Political economy and a short history of global imbalances

Jeffry Frieden of Harvard Univ has a very interesting short paper on global imbalances. He gives a historical account and political perspective to it.

He tells you how in the globalisation era before World Wars, there were global imbalances as well. This time Germany was the deficit country and US was the surplus country. Currently we are in reverse and US is the deficit country and China, Germany etc are surplus countries. He also points that both US and Germany did not like them being part of global imbalances but because of political reasons carried on.The Great Depression led US to pass anti trade policies which then led Germany and other economies to turn protective and what followed was a complete chaos. All economies turned inwards and  we had formation of nationalistic sentiments and govt coalitions.

The same problems exist today and we need to be weary. The change from a consumption society to saving one and vicer versa is painful and couild easily lead to conflict.

Excellent stuff. A short paper with a lot of punch.

Addendum:
I have heard of Jeffry Frieden but never read much. I was glancing his working papers and is very very exciting stuff.

 

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2 Responses to “Political economy and a short history of global imbalances”

  1.   Products Which China Trade To Britain. by IN ASIA ONLINE Says:

    […] h Political economy and a short history of global imbalances · … are in reverse and US is the deficit country and China, Germany etc are surplus […]

  2. How US political cycle (elections) prevented another depression? « Mostly Economics Says:

    […] the net borrower fuelling imbalances and now it is China the net lender and US the borrower (see this Frieden paper for more insights on global imbalances in the two eras). What led imbalances to […]

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