Dan here…Thomas Palley is Senior Economic Policy Advisor, AFL-CIO Washington DC. Here he addresses the issues of trade imbalances in a paper worth considering.
by Thomas Palley
The theory of global imbalances: mainstream economics vs. structural Keynesianism
Prior to the 2008 financial crisis there was much debate about global trade imbalances. Prima facie, the imbalances seem a significant problem. However, acknowledging that would question mainstream economics’ celebratory stance toward globalization. That tension prompted an array of explanations which explained the imbalances while retaining the claim that globalization is economically beneficial. This paper surveys those new theories. It contrasts them with the structural Keynesian explanation that views the imbalances as an inevitable consequence of neoliberal globalization. The paper also describes how globalization created a political economy that supported the system despite its proclivity to generate trade imbalances. [READ MORE]