Comment by epistasis
1 day ago
Nothing there explains why it's a bad deal for the middle class.
The middle class actually benefits the most from this situation! More goods, more government services, etc. How much more? Just add up all the trade deficits, that's all benefit accrued almost entirely to the middle class.
It is explained in the Alden piece, section "The Fraying of the Petrodollar System", subsection "The Triffin Dilemma Unfolds".
What I meant was "blue collar working class" as opposed to the neo-artistocrat professional class. The Triffin Dilemma is a contributor to the K shaped economy and rise of populism.
>And from there, the value of the system depends on who you ask. Folks who are often on the higher end of the income spectrum who worked in finance, government, healthcare, or technology benefitted from this system, since they obtained many of the benefits of globalization and none of the drawbacks. Folks who are often on the lower end of the income spectrum, specifically those that make physical things, are the ones that benefitted least and gave the most up, since their jobs were outsourced and automated at a faster rate than other developed countries. But now with China also undermining the structure of the system, even the geopolitical/hegemonic benefits for the political class are subverted as well.
I guess I'm not seeing anything tying the trade deficit to the destruction of unions, to the massive reduction in top tax rates resulting in higher CEO compensation, etc.
The piece puts increasing trade deficits next to lots of stuff about increasing inequality, but it does not make the case that trade deficits are the cause of increasing inequality.
There's a person that had a job making physical things, but they are not inherently a "person that only makes physical things." The idea that bringing back the making of physical things will make these people wealthier is, well, suspicious. Unions? Better taxations systems? Modernizing manufacturing so that each worker is far more productive and we can compete with the world? That may help. But reducing trade deficits will not fix any of the K shaped economy.
A current account deficit is a capital account surplus.
We can pay for imports with things we make or things we own. To a first approximation, making things employs people and owning things does not. If we pay with things we make, our economy employs people. If we pay with things we own, the jobs disappear while stocks/bonds/real estate soar.
If you want the whole story from an actual economist, read "Trade Wars are Class Wars" by Klein and Pettis.
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> Modernizing manufacturing so that each worker is far more productive and we can compete with the world
How does this not correspond directly to reduced trade deficits? In this scenario the US is either sourcing more of what it needs internally, and thereby importing less, or it is more competitive globally and therefore exporting more, or both.
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It certainly can't be leading to more government services. We get less every year. There might be more spending, but there's fewer results. We can't build trains, our police don't stop crime, healthcare covers less and costs more every year.
So good for the middle class they're evaporating at record rates!