GDP growth is necessary to provide profit for capitalism as we know it.
GDP externalizes all losses, which are at the heart of the polycrisis (most urgently loss of biodiversity and, of course, climate breakdown) but also inequality.
Therefore, surveying the world economy through a GDP lens excluding: 1) the accelerating polycrisis, 2) extreme inequality, 3) the destruction of industrial capacity and employment and 5) political fascism is questionably useful. Basically, it is assessing progress in destroying life on our planet and immiserating the many for the benefit of a small number of absurdly rich people who are becoming unaccountable tyrants.
Add that 'trade' needs to be broken down into goods and services, while financial flows are mostly for (pointless?) speculation.
Add that the US (and it's not just Trump) is pushing the world into anti-cooperation and militarization, the antithesis of what is currently needed.
So while I applaud the conventional wisdom we badly need another way of assessing the status of the world economy.
We should be talking about a capital account surplus rather than a trade deficit. Much better messaging. Why would a US president want to eliminate something as virtuous as a capital account surplus?
Why would politicians rather talk about the $35 trillion in Treasury liabilities instead of the corresponding $35 trillion in Treasury assets? Why would they rather talk about Social Security benefits as an expense of the US government, than as a huge multiplier of demand? Why would a president tell us that the country is "broke," when that's not possible? Why do people in the states that receive the most aid from the US government hate the US government the most? Why does the US run tax-favored health insurance and 401k retirement savings programs through companies, whose CEOs get to ration it? Why do politicians tell 100% of Americans that they will make it into the top 20% (the American Dream) if they just work harder? There are a lot of whys.
Or put another way if the US trade deficit was a person it wouldn't even make the top 15 of the Forbes US billionaire list. Just through native talent Elon Musk has lost more net worth in the last few months than the trade deficit.
But thanks for the interesting post, I enjoy things that make me think, even if my mind does wander out there in strange territory
"In 2021, the Euro Area, which accounts for 11 percent of the world economy in PPP terms, was making a slower recovery from COVID than the US. It was then shocked off that recovery path by the impact of Russia’s invasion of Ukraine."
I know you're focused on economics here, but as you seem to understand with Trump's tartifs, political reality is critical to understanding and possibly repairing economic damage. Germany was not laid low by Russia's invasion, but primarily by the fact that it's erstwhile ally, the Biden administration, blew up the NS pipeline, eliminating a massive supply of cheap energy inputs. More broadly, Europe as a whole idiotically loyal to US Imperialism, reacted to the Russian invasion by showering a corrupt government in Ukraine with billions. It is increasingly obvious outside of the west, that those billions will never be recouped in any way by Europe. Your formulation above gives the impression that Russia somehow caused Europes economic troubles. Nothing could be further from the truth. Europe and the US created these economic problems all on their own.
"Seen in these terms, the imbalance of the world economy are spectacularly one-sided. You can see how Trump gets the impression that the US is “paying the world” and that the whole world lives off America’s money."
Sounds like he doesn't know what money is, if that's his problem.
If US/global trade is relatively small, how is it also big enough to trigger not-insignificant inflation in the US? That is, if international trade is a small part of the US economy, then tariffs shouldn’t cause significant inflation. Likewise, the added costs of tariffs shouldn’t be all the significant.
Yet apparently it all is or will be. So how do we get from a small percentage of our trade to huge effects? Obviously, I’m failing to grasp something but what am I missing?
Let's not understate the matter. Supply shock is coming to the US. White House too aggressive and too discombobulated to walk it back. It will be inflationary for the most part. Exceptions such as fuel. Global trade networks, however could benefit at US expense.
GDP growth is necessary to provide profit for capitalism as we know it.
GDP externalizes all losses, which are at the heart of the polycrisis (most urgently loss of biodiversity and, of course, climate breakdown) but also inequality.
Therefore, surveying the world economy through a GDP lens excluding: 1) the accelerating polycrisis, 2) extreme inequality, 3) the destruction of industrial capacity and employment and 5) political fascism is questionably useful. Basically, it is assessing progress in destroying life on our planet and immiserating the many for the benefit of a small number of absurdly rich people who are becoming unaccountable tyrants.
Add that 'trade' needs to be broken down into goods and services, while financial flows are mostly for (pointless?) speculation.
Add that the US (and it's not just Trump) is pushing the world into anti-cooperation and militarization, the antithesis of what is currently needed.
So while I applaud the conventional wisdom we badly need another way of assessing the status of the world economy.
This is outstanding and so useful - I always save the charts (in itself a little economics "notebook" for an amateur 😉).
The concept of your new series seems to provide us with a (much needed 👍) crash course of the long-term trajectory.
Great idea 😃
Thanks a lot!!!
Excellent post.
We should be talking about a capital account surplus rather than a trade deficit. Much better messaging. Why would a US president want to eliminate something as virtuous as a capital account surplus?
Why would politicians rather talk about the $35 trillion in Treasury liabilities instead of the corresponding $35 trillion in Treasury assets? Why would they rather talk about Social Security benefits as an expense of the US government, than as a huge multiplier of demand? Why would a president tell us that the country is "broke," when that's not possible? Why do people in the states that receive the most aid from the US government hate the US government the most? Why does the US run tax-favored health insurance and 401k retirement savings programs through companies, whose CEOs get to ration it? Why do politicians tell 100% of Americans that they will make it into the top 20% (the American Dream) if they just work harder? There are a lot of whys.
Or put another way if the US trade deficit was a person it wouldn't even make the top 15 of the Forbes US billionaire list. Just through native talent Elon Musk has lost more net worth in the last few months than the trade deficit.
But thanks for the interesting post, I enjoy things that make me think, even if my mind does wander out there in strange territory
Jack
"In 2021, the Euro Area, which accounts for 11 percent of the world economy in PPP terms, was making a slower recovery from COVID than the US. It was then shocked off that recovery path by the impact of Russia’s invasion of Ukraine."
I know you're focused on economics here, but as you seem to understand with Trump's tartifs, political reality is critical to understanding and possibly repairing economic damage. Germany was not laid low by Russia's invasion, but primarily by the fact that it's erstwhile ally, the Biden administration, blew up the NS pipeline, eliminating a massive supply of cheap energy inputs. More broadly, Europe as a whole idiotically loyal to US Imperialism, reacted to the Russian invasion by showering a corrupt government in Ukraine with billions. It is increasingly obvious outside of the west, that those billions will never be recouped in any way by Europe. Your formulation above gives the impression that Russia somehow caused Europes economic troubles. Nothing could be further from the truth. Europe and the US created these economic problems all on their own.
"Seen in these terms, the imbalance of the world economy are spectacularly one-sided. You can see how Trump gets the impression that the US is “paying the world” and that the whole world lives off America’s money."
Sounds like he doesn't know what money is, if that's his problem.
If US/global trade is relatively small, how is it also big enough to trigger not-insignificant inflation in the US? That is, if international trade is a small part of the US economy, then tariffs shouldn’t cause significant inflation. Likewise, the added costs of tariffs shouldn’t be all the significant.
Yet apparently it all is or will be. So how do we get from a small percentage of our trade to huge effects? Obviously, I’m failing to grasp something but what am I missing?
Let's not understate the matter. Supply shock is coming to the US. White House too aggressive and too discombobulated to walk it back. It will be inflationary for the most part. Exceptions such as fuel. Global trade networks, however could benefit at US expense.
To my pleasant surprise, they did walk it back.
Very illuminating, thank you.
Global GDP is surely 100 trillion not 100 billion...
Also, on the deficit trade and imbalances, does it capture only goods or services as well?
Asking for a friend.