tag:blogger.com,1999:blog-5154389358831836369.post2051622132617961582..comments2024-03-28T02:00:36.854-04:00Comments on The Slack Wire: Trade: The New Normal Was the Old Normal TooJW Masonhttp://www.blogger.com/profile/10664452827447313845noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-5154389358831836369.post-58770624175088144422011-06-28T23:51:48.372-04:002011-06-28T23:51:48.372-04:00Anonymous-
You are certainly right that retained ...Anonymous-<br /><br />You are certainly right that retained earnings constitute an important category of savings in industrialized countries (and quite possibly poor countries too, I'm not sure.) And you're right that the conventional economics discourse that treats all savings as household savings misses this. How this is relevant to this post, I'm not sure. It may be! but I'll have to think about it more.<br /><br />The point here, which I could have made better int he original post, is that the conventional model says that returns on financial assets are proportional to national growth rates, and growth rates are higher in poor countries than rich ones; poor countries should be net debtors and run current account deficits, consuming/investing more than they produce; and rich countries should be net creditors and run current account surpluses, producing more than they consume/invest. But in the liberal eras, both pre-WWI and post-Bretton Woods, we don;t see that; we see poor countries run current account surpluses for decades, while remaining poor and remaining net debtors; in terms of aggregate financial flows, at least, most poor countries would have been better off not participating in international financial markets at all. The experience of e.g. <a href="http://www.cepr.net/documents/publications/argentina_recovery_2007_10.pdf" rel="nofollow">post-default Argentina</a> is a perfect example. Being cut off from global capital markets turns out to be a recipe for record growth.JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-26753048278042602472011-06-28T23:19:29.682-04:002011-06-28T23:19:29.682-04:00"It ought to be the case that people in fast-..."It ought to be the case that people in fast-growing countries are eager to consume more than they produce, knowing that they’ll be much richer in the near future. And it ought to be the case that people in rich countries are eager to invest in poor ones seeking higher returns. But it’s not what was happening pre-crisis and it’s not what’s been happening post-crisis."<br /><br />I think the mistake may be to characterize "savings" in either poor or rich countries on a per capita basis. Savings is usually calculated as an aggregate and a residual: GDP minus consumer expenditure. Thus, "savings," also includes debt repayment by households. Whether and how this residual is distributed is assumed. <br /><br />I believe that the "high" savings rate of ordinary Chinese is largely a myth. The distribution of wealth in fast-growing countries is highly unequal. In China, savings are concentrated in companies that have high export earnings. These savings are really high profits that are recycled into speculative assets (e.g., property, stock) or safe ones (e.g. foreign bonds).<br /><br />I'm sure the average Chinese consumer would love to consume more than he or she produces.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-79497574034929275152011-06-27T11:24:22.335-04:002011-06-27T11:24:22.335-04:00Arthurian-
Yes, I decided it needed a bit more wo...Arthurian-<br /><br />Yes, I decided it needed a bit more work. Will be up again shortly.JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-87652354798540281272011-06-27T11:23:26.255-04:002011-06-27T11:23:26.255-04:00No, I didn't realize that. Thanks!No, I didn't realize that. Thanks!JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-54651204061953336152011-06-27T11:23:24.317-04:002011-06-27T11:23:24.317-04:00Hello.
Did you take down your "Blanchard rul...Hello.<br /><br />Did you take down your "Blanchard rule" post on purpose? Came back for a second look, and it was gone.<br /><br />P.S. Good use of the Blogger Pages.<br /><br />ArtSThe Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-91900067642450540552011-06-27T10:29:58.462-04:002011-06-27T10:29:58.462-04:00You realize that you only ever use U Mass internal...You realize that you only ever use U Mass internal links, right? It's not even sufficient to have access to JSTOR. You actually have to be at U Mass to see the paper.waltnoreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-65467950793201400032011-06-25T23:22:06.870-04:002011-06-25T23:22:06.870-04:00Bill,
It's infuriating that scholarly article...Bill,<br /><br />It's infuriating that scholarly articles aren't accessible to everyone. No excuse for it, it violates the core supposed norms of academia. Anyway, I put the article up on as a google doc <a href="http://bit.ly/mnLbAN" rel="nofollow">here</a>; let me know if that works.<br /><br />I half feel I should take this post down, at least until or unless I can articulate the argument better. But anyway, the relevant section of the Fishlow article runs from 387 to 391. Take a look and see if it's clearer in the original than in my abridged version.<br /><br />In any case, the argument I'm suggesting is that the the persistence of the net debtor status over decades, despite continuous current account surpluses, casts doubt on the idea that borrowing abroad was a boon to development. I think that poor countries could have developed more successfully -- as late industrializers in fact did -- by mobilizing domestic savings and limiting their exposure to international financial markets. There's a big literature on this, which Ha-Joon Chang (in the linked book and elsewhere) does a good job summarizing. <br /><br />And yes, of course the half-century before World War I was the high tide of imperialism, and that shaped capital flows. But the biggest recipients of European foreign investment were the (at least formally) independent countries of Latin America, Eastern Europe and the Middle East, not the colonial empires. And of course financial flows today are not uninfluenced by politics either.JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-47439075575992390502011-06-25T16:08:01.715-04:002011-06-25T16:08:01.715-04:00I feel like you are in fact talking about two diff...I feel like you are in fact talking about two different things and not one long chain. It is actually different that the "developed" world had an "excess of capital" in the late 1800s and that now it is the developing world that has the excess.<br /><br />Also, dividends etc are returns on investment, so at least in principle those dividend payments are a return on value added to developing world economies and not just simple appropriation of resources.Andrew Bossiehttps://www.blogger.com/profile/00353842153288646125noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-74361893499927278162011-06-25T15:51:53.340-04:002011-06-25T15:51:53.340-04:00@Josh:
I wasn’t able to read the Fishlow paper be...@Josh:<br /><br />I wasn’t able to read the Fishlow paper because I cannot access academic archives—apologies. I notice that the period he looks at, 1870-1930s, was the heyday of European imperialism, and I’m wondering whether Fishlow weeded out finance and trade occurring within formal empires. Financial flows within imperial systems will obviously depart drastically from any model of unregulated capitalist investment and trade involving autonomous creditors and debtors.<br /><br />I’m afraid I missed the point of this post. Why are we amazed, or disgusted, that the flow of money back to creditors in rich nations from their investments in poor nations is larger than the actual investments themselves? Isn’t investment supposed to work that way? Why is international finance supposed to be a net transfer of resources from rich to poor, i. e., a free gift? It doesn’t work that way in domestic finance. A bank channels money from savings-rich creditors to savings-poor debtors, but then the backward flow of repayments has to be larger than the initial investments, or else the bank and its depositors go bankrupt. In that sense, successful domestic bank lending is also a net channeling of wealth from borrowers to creditors, from the savings-poor to the savings-rich. But clearly a profitable banking system is immensely useful to debtors as well as creditors, as long as the increase in production and wealth stimulated by investments is larger than the repayments.<br /><br />You seem to feel that that is not the case for international finance—that instead the net result of international investment is one-way extraction and the net immiseration of debtor nations. Is that your contention? Do you believe that the growth stimulated by investments in developing nations by creditors in the developed world has been outweighed by the net transfer of interest and dividends on those investments from debtors to creditors? That might be true in certain regions—Africa, the Caribbean—but I doubt that it is true in most of Asia, Brazil, etcWill Boisvertnoreply@blogger.com