Frances Coppola on repressing domestic demand… globally
The one thing I love about Frances Coppola, who is an economist from the United Kingdom, is that she is a perfect blend of someone inside the box and yet outside the box. I truly appreciate how she balances the two with an open and creative, yet grounded mind.
She wrote a terrific article, The Intergalactic Trade Frontier. She writes about trade balances, focusing on the trade surplus of Germany.
“Trade moralists are fundamentally illogical and dangerously plausible. The idea of exporting your way to recovery is seductive. But it simply is not possible for all countries to export their way to recovery. Someone, somewhere has to have a trade deficit.”
She is absolutely correct and wise to understand the seduction of something that is ultimately not workable. We are witnessing a huge market failure on a global scale. What is at the core of this market failure? Cutting wages to raise national savings and raise exports originally by a few countries and now by many more.
“Everyone, it seems, is “making reforms” to repress domestic demand and promote exports. This is not encouraging. If everyone tries to increase exports and cut imports by repressing domestic demand, the result will not be a global export-led recovery. It will be a global depression.”
I recommend reading the whole article.