SOTU: The Risk of a Mercantilist World
Over at Project Syndicate Brad Delong writes:
But there are two dangers in America’s forthcoming debate. The first concerns the term likely to be used to frame the debate: competitiveness. “Productivity” would be much better. “Competitiveness” carries the implication of a zero-sum game, in which America can win only if its trading partners lose.
The second danger is that “competitiveness” implies that what is good for companies located in America – good, that is, for their investors, executives, and financiers – is good for America as a whole. Back when President Dwight D. Eisenhower’s cabinet nominee Charlie Wilson claimed that what was “good for America was good for General Motors – and vice versa,” GM included not just shareholders, executives, and financiers, but also suppliers and members of the United Auto Workers union. By contrast, General Electric CEO Jeffrey Immelt, recently appointed by Obama to lead the President’s Council on Jobs and Competitiveness, runs a company that has long since narrowed to executives, investors, and financiers.
In other words, “competitiveness” may refer to a neo-mercantilist class society. It is hard to imagine a world in which all major economic powers are neo-mercantilist, but that seems to be a real risk. China and Germany already pursue mercantilism through their currency polices, and if the USA does also, mercantilism is that much closer to becoming the global economic order. A mercantilist economic order is not likely to be an economic order in which anyone except the very wealthy would be happy.
It would also be an economic order where conflict will be endemic. Between the great mercantile powers, trade conflict. Within the great mercantile powers, class conflict. Between the successful mercantilist powers and their less-successful trading partners, international conflict. There is a cost, paid in security measures and hatred, to maintaining a class society: to being the filthy rich minority in impoverished world. Nor can I see how such a world could be environmentally sustainable: there would always be the temptation to gain a competitive edge by damaging the environment by extensively using fossil-fuel energy, overfishing, polluting. A neo-mercantilist world would institutionalize the tragedy of the commons.
This could be the way the world ends.
[minor changes on day of publication]