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end of an era? « Previous | |Next »
February 13, 2009

A lot of recent economic commentary raises the spectre of the rise of protectionism in response to the global economic recession. This commentary states that trade amongst nations is part of the solution, not the problem, that nations need to keep exporting, and politicians need to work towards liberalizing trade to ensure economic growth.

Simon Crean, the Australian Trade Minister, is a strong advocate of this position in the context of a huge economic crisis and an overheated planet in the pages of the Australian Financial Review.

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The rationale is that globalization is good. It lifts poor nations out of poverty etc. Maybe we are not experiencing an economic downturn, but are living through the end of an era of export-oriented industrialization. The trade liberalization model has built-in contradictions and the era of growth may be coming to an end.

Export-oriented industrialization is where Japanese--and U.S companies---tapped into the platforms of export processing zones, where foreign capital could be married to cheap (usually female) labor using them to re-export goods back to Japan, the U.S., and elsewhere. China perfected the strategy.

Walden Bello at the Foreign Policy in Focus think tank highlights the limitations of the export growth model:

This process depended on the U.S. market. As long as U.S. consumers splurged, the export economies of East Asia could continue in high gear. The low U.S. savings rate was no barrier since credit was available on a grand scale. China and other Asian countries snapped up U.S. treasury bills and loaned massively to U.S. financial institutions, which in turn loaned to consumers and homebuyers. But now the U.S. credit economy has imploded, and the U.S. market is unlikely to serve as the same dynamic source of demand for a long time to come. As a result, Asia's export economies have been marooned.

End of an era. The sheer size of China--and the rapidity with which exports platforms were built, without any regard to dangerous imbalances--simply crashed this simple model of globalization

| Posted by Gary Sauer-Thompson at 3:09 AM | | Comments (3)
Comments

Comments

It is the US that is going increasingly protectionist and it still has yet to realize that it needs China as much as China needs it. Ours is a world that no longer marches to America's drum. Washington has yet to realize that.

The Rudd government's strategic narrative of the economic crisis has three parts.

First, it has said that Australia was the victim of international, and specifically US, banking problems; second, that Australia was particularly well-positioned to ride out the financial and economic storm; and, third, that a Labor government was willing and able to do limitless decisive and effective things to combat the crisis.

That is still holding up even if it is looking frayed.

This craziness will last for at least another 18 months....