Lecture Notes: Reshaping the Global Economy

Overview

• The US government is making significant changes to the global economy.
• New era in the global system, reminiscent of pre-WWII economic strategies.
• Focus: Reshaping economic policy due to new threats, risks, values, and rivalries.

Key Statements

• Biden:
  • "There is no reason why the blades for wind turbines can't be built in Pittsburgh instead of Beijing."
  • "American workers can lead in the production of electric vehicles and batteries."
• These statements hint at a shift towards economic nationalism.

Historical Context

• Global Trade Development: Humans have long benefited from specialized production and trade.
• Post-World War II:
  • The US emerges as a global power, promoting free trade and minimal tariffs.
  • US dollar becomes the standard currency, stabilizing the global economy.
• China Enters the Market (1980s):
  • China opens coastal cities for global business, leading to massive economic transformation and reducing poverty.
  • US companies move factories to China for cheaper labor.

The Global Economy's Growth and Impact

• Massive benefits from globalization:
  • Lower costs for goods.
  • Improved economies in countries like Vietnam, India, Chile.
• China Shock: Many American jobs moved overseas, leading to economic hardship in some communities.

Shift in Economic Policies (1990s - Present)

• 1990s Mindset: Free trade seen as a solution for global conflict, poverty, and democratization.
• Current Shift: Moving away from global free trade towards protectionism.

Reasons for Policy Shift

1. Worker Protection:

• Addressing job losses due to overseas production (e.g., China shock).

2. Climate Concerns:

• Need for green infrastructure (electric cars, solar panels).

3. Supply Chain Fragility:

• COVID-19 exposed vulnerabilities in global supply chains.

4. Geopolitical Tensions:

• Rise of China as a formidable economic and military power.
• Rivalry between the US and China over resources like microchips.

Recent Policies and Actions

• US Policies:
  • CHIPS Act: $50 billion to boost domestic chip production.
  • Tariffs on imports and restrictions on selling to China.
• Global Trends:
  • Countries (India, South Korea, Japan, Australia, Nigeria, Europe) focusing on domestic production and self-sufficiency in critical sectors.

Economic Nationalism

• Government involvement in boosting domestic industries.
• Recognition: Economic entanglements might now be tools of conflict rather than peace.
  • Example: Russia’s gas pipelines to Europe.

Conclusion

• Future Uncertainty: The effects of reverting to protectionist policies.
• Historical Parallels: Drawbacks of the 1930s protectionism leading to global conflict.
• Final Thoughts: Observing the rise of populism and economic nationalism.