LQD: the 70s again.

by Metatone Mon Jul 22nd, 2013 at 04:47:00 AM EST

A couple of days ago Krugman posted a very interesting graph on his blog:

Unprecedented Globalization - NYTimes.com

A couple of weeks ago I posted a chart showing the long-term trend of world trade in manufactures relative to world production. The paper I took the chart from, however, only went up to 2000. And I decided to update it for the next edition of Krugman Obstfeld Melitz. And it's pretty striking:
You see the interwar trade decline; the growth in world trade after World War II didn't return to 1913 levels of globalization until around 1970. But since then, trade has grown incredibly. Interestingly, the big tariff cuts in GATT rounds had already happened; what we're looking at here is trade liberalization in developing countries plus containerization, and the emergence of massive vertical specialization (iWhatevers being made in many stages in different countries).

front-paged by afew

I think it's worth recording because it has two useful properties:

It shows how globalization now really is different in scale to the pre-WW1 state everyone (particularly The Economist) is fond of quoting as a touchstone reference to why globalization isn't something to be concerned with.
There's an interesting correlation between this graph and the economic problems that came to light in the 70s and proved to be the impetus for politicians to become enamoured of the neoliberal movement.

Previous 70s diaries for reference:
European Tribune - So what really happened in the 70s?

It's been apparent for quite a while that the core myths of neoliberalism sit on the foundation of a neoliberal/right-wing narrative of what happened in the 1970s.

and

European Tribune - The 70s redux...

Benjamin Studebaker has published an interesting blog

LQD: the 70s again. | 21 comments (21 topical, 0 editorial, 0 hidden)

Re: LQD: the 70s again. (4.00 / 5)

Thanks for the links back. Good discussions.

I posed a question:

Also I wonder if trade really increased if measured in tons of moved goods. For me the globalisation narrative hides the colonial world and its trade patterns and appears to insert a pre-globalization world where every country had massive trade walls.

To which BruceMcF answered:

Comparing the 1960's and the turn of the century, trade certainly increased for the US in terms of tonnages of goods imported and exported ... the question at hand is to what extent that process was well underway by the mid-1970's. I don't have that data immediately at hand, but I would not be surprised if the impact of Asian neo-mercantalist exports in the mid-1970's were more in terms of competitive pressure in specific industries and not the actual dominance in terms of units shipped and total market share that become common in a number of industries in the 80's and 90's.

And while this fits with the graph, I'd like to add Krugman's analysis of his graph:

Globalization and Macroeconomics - NYTimes.com

one important point is the nature of that rapid growth in manufactures trade. For it mainly involves vertical specialization, breaking up the value chain, so that in the course of producing $1 of final consumer goods one may have several dollars' worth of trade. The gains from this trade are as real as those from any kind of trade; but the macro implications are different. Put it this way: while we trade a lot more than we used to, we probably if anything spend a higher share of our income on nontraded goods and (mostly) services than we did a few decades ago, and maybe even more than in 1913.

So more goods moving, but also more moving back and forth, reflected in the rapid increase of value of trade vs manufacture, in such a way that lots of the actual money stays in the West.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Jul 5th, 2013 at 03:05:45 PM EST

Re: LQD: the 70s again. (4.00 / 3)

Indeed,

But trade balance issues seem to crop up a lot in the politics of economics. We often hear in the UK (but also to some degree in the US) that "we can't afford a social safety net, because we're not making things the world wants."

by Metatone (metatone [a|t] gmail (dot) com) on Fri Jul 5th, 2013 at 04:44:25 PM EST
[ Parent ]

Re: LQD: the 70s again. (4.00 / 2)

Let's assume, for a moment, Britain isn't making anything the world wants.

OK, who's fault is it? The people on the assembly line or management, the folks who are:

... responsible for planning and directing the work of a company, monitoring the work and profit of a company, and taking corrective action when necessary.

?

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Jul 5th, 2013 at 05:26:52 PM EST
[ Parent ]

Re: LQD: the 70s again. (none / 0)

Naturally enough, we're in agreement that management is largely to blame.

But I think my point is that the balance of the world economy has changed. This whole trying to describe the economy of a country like it's a small company or household isn't helping.

For instance, changes in currency rates haven't done much for Britain because a bunch of our manufacturing is "middle chain" - half-finished goods come in, 3/4 finished goods go out. So rising exports are partly balanced automatically by rising imports.

by Metatone (metatone [a|t] gmail (dot) com) on Sat Jul 6th, 2013 at 07:11:27 AM EST
[ Parent ]

Re: LQD: the 70s again. (4.00 / 4)

First thing to do is stop throwing people into dustbins if they are outside the Golden Circle. This band of bearded, long-haired, freaky weirdos:

The google-eyed goop in the left foreground is Bill Gates.

Would the average Brit financier lend a rusty nail to these:

two guys? And I note, at the time, the guy on the right didn't bathe, so his odor was ripe.

Woz and Jobs had the typical look for a member of the Mountain View Homebrew Club, a group whose fascination and joy in microcomputers are responsible for something along the lines of $20 trillion (US) of economic activity.

It's a statistical certainty there's someone in the unemployed young of the UK with the ability to create a world-class business. In the current UK business environment it's also certain that person will never, ever, get a chance to show their stuff.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Jul 6th, 2013 at 12:48:07 PM EST
[ Parent ]

Re: LQD: the 70s again. (4.00 / 4)

First thing to do is stop throwing people into dustbins if they are outside the Golden Circle.

Ah. You haven't understood our Tories, have you?

Creating a Golden Circle and throwing everyone outside it into a dustbin is exactly what Tory values are about.

They don't care how big the Circle is, as long as they're inside it.

If it's getting smaller - too bad. (As long as they're inside it.)

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jul 6th, 2013 at 06:06:09 PM EST
[ Parent ]

It may be no different in meaning to say ... (4.00 / 4)

... that the first thing to do is to stop throwing people into dustbins if they are outside the Golden Circle ... or to say that the first thing to do is to abandon Tory thinking ...

... but the first does sound less partisan, and has the advantage that it also indicates we should abandon it whether its the Tories, the Lib Dems or Labour that's doing it.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jul 22nd, 2013 at 06:53:18 PM EST
[ Parent ]

Re: LQD: the 70s again. (4.00 / 2)

But that is just effective propaganda because the task of manufacturing has largely returned to China, and everybody knows that there were good jobs in manufacturing. But those jobs were well paid not due to intrinsic well-paidness of manufacturing, but due to a century of unions organising, striking and negotiating. Once moved they become low-paying jobs compared to western wages, and the difference can be grabbed by the chain of capitalists involved, minus expenses for grabbing.

And how much of a social safety net is imported goods anyway? Is the UK like North Korea and lack enough rice to feed its population? Can it not pony up the exports to cover the imports of clothes to wear? Perhaps estates should then be turned over to growing potatoes and raising sheep for the wool.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Jul 5th, 2013 at 05:53:47 PM EST
[ Parent ]

Re: LQD: the 70s again. (4.00 / 2)

I agree that it's propaganda - the problem, I assert, is that there is no alternative model for the population at large to understand things.

We're back to the "country as a household/small company" thing.

I've pointed out a bunch of times that for the UK, but also for currently troubled countries like Greece, green energy projects are huge win because they help with import substitution, because these are countries that import energy. But this is never taken on by VSPs.

I think the problem is that economists basically have it both ways, citing "Free trade" against import substitution policies and then "balance of payments" against the safety net...

by Metatone (metatone [a|t] gmail (dot) com) on Sat Jul 6th, 2013 at 07:15:05 AM EST
[ Parent ]

Re: LQD: the 70s again. (4.00 / 3)

No, the problem is we're still using Renaissance European politics in the 21st century.

The 'country as household' idea is for the peasants.

What our so-called leaders really believe is the 'country as warring city state' idea.

There's a bit less actual hands-on killing than there used to be. But it's sublimated (barely) into 'economic competition' - which is still just animalistic social darwinism elevated to a moral principle.

There is nothing you can do to economics to fix this. You can only fix it by making huge progressive changes along the lines of:

Abolishing countries altogether (which immediately frees up trillions from military budgets, and also gets rid of this 'competition' nonsense)
Taking draconian steps to prevent excessive concentrations of power and wealth, including decentralisation of power, redistribution of asset ownership for the public good, and sortition to avoid the creation of a political class.
Eliminating evangelical and rhetorical 'logic' from political debate and making public discussion evidence-based.
Excluding individuals with personality disorders (narcissism, sociopathy, etc) from any kind of public office.

Now, of course these ideas seem laughably naive and unrealistic.

But they're not. The reason they're not is because current systems are equally naive and unrealistic.

The only 'rational' advantage they have is simplistic narrative logic in place of predictive power, and established precedent.

Precedent and failure don't make a workable combination. And - pace Krugman - I think enough people are waking up to the true state of politics now that the beginnings of change are becoming possible.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jul 6th, 2013 at 08:17:35 AM EST
[ Parent ]

Re: LQD: the 70s again. - Crocodile tears. (none / 1)

"we can't afford a social safety net, because we're not making things the world wants."

Which was exactly the intended aim. What else is the point of wage and labor standards arbitrage?

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jul 5th, 2013 at 07:25:37 PM EST
[ Parent ]

Re: LQD: the 70s again. (none / 0)

How do you get a diary to appear on the new European Tribune? afew asked me via twitter to post my last Sunday Train. It complained that I didn't pick a section, a new feature of the site, but after picking the top section in the list, which I assumed to be the default, it doesn't seem to have shown up.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jul 22nd, 2013 at 06:26:26 PM EST
[ Parent ]

Re: LQD: the 70s again. (none / 0)

[ET Moderation Technology™]

You must have clicked on the [new story] link rather than the correct [new diary] link. See if you can open a new diary, and copy the content from this link.

Finance is the brain [tumour] of the economy

by Carrie (migeru at eurotrib dot com) on Mon Jul 22nd, 2013 at 06:38:51 PM EST
[ Parent ]

Re: LQD: the 70s again. (none / 0)

Well, on Energy rather than Diary since Diary didn't seem to work any more, since that was the default setting it was one when it got an extraordinarily ambiguous red error message about me being naughty in missing one or more of a long list of necessary things.

Which section does a normal, regular diary go into, anyway?

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jul 22nd, 2013 at 06:55:16 PM EST
[ Parent ]

Re: LQD: the 70s again. (none / 1)

Anyway, now its up.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jul 22nd, 2013 at 07:02:26 PM EST
[ Parent ]

Re: LQD: the 70s again. (none / 0)

One thing to keep in mind is that in the pre great war era, the world was split into the French, British, American, Japanese, Russian and to some extent even German and Portuguese trade blocs. And to add to that, I'm a bit fuzzy on how trade between, say, metropolitan Britain and British India was counted in the trade statistics.

After the War, the American trade bloc gobbled up first the Japanese and German, then the Portuguese, then the British, then the French and finally the Russian trade blocs. Generally, you would expect this to increase the total volume of foreign trade, because the foreign trade increases faster than linearly in the size of the trade bloc.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 22nd, 2013 at 12:50:31 PM EST

Re: LQD: the 70s again. (none / 0)

Sure, but surely all except the BRICs were integrated into the USA bloc by 1960?

by Metatone (metatone [a|t] gmail (dot) com) on Mon Jul 22nd, 2013 at 03:14:48 PM EST
[ Parent ]

Re: LQD: the 70s again. (none / 0)

Well yes, but that's a bit like saying that all of Europe is Protestant except for the Catholic part.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 22nd, 2013 at 03:27:50 PM EST
[ Parent ]

Re: LQD: the 70s again. (none / 1)

So much for Albania.

by gk (gk (gk quattro due due sette @gmail.com)) on Mon Jul 22nd, 2013 at 03:35:06 PM EST
[ Parent ]

Re: LQD: the 70s again. (none / 0)

Right, but timing is important.

Notably that some trend was in action before the 1970s which later BRIC integrations intensified, but can't really be put down to BRIC integrations.

by Metatone (metatone [a|t] gmail (dot) com) on Mon Jul 22nd, 2013 at 04:15:50 PM EST
[ Parent ]

Re: LQD: the 70s again. (4.00 / 3)

Rather it was the ongoing Washington Consensus policies to take measures to permit those trends to continue, when otherwise they would slow down in the face of nationally based pushback.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jul 22nd, 2013 at 07:04:41 PM EST
[ Parent ]

LQD: the 70s again. | 21 comments (21 topical, 0 editorial, 0 hidden)

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LQD: the 70s again.

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