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Roula Khalaf, Editor’s FT, choose her story in this weekly newsletter.
The writer is Senior President of the Carnegie’s members for International Peace
Today there is a reasonable concern this month that the chaos released the world’s financial market in the role of the US dollar.
Keeping the role of the dollar is a safe « security currency » requires a powerful economy Dani Rodrik Conflict inherent Between the integration between the world and the National sovereign. He noticed many countries that choose global combination of their country in traditional control of trade and funding.
In this world hyperglobalohouse creates trade tension. It is one thing if every country chooses to abandon the same level of control level as their domestic economy in vast compressions. It is very different if some major economics will choose to control their domestic economy.
This is because in every country, the incorporation of outside economics must always be consistent. When some countries are limited to funding and commercials to maintain favorable domestic trafficking in their trade account Joan Robinson Called these « Beggar-beggar-sogg-so-ba » commercial policy, and said that in the end they will lead to increase in global trade clasheside.
For example, when the country suppress domestic need to support their own production, in the open world of market forces. But by limiting its commercial account and capital and intervention in its currency, the country can prevent such adjustments. In this case the trade of its production must be absorbed by its partner used less to control their trade account and funding. Moreover, as a share of global production involves the world’s share of demand, that it is more open Trade Partner must decrease.
That’s why it is not just an accident at the United States, with a deepest and flexible market Well below the world worldwideUnlike economics, such as China, the production of the stock around the world. Industrial policy targets highly controlled internal economic economy with their open trade partner.
It is clear that previous trading and capital policy – Tuesdays of the Placement Place President in the country with Chinese exceptions. These policies are unlikely to resolve the cause of US economic immuneration and non-industrial rates.
But recognizing the drawbacks in these policies should not mean the cancellation of structures they look for. The truth remains at the world economic resistance is real. The challenge is not that the United States should be taken to solve these resistance, but rather do so in the way effectively and effectively both. The best solution is in the way with a cooperative way, the countries must be procedure in the overall demand for overall balance.
However, the world cannot come to the agreement, the United States is valid in expression as a role of distortion abroad, as it is doing now. The most effective way is likely to control US capital account, which limits the capacity of their excessive countries by receiving US assets. While this first may be resistance to US policy under the minute trading way, with a particular bilateral rate of charges of trade.
The dominance of the dollar in trade and money around the world are expected to be a net benefit for American economy, but this assumption is challenged. While it benefits from the owner of the wall and the ownership of these capital, these benefits will cost to American manufacturers and American farmers.
In the world where some countries manage their external disorders and others are not safe currencies for the global economy. Solve these deficiency requirements require a new assessment of trade rules and funds.
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