We are all mercantilists now(bridgewater.com)
bridgewater.com
We are all mercantilists now
https://www.bridgewater.com/what-trumps-global-order-could-look-like
101 comments
> Smith wasn't right on everything, but he was right to criticize Mercantilism.
I don't know why there's a need to hedge. Smith's observations were incredibly objective and insightful and have aged extremely well.
There were areas where his observations were incomplete or refined later (absolute vs relative advantage, paradox of value, efficiency of corporations).
Even Karl Marx found little in Smith's work that was disagreeable.
The Wealth of Nations is a seminal piece of Western civilization and deserves all the respect we can bestow such works.
I don't know why there's a need to hedge. Smith's observations were incredibly objective and insightful and have aged extremely well.
There were areas where his observations were incomplete or refined later (absolute vs relative advantage, paradox of value, efficiency of corporations).
Even Karl Marx found little in Smith's work that was disagreeable.
The Wealth of Nations is a seminal piece of Western civilization and deserves all the respect we can bestow such works.
Adam Smith mostly has a lousy reputation these days because of the work of the Adam Smith Institute, which does not accurately reflect his thinking.
Yes, it seems that a lot (most?) of contemporary proponents of capitalism have cherry picked from 'The Wealth of Nations' and completely ignored 'The Theory of Moral Sentiments'.
Mark Blyth has some interesting critique of Adam Smith in https://youtu.be/JQuHSQXxsjM
Yes, it was a very important book and set of ideas. But it also had some shortcomings. For example, he has a theory of value based on labor/work (and David Ricardo continued with that approach, and then Karl Marx as well). That is greatly improved by Carl Menger's marginal theory of value.
While I agree that labor theory of value is wrong, I believe that theory of value based on utility is even less descriptive of the real world (and in that sense a regress).
People are not utility calculating machines. I would say these utility theories (I would call them theories of subjective value) have several flaws:
1. There are some things that all sane humans objectively (universally) value (things like survival, not being harmed, time and energy expenditure).
2. Sometimes humans simply value things that other humans value, as a shortcut to expending energy in figuring out what to value.
3. Any reasonably good theory value has to incorporate incomplete information that people have, and thus might value something that is not valuable and vice versa due to lack of information.
Some of these lead to nonlinear behavior which is really not well captured by an additive theory such as marginal theory of value.
People are not utility calculating machines. I would say these utility theories (I would call them theories of subjective value) have several flaws:
1. There are some things that all sane humans objectively (universally) value (things like survival, not being harmed, time and energy expenditure).
2. Sometimes humans simply value things that other humans value, as a shortcut to expending energy in figuring out what to value.
3. Any reasonably good theory value has to incorporate incomplete information that people have, and thus might value something that is not valuable and vice versa due to lack of information.
Some of these lead to nonlinear behavior which is really not well captured by an additive theory such as marginal theory of value.
Don't worry, economists surely have their calculation of the day.
Previously it was ordinary differential equations. Now attempting to solve these is intractable for such a big and complex system so far, and worse if you misrepresented the model or approximated ot too much.
So essentially all the theories with an equation are a guess.
Doubly so for theories without an equation that are not tied to experimental data... (Hello Austrians)
Previously it was ordinary differential equations. Now attempting to solve these is intractable for such a big and complex system so far, and worse if you misrepresented the model or approximated ot too much.
So essentially all the theories with an equation are a guess.
Doubly so for theories without an equation that are not tied to experimental data... (Hello Austrians)
I don't think you understand the marginal theory of value at all. Like, at all. Obviously the marginal theory of value does incorporate all your concerns.
First, because Menger, creator of the Austrian school of economics, uses methodological individualism. That means it includes the fact people have incomplete information and subjective value (for example based on what others value). These are points 2,3.
About point 1, you clearly don't understand marginalism. You value more water over gold, but a glass of water is cheaper than the same weight of gold. If you were thirsty and about to die in the middle of the desert, you'd pay up to infinite money for a glass of water and 0 for gold. But you value just the next marginal unit of water, not the first one, so you know you can have as many glasses of water as you want just by opening the tap. I'm sure in your lifetime you'll spend way more money on water/beverages than on gold, but a single glass of water is cheaper.
First, because Menger, creator of the Austrian school of economics, uses methodological individualism. That means it includes the fact people have incomplete information and subjective value (for example based on what others value). These are points 2,3.
About point 1, you clearly don't understand marginalism. You value more water over gold, but a glass of water is cheaper than the same weight of gold. If you were thirsty and about to die in the middle of the desert, you'd pay up to infinite money for a glass of water and 0 for gold. But you value just the next marginal unit of water, not the first one, so you know you can have as many glasses of water as you want just by opening the tap. I'm sure in your lifetime you'll spend way more money on water/beverages than on gold, but a single glass of water is cheaper.
Theory of comparative advantage is probably wrong, though. There are huge advantages for a nation in doing (pretty much) everything, and having research close to application, and having tool makers close to their users.
Analogy with human specialization is flawed, because human attention span is limited. Even there the famous Heinlein quote on versatility still applies.
Analogy with human specialization is flawed, because human attention span is limited. Even there the famous Heinlein quote on versatility still applies.
Competitive advantage is how every small community works. One person runs the coffee shop, someone is the mechanic, there’s the town contractor, plumber, grocer, sheriff, etc. the more each person is able to specialize the more services are available to the whole town.
I understand international politics are completely different, but it is hard for me to understand how comparative advantage would not be useful at that level as well.
I understand international politics are completely different, but it is hard for me to understand how comparative advantage would not be useful at that level as well.
Comparative advantage somewhat works on international level, but with very specialized stuff. There is no reason every country needs its own space program, its own EUV tooling or its own global positioning system.
But for commonly used goods that every person needs, every country would benefit from producing these on their own, thanks to various synergies.
Specialization has also transaction cost. If you're skilled it might be better to plumb some things yourself than call a professional and risk him being a hack.
So I don't think it's one system being better than other. Rather, specialization is like paralelism - there is a transaction cost due to nonlocality, but also better scaling. So, like with paralelism, the rule should be - try as much as you can to produce locally, and specialize only where the scale advantage becomes really strong (usually that happens with high-tech products that are needed in very low quantities - by centralizing production, knowhow is easier to apply and capital costs are easier to justify).
But for commonly used goods that every person needs, every country would benefit from producing these on their own, thanks to various synergies.
Specialization has also transaction cost. If you're skilled it might be better to plumb some things yourself than call a professional and risk him being a hack.
So I don't think it's one system being better than other. Rather, specialization is like paralelism - there is a transaction cost due to nonlocality, but also better scaling. So, like with paralelism, the rule should be - try as much as you can to produce locally, and specialize only where the scale advantage becomes really strong (usually that happens with high-tech products that are needed in very low quantities - by centralizing production, knowhow is easier to apply and capital costs are easier to justify).
Juche doesn't work. The theory of comparative advantage is not wrong.
It's unfalsifiable though. How can comparative advantage be distinguished from being created versus being innate?
If economic actors can choose what comparative advantages they possess (e.g. by moving the economic factors or through training or investment), the theory becomes meaningless. It turns into a predestination fallacy since it myopically focuses on geographical factors that happen to not matter that much in the modern world.
If economic actors can choose what comparative advantages they possess (e.g. by moving the economic factors or through training or investment), the theory becomes meaningless. It turns into a predestination fallacy since it myopically focuses on geographical factors that happen to not matter that much in the modern world.
You can falsify it with this experiment. Move into the wilderness and be self sufficient yourself starting tomorrow. Give up all the comparative advantage you currently experience through your trading with other people (labor for money, money for things you can't make). See what happens.
No, first you need to make a formulation of the theory that you're trying to falsify.
What economic advice would the theory of comparative advantage give to China in the 1960s?
If it is "just do the free trade", it would have been wrong. China started to implement its market reforms with dual pricing to protect its own citizens from the foreign markets.
What economic advice would the theory of comparative advantage give to China in the 1960s?
If it is "just do the free trade", it would have been wrong. China started to implement its market reforms with dual pricing to protect its own citizens from the foreign markets.
But it appears their secret sauce is not dual pricing, but horizontal and vertical integration in manufacturing, combined with low labor costs.
Same thing the USA companies did earlier.
Now that is an actual comparative advantage that is actually hard to replicate due to huge entry costs.
(To lower the costs of labor further you need to actually give out life basics for free! China gets away with this by having a huge population competing thus far, but it won't hold.)
Now that is an actual comparative advantage that is actually hard to replicate due to huge entry costs.
(To lower the costs of labor further you need to actually give out life basics for free! China gets away with this by having a huge population competing thus far, but it won't hold.)
If current trends continue, North Korea will be around longer than South Korea.
Ironic, no?
[deleted]
There is no reason to believe trends will continue. Countries populations are stabilizing, not trending toward zero.
How did you make the leap from free markets vs. autarkic Juche to birth rates discourse?
It's unambiguously true that free markets has made South Korea significantly, mind-bendingly wealthier than the North. And on the subject of fertility, birth rates are so low (1.8) that you have Kim Jong Un crying on national TV, begging women to have more kids.
Personally, I have this pet theory (irrational, it may be) that as the boomers die off across the West, newer generations will pick up having more kids and TFR will level off. Like new growth springing up in a forest after a wildfire burns up all the old, dry wood.
Something similar to the post-war baby boom.
It's unambiguously true that free markets has made South Korea significantly, mind-bendingly wealthier than the North. And on the subject of fertility, birth rates are so low (1.8) that you have Kim Jong Un crying on national TV, begging women to have more kids.
Personally, I have this pet theory (irrational, it may be) that as the boomers die off across the West, newer generations will pick up having more kids and TFR will level off. Like new growth springing up in a forest after a wildfire burns up all the old, dry wood.
Something similar to the post-war baby boom.
[flagged]
Exactly this. I believe it'll free up housing and general consumer demand, reduce social security spending, etc.
But South Korea wasn't using pure comparative advantage either. Ha Joon-Chang mentions that LG was originally a textile company, but the government forced them to expand into cables. And 50 years later.. had they followed comparative advantage, they would still be a textile company.
You guys(I'm not from US) are confused because you thought gaming economy and chasing global economic optima gives you everything, and it didn't quite do so. That's because economic theories don't consider purposes or political importances of a product, it'll tell you it's stupid to make your own nuclear missiles when you can get a bulk discount from China. And you're looking for a different framework that works better than that.
The USA was unique in that it was always outspoken with patriotism, and to lesser extent with classical nationalism than usual. Maybe the US is reaching some stage where it grows its own proper form of good-old ethnic nationalism, whether it's a good thing or not...
The USA was unique in that it was always outspoken with patriotism, and to lesser extent with classical nationalism than usual. Maybe the US is reaching some stage where it grows its own proper form of good-old ethnic nationalism, whether it's a good thing or not...
Simple models shouldn't be applied without nuance (and that's why I get really annoyed at "engineers" on HN who think they know jack shit about economics because they took econ 101). The idea is sound, but the real world is more complicated. In a simple world model where there are two industries of equal value and two countries with complementary specialization in these industries, it makes sense.
There is an opportunity cost to closing the borders and trying to do everything yourself, which you are not considering.
There is an opportunity cost to closing the borders and trying to do everything yourself, which you are not considering.
The theory of comparative advantage should really be dubbed the theory of static comparative advantage to highlight where it fucked up.
If China believed in it theyd still be making cheap plastic tat. If the west hadnt believed in it China's industrial rise probably wouldnt have been quite so shocking - 90s/00s neolib economists thought China was shooting itself in the foot.
If China believed in it theyd still be making cheap plastic tat. If the west hadnt believed in it China's industrial rise probably wouldnt have been quite so shocking - 90s/00s neolib economists thought China was shooting itself in the foot.
Actually they still are making that. And now advanced expensive stuff nowadays too.
After all, it's easier to further an already existing advantage.
After all, it's easier to further an already existing advantage.
shrug and the theory of static comparative advantage said that by trying to move up the value chain they were shooting themselves in the foot.
It sounds stupid, but so do many intellectual fashions of a bygone era.
It sounds stupid, but so do many intellectual fashions of a bygone era.
> There are huge advantages
What are they?
What are they?
When things are produced locally, you get closer to consumer and feedback loop is shorter. (That's why Shenzen is so great as a HW startup hub - if you can get a part in minutes compared to days, prototyping is faster.) You can understand the practical problems with your products better if you can more interact with customers.
Isn't this priced into the product? I don't see how this contradicts comparative advantage.
No, see https://news.ycombinator.com/item?id=44866613. If the theory of comparative advantage is to give any useful advice, it cannot just rely on people doing "the right thing". That will quickly make it into an unfalsifiable tautology.
In this case, you also forget that the pricing signals have a time horizon, which is bounded by the expected time of survival of the private company being non-competitive. But government (society) can take a longer term view than a company that is influenced by pricing signals, See the LG example I gave elsewhere in this thread.
Another reason is incomplete information. Free market works in theory because you assume complete information; in the real world, this is not the case.
In this case, you also forget that the pricing signals have a time horizon, which is bounded by the expected time of survival of the private company being non-competitive. But government (society) can take a longer term view than a company that is influenced by pricing signals, See the LG example I gave elsewhere in this thread.
Another reason is incomplete information. Free market works in theory because you assume complete information; in the real world, this is not the case.
> the theory of comparative advantage
It's not a theory. Firms trade internationally because it's cheaper, not because they "believe" in free markets.
> But government (society) can take a longer term view than a company that is influenced by pricing signals
Private markets routinely make multi-decade bets; entire industries (mining, energy, infrastructure, biotech) work on 20–100 year horizons. Risk and time are already priced in.
> Free market works in theory because you assume complete information
Free markets don’t "assume" anything; they function through decentralized price signals. And even with imperfect information, dispersed actors still aggregate and react to knowledge far better than any central planner can.
It's not a theory. Firms trade internationally because it's cheaper, not because they "believe" in free markets.
> But government (society) can take a longer term view than a company that is influenced by pricing signals
Private markets routinely make multi-decade bets; entire industries (mining, energy, infrastructure, biotech) work on 20–100 year horizons. Risk and time are already priced in.
> Free market works in theory because you assume complete information
Free markets don’t "assume" anything; they function through decentralized price signals. And even with imperfect information, dispersed actors still aggregate and react to knowledge far better than any central planner can.
It's kinda funny that Americans look at the German economy and think they want to be in that situation. You would rather have an economy based on manufacturing cars, rather than one based on leading in tech? You sure?
The German economy is indeed heavily influenced by its manufacturing sector and its reliance on large trade surplusses. Consequently the German workers can't be granted huge wage increases because it would reduce their competitiveness internationally.
In contrast the US economy is service-based and thus isn't constrained to scale their prices up so much. Of course manufacturing becomes very hard to maintain when skilled workers can earn >100k.
All stats show that top US tech companies earn incredible amounts of money but their share of GDP growth isn't as big as the Mag7 share of the stock markets makes you think. (<15% of GDP growth in 2024)
In contrast the US economy is service-based and thus isn't constrained to scale their prices up so much. Of course manufacturing becomes very hard to maintain when skilled workers can earn >100k.
All stats show that top US tech companies earn incredible amounts of money but their share of GDP growth isn't as big as the Mag7 share of the stock markets makes you think. (<15% of GDP growth in 2024)
How does Australia fit into that model? Their economy is based more on resource extraction than on technology or manufacturing, and wages are high relative to most other developed countries.
What makes those two things mutually exclusive?
> "Each of you in your private household would know better than that. You don’t regard it as a favorable balance when you have to send out more goods to get fewer coming in. It’s favorable when you can get more by sending out less.”
- Milton Friedman
Being obsessed about trade deficit is missing the forest for the trees. If you can run a successful modern economy just by sending out slips of paper, that's a great deal.
That said, even Friedman made a caveat for national defense. If war breaks out and you have no manufacturing capacity, there are theoretically bad problems there.
It also doesn't account for cultural concerns. Maybe a country that doesn't have enough manual labor jobs develops weakness and stagnation?
- Milton Friedman
Being obsessed about trade deficit is missing the forest for the trees. If you can run a successful modern economy just by sending out slips of paper, that's a great deal.
That said, even Friedman made a caveat for national defense. If war breaks out and you have no manufacturing capacity, there are theoretically bad problems there.
It also doesn't account for cultural concerns. Maybe a country that doesn't have enough manual labor jobs develops weakness and stagnation?
I want to have good American-made tools that don't break under normal use and can be easily maintained. To do that we apparently need a robust manufacturing economy.
Cars are great: we need good cars, but more than that, we need good tools to fix the cars.
Taiwan make/have some of the best tools in the world. There's no reason the USA can't do the same. We once did.
Cars are great: we need good cars, but more than that, we need good tools to fix the cars.
Taiwan make/have some of the best tools in the world. There's no reason the USA can't do the same. We once did.
Why do you care if the tools are American-made? What's wrong with buying good Tawianese-made tools?
b/c Taiwan's very existence is precarious: Red China keeps threatening to take over Taiwan and Red China clearly views the USA as a political and military enemy.
I do buy good Taiwanese-made tools unless there's a better American-made tool.
I do buy good Taiwanese-made tools unless there's a better American-made tool.
People want Germany's 1,350 average annual working hours compared to America's average 1,765 hours, and then tax billionaires to make up the difference.
Probably wouldn't work out well, but that is the shiny object they are transfixed on.
Probably wouldn't work out well, but that is the shiny object they are transfixed on.
The PPP median income of the US is 36% higher than Germany. If they want 30% fewer working hours then they can have it now, and 6% left over.
German economic growth has been shrinking for decades and is now in decline (negative growth). Meanwhile the US has been chugging along at a steady 2-3% for that same time period.
Ironically, PPP is exactly the kind of myopic metric Germany would use to self-access right now.
Ironically, PPP is exactly the kind of myopic metric Germany would use to self-access right now.
Watching intelligent people across America defend tariffs has been shocking/amusing, to say the least.
We all understand that for most of human history, everyone lived at a subsistence level because we all had to farm our food, bake our bread, sew our clothes, build our own houses, etc.
Specialization is what makes the luxury and wealth of the modern world possible: you do one thing all day long and convert it to cash, then exchange value with people who do other stuff to get what you want. And since they're operating at scale, they can build more houses, make more stuff, etc. that you ever can if you did it yourself. So, you pay less for more stuff.
International trade simply takes it to the next level. For instance, the average American will not bend over to pick cocoa beans for chocolate for even $100k/yr. Many of you will argue, but all I'll say to you is that there's a reason agricultural work is referred to as back-breaking work. There's also a reason why farmers have the highest rate of suicides. Even if the American eventually agrees to do it, the cost will be so prohibitive that buying chocolate will be out-of-reach for everyone but the rich. Abundance ended; the end.
Now, using tariffs, the US gov. wants to take money away from customers and use it to prop up inefficient businesses that should be outsourced to other places that can do it well.
If the CCP wants to subsidize solar panels and sell them to you, why not accept free panels funded by diluting the wealth of Chinese workers and savers?
The main argument mercantilists use against free trade is that after establishing a monopoly, incumbents can raise prices. They forget that there's competition, even among solar manufacturers in China and anyone trying to bait and switch would be driven out of business by smaller, hungrier players.
And in this example, PV lasts 40-50 years and once you buy it, they can't gouge you.
No country has benefited from free trade like America; no bloc has benefitted like the West. You're mad at China for lifting hundreds of millions from grinding poverty, without realizing that Chinese mass production has cushioned the effect of all the money-printing by Western economies for decades now. Hundreds of millions of Chinese workers going into cities to work in manufacturing are the reason why many middle class workers across the West can afford cheap consumer goods, despite their government's dumb financial decisions.
But, it's okay: we'll see how it plays out.
We all understand that for most of human history, everyone lived at a subsistence level because we all had to farm our food, bake our bread, sew our clothes, build our own houses, etc.
Specialization is what makes the luxury and wealth of the modern world possible: you do one thing all day long and convert it to cash, then exchange value with people who do other stuff to get what you want. And since they're operating at scale, they can build more houses, make more stuff, etc. that you ever can if you did it yourself. So, you pay less for more stuff.
International trade simply takes it to the next level. For instance, the average American will not bend over to pick cocoa beans for chocolate for even $100k/yr. Many of you will argue, but all I'll say to you is that there's a reason agricultural work is referred to as back-breaking work. There's also a reason why farmers have the highest rate of suicides. Even if the American eventually agrees to do it, the cost will be so prohibitive that buying chocolate will be out-of-reach for everyone but the rich. Abundance ended; the end.
Now, using tariffs, the US gov. wants to take money away from customers and use it to prop up inefficient businesses that should be outsourced to other places that can do it well.
If the CCP wants to subsidize solar panels and sell them to you, why not accept free panels funded by diluting the wealth of Chinese workers and savers?
The main argument mercantilists use against free trade is that after establishing a monopoly, incumbents can raise prices. They forget that there's competition, even among solar manufacturers in China and anyone trying to bait and switch would be driven out of business by smaller, hungrier players.
And in this example, PV lasts 40-50 years and once you buy it, they can't gouge you.
No country has benefited from free trade like America; no bloc has benefitted like the West. You're mad at China for lifting hundreds of millions from grinding poverty, without realizing that Chinese mass production has cushioned the effect of all the money-printing by Western economies for decades now. Hundreds of millions of Chinese workers going into cities to work in manufacturing are the reason why many middle class workers across the West can afford cheap consumer goods, despite their government's dumb financial decisions.
But, it's okay: we'll see how it plays out.
> A version of Greg's research was published in the Wall Street Journal.
This is not research; it's an opinion piece by a Bridgewater employee that may prove right in the years to come.
Plus, the rhetoric of differentiating China from the "free world" paints a Big Red Flag over the article's face.
This is not research; it's an opinion piece by a Bridgewater employee that may prove right in the years to come.
Plus, the rhetoric of differentiating China from the "free world" paints a Big Red Flag over the article's face.
When did China become part of the free world?
Around the same time the US left it. It's all relative, after all.
During the Umbrella Revolution I guess
The joke's on anyone outside of China thinking they're free.
The only problem I have with articles like this is that it frames what Trump is doing with an air of intention. Most readers will obviously think that becoming mercantilist is a bad idea. However, readers will also walk away with the notion that these actions have all been done with the a grand plan in mind.
The reality is much more stupid though. Recent policies have been made without any plan to begin with. There is no driving philosophy of "we must create modern mercantilism" and the resulting policies being a coherent plan to bring about that change. Instead actions are being made based on the split second decision making of a moron would lacks the most basic understanding of economics much less mercantilism.
This is a decidedly worse world than one in which the plan is simply a bad one. A bad plan would at least be coherent and something that our allies could predict and make their own plans around. Nevertheless, I think the thesis is broadly correct as being the outcome of recent actions.
The reality is much more stupid though. Recent policies have been made without any plan to begin with. There is no driving philosophy of "we must create modern mercantilism" and the resulting policies being a coherent plan to bring about that change. Instead actions are being made based on the split second decision making of a moron would lacks the most basic understanding of economics much less mercantilism.
This is a decidedly worse world than one in which the plan is simply a bad one. A bad plan would at least be coherent and something that our allies could predict and make their own plans around. Nevertheless, I think the thesis is broadly correct as being the outcome of recent actions.
I don't think they're gracing him with an air of intention. I think they're just looking at what he's doing and finding the closest model that makes reasonably accurate predictions about the future.
I don't think so. Recent actions are not delivering an industrial policy, or promoting research. They are not addressing the distribution of "wealth and power" which is possibly more important than its magnitude.
True. And in a few years we'll find out how much Trump has actually affected the nation's trajectory. His trade policy is an absolute 180 from GOP orthodoxy and members of his own party have mostly said "we'll do what the president wants" and not "we think this is a great idea". I'd wager a lot of this policy gets undone at the first opportunity.
> I'd wager a lot of this policy gets undone at the first opportunity.
You're likely right, but it likely won't happen for about 3.5 years during which time much damage will be done.
You're likely right, but it likely won't happen for about 3.5 years during which time much damage will be done.
If it won't happen during these 3.5 years, it won't happen for decades. Do you really except this Grand Old Pedophile party to cede power willingly, now that they own all four branches of government?
Trump doesn't have to have intention.
The trend of the US pulling out of the "global order" has already been happening. It's just that Trump is taking something that was happening gradually, and through his policy button-mashing, accelerated it much faster
The trend of the US pulling out of the "global order" has already been happening. It's just that Trump is taking something that was happening gradually, and through his policy button-mashing, accelerated it much faster
> China turned a slow drip into a death spiral. While many countries pushed the boundaries before China did, its economic size and the effectiveness of its mercantilist policies broke the pre-existing order. Through currency management, public procurement, state subsidies, protectionism, and other implicit subsidies, China has developed a range of leading industries, including electric vehicles, solar power, and batteries.
China's rise can be attributed to taking advantage of the neoliberal order. Many of their nationalistic successes come through things like currency manipulation, hiding illegal subsidies, intellectual property theft, and using state monopolies to bully other nations and their corporations.
It's a prisoner's dilemma. If everyone copies China's playbook, there is nothing left to take advantage of. We will all be poorer for it.
It cannot be understated that we are getting front row seats to the end of Pax Americana. In a world where countries can no longer enjoy reliable trade for commodities, we are going to revert to a world of imperialist land grabs and violence.
China's rise can be attributed to taking advantage of the neoliberal order. Many of their nationalistic successes come through things like currency manipulation, hiding illegal subsidies, intellectual property theft, and using state monopolies to bully other nations and their corporations.
It's a prisoner's dilemma. If everyone copies China's playbook, there is nothing left to take advantage of. We will all be poorer for it.
It cannot be understated that we are getting front row seats to the end of Pax Americana. In a world where countries can no longer enjoy reliable trade for commodities, we are going to revert to a world of imperialist land grabs and violence.
> It cannot be understated that we are getting front row seats to the end of Pax Americana. In a world where countries can no longer enjoy reliable trade for commodities, we are going to revert to a world of imperialist land grabs and violence.
I don't agree with everything Peter Zeihan writes, but he did a good job of capturing this in "The end of the world is just the beginning"[0].
It feels like it is going to be a rough couple of decades.
0: https://zeihan.com/end-of-the-world/
I don't agree with everything Peter Zeihan writes, but he did a good job of capturing this in "The end of the world is just the beginning"[0].
It feels like it is going to be a rough couple of decades.
0: https://zeihan.com/end-of-the-world/
>In a world where countries can no longer enjoy reliable trade for commodities
When the firefighters get blamed for causing fires because they are always present every time there is one.
When the firefighters get blamed for causing fires because they are always present every time there is one.
On trade imbalances: Trump expects Canada, a country of 40 Million people, to buy as much goods from the USA, a country of 300+ Million people. And if you subtract the oil that the USA buys from Canada, Canada has a trade SURPLUS with the USA. That is, apart from selling oil to the USA, Canada buys MORE from the USA than the USA buys from Canada, a country roughly one tenth the size.
This trade war isn't about righting trade imbalances. It's about the USA exerting leverage over countries that it can get away with. Just like a Mafia Don.
Or to quote a crude summary from Peaky Blinders: "Big $ucks small".
That's the philosophy of the Trump Administration in a nutshell.
This trade war isn't about righting trade imbalances. It's about the USA exerting leverage over countries that it can get away with. Just like a Mafia Don.
Or to quote a crude summary from Peaky Blinders: "Big $ucks small".
That's the philosophy of the Trump Administration in a nutshell.
Have you seen (or read) "Cloud Atlas", by David Mitchell? It's worth watching. And I think the phrase from the movie "the big eats the small" encapsulates this administration's behavior. It's simply exploitative, even predatory (for e.g., if you're homeless in Washington D.C. right now.)
I think that the attitude that "the big eats the small", and its consequences (that is: the trade war and the accompanying uncertainty for business, slashed science funding, tax cuts that lead to more debt for the country, and all the other potentially disasterous policy decisions) America and the world will pay a very heavy price.
I think that the attitude that "the big eats the small", and its consequences (that is: the trade war and the accompanying uncertainty for business, slashed science funding, tax cuts that lead to more debt for the country, and all the other potentially disasterous policy decisions) America and the world will pay a very heavy price.
Thanks for the recommend. I have considered watching it. Just haven't gotten around to it.
I guess the proper term is "Social Darwinism". Trump will do whatever he can get away with. That's his only code.
Supposedly architect Andrew Tesoro did some work on one of Trump's golf courses. He invoiced Trump for $140,000. Trumps lawyers offered $50,000. They threatened to drag it out in the courts otherwise. He agreed to charge $50k. Trump didn't pay. Tesoro contacted Trump. Trump offered half that, $25,000. Tesoro got $25k. Trump's transactions are all about leverage.
https://www.forbes.com/sites/forbestreptalks/2016/07/13/this...
I guess the proper term is "Social Darwinism". Trump will do whatever he can get away with. That's his only code.
Supposedly architect Andrew Tesoro did some work on one of Trump's golf courses. He invoiced Trump for $140,000. Trumps lawyers offered $50,000. They threatened to drag it out in the courts otherwise. He agreed to charge $50k. Trump didn't pay. Tesoro contacted Trump. Trump offered half that, $25,000. Tesoro got $25k. Trump's transactions are all about leverage.
https://www.forbes.com/sites/forbestreptalks/2016/07/13/this...
What would you recommend Canada do now, other than get the US to change its mind? This seems like the reality now
Invest heavily in the Electricity grid. Both AI Data Centers and The Transportation Grid (Electric Vehicles, Batteries). These two sectors are only going to grow and they require massive amounts of electricity.
Peak Oil is going to happen soon 2020-25. China's oil demand in 2025 dropped from previous years. Even in the "drill baby drill" USA refineries are closing do to falling demand in the USA.
The private sector does not see new pipelines as economically viable. Trudeau had to step in to finish the Trans Mountain twinning. Existing pipelines that go to the USA are only at 75% capacity. If Canada wants to ship oil to Europe or Asia they should ship it by rail. It would be foolish to spend money on new pipelines when overall demand for oil is declining. And by the time these pipelines would be completed Peak Oil would be a done deal.
Develop more trade with Asia and Europe (which the current govt appears to be trying to do). A big problem is this emerging multipolar world means the USA is going to increasingly pressure Canada to become even more of a vassal state.
This youtube channel has excellent information about Canada's Engergy Future: Energi Media https://www.youtube.com/@EnergiMedia/videos
Peak Oil is going to happen soon 2020-25. China's oil demand in 2025 dropped from previous years. Even in the "drill baby drill" USA refineries are closing do to falling demand in the USA.
The private sector does not see new pipelines as economically viable. Trudeau had to step in to finish the Trans Mountain twinning. Existing pipelines that go to the USA are only at 75% capacity. If Canada wants to ship oil to Europe or Asia they should ship it by rail. It would be foolish to spend money on new pipelines when overall demand for oil is declining. And by the time these pipelines would be completed Peak Oil would be a done deal.
Develop more trade with Asia and Europe (which the current govt appears to be trying to do). A big problem is this emerging multipolar world means the USA is going to increasingly pressure Canada to become even more of a vassal state.
This youtube channel has excellent information about Canada's Engergy Future: Energi Media https://www.youtube.com/@EnergiMedia/videos
Just before the plandemic, China put in an offer on everything that Alberta could produce, and that deal never got past the first stage, and then, we kidnaped the daughter of the guy behind Huawie, all the rest of the anti China stuff and now we are here, watching Trump fly out to entertain Putin......perhaps Canada can put together a very special surprise for both of them
It was never about trade imbalances.
Trump wants Canada to help more with policing the illegal drug trade.
Trump wants Canada to help more with policing the illegal drug trade.
It's not really about illegal drugs from Canada - not a lot of illegal drugs coming in from there. It's about intimidating Canada and attempting to annex parts of it.
> as countries defected and adopted mercantilist policies, the global system lacked sufficient authority to stop them. Each time another country adopted mercantilist policies, it pushed others to react similarly
This is just a prisoner's dilemma.
This is just a prisoner's dilemma.
A good way of understanding the function of the EU is as a way of negating prisoners dilemma effects, or at least externalising them.
Are countries other than the US and China adopting tariffs and becoming "mercantilists"?
He's talking about a fait accompli:
> But as countries defected and adopted mercantilist policies, the global system lacked sufficient authority to stop them.
It's not the future. It's now.
> But as countries defected and adopted mercantilist policies, the global system lacked sufficient authority to stop them.
It's not the future. It's now.
Smart enough to see it, smart enough to understand it, thinks we're dumb enough to not realize he and his ilk helped it along. These men yearn for the pyre.
So 40 years of "Free Market" absolutism, which was a central pillar of conservative economics, gets reversed just like that?
There's consequences to mercantilism. For starters, the best products may no longer win. Justifying anything by "best product won due to consumer choice" will be a laughable reason. Justifying respect for founders and CEOs as intelligent or better isn't possible. A successful founder or CEO is just better at sucking up or whatever it takes to be blessed by authority.
There's some consequences to this reversal to conservatism as well. How can any thinking man believe a justification from principles now? They're reversible. Conservatives lose any kind of intellectual high ground, even in retrospect. Are they reasoning from principles now or were they doing it then? Can't tell.
There's consequences to mercantilism. For starters, the best products may no longer win. Justifying anything by "best product won due to consumer choice" will be a laughable reason. Justifying respect for founders and CEOs as intelligent or better isn't possible. A successful founder or CEO is just better at sucking up or whatever it takes to be blessed by authority.
There's some consequences to this reversal to conservatism as well. How can any thinking man believe a justification from principles now? They're reversible. Conservatives lose any kind of intellectual high ground, even in retrospect. Are they reasoning from principles now or were they doing it then? Can't tell.
A lot of people who describe themselves as "conservative" have completely abandoned formerly conservative values: the rule of law, moral integrity, personal humility, and so on. I'd prefer we not call these people "conservative" because those old values have real merit.
I live in a major American city run by progressive democrats, like all major American cities, and petty crime is rampant. The "rule of law" here doesn't seem to apply to anything except murders because reporting anything else takes hours at the station to even get them to file a report, let alone solve anything (hah!). Even worse, the apparatchiks that run local politics never believe anything they do is wrong and entirely lack personal humility. It is hard to square this being a "Republicans Only!" problem when I see so much of the same all around me.
"the rule of law" doesn't mean miraculously eliminating petty crime, it means believing that the administration itself should try not to conspicuously break it on a regular basis...
Where I live, laws are broken routinely, and criminals are let out of prison with a slap on the wrist
Yet prisons are overfull everywhere in America
Maybe we need more prisons
See, here's the problem. You've revealed yourself as a conservative, at least in social issues, and that usually comes with all the conservative beliefs. Why should we believe you, why should we believe you're not just taking some position today that makes you money at the expense of the rest of us? That's why 180 degree policy reversals are weird. I just don't know what to believe about what you're writing - sincere position or throwaway trolling.
You already said that you lived in the US, no need to repeat it.
I agree that in our current system, consumer choice generally determines which product wins.
But does the best product really always win? As a fan of BeOS, it doesn't seem that way to me.
But does the best product really always win? As a fan of BeOS, it doesn't seem that way to me.
Arguably, there wasn't a free market. Jean-Louis Gassée has been on record criticizing the Microsoft Windows monopoly of the late 90's, early 2000's.
> Conservatives lose any kind of intellectual high ground
I'm not sure what country you're from but in the US conservatism has always been a reductionist, post-hoc justification of doing "whatever the hell I want because I can", going back as far as I know political history. Civil war era at least, when states rights were when it was good for me and Federal enforcement when it was bad.
The market was free when that was how these groups made the most money, now that they arent making the most money its tossed out like yesterdays garbage. And if you believed "reasoning from principles" fluff around it, I think you could reconsider what incentives lead you originally down that path of weaponized naivety that is so common in this community (organized as it is around making money.)
I'm not sure what country you're from but in the US conservatism has always been a reductionist, post-hoc justification of doing "whatever the hell I want because I can", going back as far as I know political history. Civil war era at least, when states rights were when it was good for me and Federal enforcement when it was bad.
The market was free when that was how these groups made the most money, now that they arent making the most money its tossed out like yesterdays garbage. And if you believed "reasoning from principles" fluff around it, I think you could reconsider what incentives lead you originally down that path of weaponized naivety that is so common in this community (organized as it is around making money.)
The media typically let conservatives get by with assertions of principle in the past, and let them get away with slurs like "radical leftist" or "socialist". Conservatives in real life very often argued from principle in my experience, letting them override lived experience.
Justification from principles is for rationalisation. Never confuse cause and effect.
If the free market is good for my business, it is good. Same thing with foreign relations. Same thing with control over democratic instutions.
Always look at what people do, not what they say.
(Keep in mind though, that just because things have always been this way does not justify getting bitter over it. Society has been through this before.)
If the free market is good for my business, it is good. Same thing with foreign relations. Same thing with control over democratic instutions.
Always look at what people do, not what they say.
(Keep in mind though, that just because things have always been this way does not justify getting bitter over it. Society has been through this before.)
I will die on the hill that the "best product" respects its customers, is safe, performs correctly, and is purchased not rented.
Under those constraints the "best product" largely does not win now.
Under those constraints the "best product" largely does not win now.
It's wild how people keep on talking about the prisoner's dilemma in the face of economist consensus that the selfishly dominant strategy is free trade. It's consistently easy for special interests to convince the public that tariffs are part of a sophisticated strategic/moral dilemma, while in fact they're just handouts. Likewise the glorification of China. The idea that the Communist Party might make bad economic decisions is never considered.
"The four tenets of Modern Mercantilism include:
- The state has a large role in orchestrating the economy to increase national wealth and strength.
- Trade balances are an important determinant of national wealth and strength, and trade deficits should be avoided.
- Industrial policy is used to promote self-reliance and defense.
- National corporate champions are protected."
- The state has a large role in orchestrating the economy to increase national wealth and strength.
- Trade balances are an important determinant of national wealth and strength, and trade deficits should be avoided.
- Industrial policy is used to promote self-reliance and defense.
- National corporate champions are protected."
Feels a bit stretchy that...
Trump strongly believes the second point but is [even] less convinced of the importance of the other three points than previous US administrations (they're actively sabotaging a lot of the state organs that could orchestrate the production of US national wealth, and seem to regard national corporate champions as entities to demand protection money from more than entities to actually protect)
China does believe in the role of the state and industrial policy and corporate champions but I don't think they actually believe the trade balance is a measure of strength, and they've been pursuing broadly similar policies for decades. The EU might be slightly more interested in linking defence to industrial policy than it used to be and a lot less trusting of the US as a trade partner, but its state aid sits under the same Single Market restrictions it always has and it certainly isn't making the mistake of trying to maximise its trade surpluses. And most of the rest of the world is trying to industrialise via Chinese imports and wondering why the US is being weird.
Trump strongly believes the second point but is [even] less convinced of the importance of the other three points than previous US administrations (they're actively sabotaging a lot of the state organs that could orchestrate the production of US national wealth, and seem to regard national corporate champions as entities to demand protection money from more than entities to actually protect)
China does believe in the role of the state and industrial policy and corporate champions but I don't think they actually believe the trade balance is a measure of strength, and they've been pursuing broadly similar policies for decades. The EU might be slightly more interested in linking defence to industrial policy than it used to be and a lot less trusting of the US as a trade partner, but its state aid sits under the same Single Market restrictions it always has and it certainly isn't making the mistake of trying to maximise its trade surpluses. And most of the rest of the world is trying to industrialise via Chinese imports and wondering why the US is being weird.
No? Our President doesn't know what tariffs are.
A lot of this is enabled in part by all these capitalists rolling over and submitting.
A lot of this is enabled in part by all these capitalists rolling over and submitting.
The orange figurehead, probably not, but the people actually pulling the strings and writing all those executive orders absolutely do. The folks in power might be misguided but they are acting purposely creating more protectionist policies. To what end I think is anyone's guess. I don't think it's clear how an isolationist US benefits us when right now we have every country in the world giving us real tangible wealth in exchange for paper.
For example: Peter Navarro (Counselor to the President of the United States)
Here he is on CBS News, 30 July 2025
https://youtu.be/Ez_KJp4fDy0?t=65
"The reason we put tariffs on products from other countries is because they cheat, full stop. When they cheat, products come in and they steal our jobs, shut down our factories, and wages go down. So, the logic of tariffs is to stop that."
Here he is on CBS News, 30 July 2025
https://youtu.be/Ez_KJp4fDy0?t=65
"The reason we put tariffs on products from other countries is because they cheat, full stop. When they cheat, products come in and they steal our jobs, shut down our factories, and wages go down. So, the logic of tariffs is to stop that."
This isn't an example of them not knowing what tariffs are. This is an example of the rhetoric they're using to convince the voter.
> absolutely do
I'm not convinced. There is no coherence in their decisions, well any more than tossing out red meat. We can't even call them protectionist policies. It's just populism.
Still, I agree about isolationist. But we started down that road with W and are now running off that cliff with Trump. Not coherently but enthusiastically.
I'm not convinced. There is no coherence in their decisions, well any more than tossing out red meat. We can't even call them protectionist policies. It's just populism.
Still, I agree about isolationist. But we started down that road with W and are now running off that cliff with Trump. Not coherently but enthusiastically.
Look, I'm not agreeing with this admin's policy direction, and I certainly don't want the world they envision that this policy will drive us toward—there's plenty of reasonable skepticism that it won't even have the desired knock on effects they're hoping for, but I do think the folks at the helm know broadly what the levers they're pulling do. I worry the level of stupidity that their critics project on them is both inaccurate and is so severe as to essentially excuse their actions and absolve them of any responsibility for them.
We disagree. To reduce it to a few words, I think that you see policy (even if misguided policy) and I just see populism, entertainment if you will. I think the purpose of the article is to remind us what mercantilism is. But again, I don't see this as mercantilism which has a coherence, and instead just as populism which doesn't.
Putting a heroin addict in charge of Health and Human Services and shutting down vaccine development is not policy. It's populism.
Putting a heroin addict in charge of Health and Human Services and shutting down vaccine development is not policy. It's populism.
We always were. There was no point in history when governments weren't mostly mercantilist.
The WTO was entirely built on the idea that "if you insist on hitting your face that hard, I'll hit my face and then you will see it!"
The WTO was entirely built on the idea that "if you insist on hitting your face that hard, I'll hit my face and then you will see it!"
For example, if trade imbalances were so bad, we should sink any ship that comes into the US as this reduces trade imbalances (absurd example from Bastiat btw).