are-stirring-protests-1426466068
theyre dumping as usual... once their storage fills up, they dump...
Otherwise they face imposing a cutback to only 2 rations of dog brain soup per day instead of the more robust 3 they provide now...
"The actual risk is when China switches back to a domestic focus and the rest of the world is left short of real output - along with the skills to produce it."
Is that when the dollar collapses and you get hyperinflation?
Philippe,
Right. The actual risk that Neil notes implies bad economic times (higher prices for U.S. consumers of Chinese manufactures). That's why we (in the U.S.) should be managing trade and implementing an industrial policy of some sort. A strong U.S. economy is not something that is magically guaranteed by free trade. On the other hand, relatively free trade is likely to be a part of it.
Us firms are already planning the moves to lower cost countries, which will probably occupy the next several decades if not the rest of the century of globalization in which the global economy levels out as the emerging world catches up. At the same time, automation and robotics are also increasing, not necessarily only for a wage advantage but to eliminate the need for pesky workers and to increase standardization and quality.
So don't look for a big reflux of employment back to the developed world. The pressure on labor is here to stay in a globalization process dominated by neoliberalism.
Many here probably don't recall the period after WWII when Japanese imports were cheap not only in price but also in quality. Quality began to improve as Japan rebuilt and retooled and then Japanese exports started to impact US firms. The US steel industry, whose fixed capital was deteriorating, could not compete with quality and price of the new Japanese factories. Then Japan moved on to dominate electronics and automobiles and other industries.
The same is going to happen with China, but China is much much larger than Japan and has more resources. China is also tapping cheaper labor in Southeast Asia and is becoming a leader in robotics, too.
Post a Comment