What I didn’t mention in today’s OA ‘Brief’

Partly for reasons of space, but more because I am cautions of repetition. My sense is the consumers of these analytical papers remain to be convinced how much relevance prior downturns, the Great Depression, and history in general have for today. That’s OK with me; I used to be of a similar view.

Today’s brief is an “In-Depth Analysis”, which is Oxford Analytica’s term for a survey-style piece. It is double the length of a normal article (2400 words instead of 1200). The title is G7 forced to confront the reality of a rising ‘periphery’  and the remit was to look ahead to the response of the developed world to unprecedented growth in the developing. In short, this is a bullish story. It is no less than the redress of centuries of divergence in development between the global core and ‘periphery’, what used to be called the “third world”. What’s not to celebrate?

What I left out today is the parallel between China’s global role today and that of the USA between the wars. It’s something I raised in a footnote to this post, which footnote I’ve copied below:

1/ There is no solace in examining the outcome when the US was the premier global exporter, akin to China today. This was the interwar period. What the world needed desperately was a US economy as capable and willing to run an occasional trade deficit as it was a surplus. But the US economy wasn’t that way inclined and neither were its managers. A trade-surplus mindset was firmly implanted and nothing shifted it. Nothing, that is, except world war. It was only amidst that conflagration that the US policy establishment took a hard look in the mirror and asked, What happened? The answer is a 1943 publication commissioned and published by the US Department of Commerce, written by a private economics consulting firm called Hal B. Lary and Associates. (The citation is Lary, H.B., The United States in the World Economy: The International Transactions of the United States in the Interwar Period.)  You won’t find a drier piece of reading nor one as illuminating in this respect. It is one giant mea culpa for the US role in the interwar depression. I gave a talk here recently to a delegation of banking executives from Shanghai, on the prospects and requirements of a ‘global currency’, which the renminbi is certainly destined to become (look out for the blog posting). I mentioned the Lary publication and urged them to consider their own views about China’s role today and whether it might be repeating the US’ own policy experience. Which of course is its right. The US currency was no less pegged between the wars as China’s is today, and that was seen very much as the sovereign’s prerogative. Which it was and is.

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