Against Trade Wars

How global imbalances are threatening peace, justice and democracy

Dec 1st, 2019
Cédric Durant

About the brochure

Like the 1930s or the 1970s, the 2010s are a pivotal period. At first, it seemed like neoliberal globalisation had absorbed the shock waves of the major 2008 financial and economic crisis. The rise of the G20 and the main powers’ commitment to pursuing free trade buoyed hopes that globalisation had a future. At the dawn of the 2020s, it is clear that it does not. When Donald Trump and his protectionist agenda arrived in the White House, a trend reversal already apparent in international trade statistics also burst onto the political scene, signalling the end of an era that saw national economies rapidly drawn into globalisation. While we are not yet experiencing deglobalisation, in trade and financial terms the progress of globalisation has come to a halt. However, the global imbalances that had built up before the crisis remain and are fuelling mounting geopolitical tensions.

Faced with these circumstances, there are two opposing positions. On the one hand, there are those who support pursuing the neoliberal agenda of the 1990s, entailing a new generation of free trade agreements which would enable much closer integration, particularly in terms of rules and regulations, between economies. This position, held by former US President Barack Obama’s administration, remains dominant in Europe but is now severely weakened. The Trump administration has made protectionism its characterising feature; opposing the internationalist agenda of much of the business community, it exhibits an unbridled nationalism which is being echoed by a growing number of governments around the world. The situation is evolving so fast, especially with a hardening confrontational atmosphere between the United States and China, that there is an increasing likelihood that the world economy will fragment into rival blocs that are relatively isolated from each other. In Europe, this issue is manifesting itself differently. Against the backdrop of a cataclysmic decade for European Union integration, far-right forces who are critical of this process are making headway.

With such polarisation between the nationalism and internationalism of capital, sometimes the attitudes of the left are having trouble being heard. How can the denunciation of free trade and the rejection of nationalism be reconciled? How can international solidarity be promoted while challenging an agenda guided by the interests of multinationals and the financial sector? How can the social aspect of the economy be consolidated without succumbing to the risk of turning in on ourselves? These questions must be asked. This publication does not intend to answer them directly, but rather provide a few avenues for further reflection, taking as a starting point a key dimension of the problem, namely the issue of global financial and trade imbalances.

Standing as they do at the crossroads between economics and politics, global imbalances are the main point of friction in fashioning a world market. This is the point at which the shared interests of capital to expand opportunities for trade and investment clash with the temptation for individual capital to delve into state resources for the means to take advantage of their benefits. This is also the interface where the various national social compromises impact on each other. In a nutshell, this is the dangerous place where the national convergence of these cold monsters, the State and capital, can transform geo-economic rivalries into open conflict. In the course of the following, I will try to outline a perspective from the political left regarding this issue.

Any left-oriented view of international imbalances in essence comprises two components. First, there is the adoption of an internationalist approach, i.e. an analysis in which the effects of the economic policies adopted in a given country are also considered in terms of their repercussions for other countries. Second, there is its aspiration to replace the capital-based rationale with that of social justice, environmental renewal and the fulfilment of people’s needs, in other words a desire to put policy in control. For the left, the problem is that of the external constraint to which so many governments have succumbed.

We start off by providing various clarifications. These show that the drive for greater competitiveness is a zero-sum game, with some people’s gains being others’ losses, and that mounting surpluses lead to the crystallisation of unequal economic relationships.

We then go on to present the notions of imperialism, Keynesian self-sufficiency and globalisation, thus broadly covering the main models that characterised the world in the 20th century. The following section reports on the growing instability resulting from neoliberalism, with the proliferation of financial crises in developing countries and the sharp increase in current account imbalances starting in the 2000s, helping pave the way for the crisis.

This is followed by an analysis of how today’s imbalances mirror one another, focusing on the world’s leading economies, which are also those with by far the largest surpluses: the United States, China, Japan and Germany. The complementary nature of their growth regimes and the resulting tensions are examined. The final section focuses on the issue of internal imbalances in the euro zone. As a strategic illustration, the question of external economic constraint on Greece’s Syriza party in summer 2015 is addressed. The causes of the German surplus and the urgent need to reduce this, both in the interests of the country’s population and with a view to establishing a climate of cooperation, are also discussed. The conclusion reveals the shared yet unequal responsibility of the various respective countries in the rise of international imbalances and points to strategies to consider with a view to bringing about an international order that is both cooperation-oriented and pro-democracy.

About the author

Cédric Durand is an economist at Paris University 13. His research, which belongs to the tradition of Marxist/regulationist economics, focuses on globalisation, financialisation and changes to contemporary capitalism. He has published many academic papers on these subjects and is a regular contributor to the online journal ContreTemps.

His most recent book, Le capital fictif, was published in his native French by Les Prairies Ordinaires in 2014, with translations into English (Fictitious capital: how finance is appropriating our future, published by Verso) and Spanish (published by Ned Ediciones) appearing in 2017.