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Showing posts with label John Maynard Keynes. Show all posts
Showing posts with label John Maynard Keynes. Show all posts

Wednesday, July 02, 2025

Rethinking Trade in an Age of Chaos: Why the Trump Tariff Circus Is No Substitute for a Global Blueprint

 



Rethinking Trade in an Age of Chaos: Why the Trump Tariff Circus Is No Substitute for a Global Blueprint

By Paramendra Bhagat

The Trump administration's trade negotiations have never been rooted in sound economic theory. As someone who is not formally trained as an economist but who has followed global trade developments closely, I’ve searched extensively for any credible framework supporting the administration's dismantling of the World Trade Organization (WTO). There is none.

What we’re witnessing is not trade policy—it’s economic roulette. And the chamber is loaded.

Trump’s approach to tariffs and trade agreements mirrors the chaos of Atlantic City’s casinos more than it reflects any rational, strategic economic model. There’s no coherent doctrine, no comprehensive vision. What we have instead is a hollowed-out mercantilism, punctuated by ad hoc threats and photo-op diplomacy. These are not negotiations; they’re stunts. And they’re hurting everyone.

A House of Paper vs. a World of Goods

The U.S. dollar, for all its privilege as the global reserve currency, is still just paper without the backing of goods and services. You can’t eat printed bills. You can’t power an economy on a pile of Treasury notes. When the rest of the world holds bananas, rice, lithium, microchips, and solar panels—and America holds IOUs—who really holds the upper hand?

The illusion of control through tariffs is quickly unraveling. U.S. businesses have temporarily absorbed the shock by frontloading imports, shifting supply chains, and burning through stockpiles. But this is a stopgap, not a strategy. The delayed pain is now metastasizing into cost increases, broken supply lines, and a tidal wave of inflation. Not inflation. Inflation explosions.

Economic Masquerade: When Machines Play Farmers

The administration’s pressure on India to “open up” its agriculture sector is perhaps the most farcical element of this theater. India’s agricultural workforce is massive—about 40% of its population, meaning there are more farmers in India than there are total people in the United States. These are smallholder farmers who rely on agriculture not just for income, but for survival.

Contrast that with U.S. corporate agriculture, the most subsidized sector in any economy anywhere in the world. These aren’t farmers—they're machine operators. Demonic-sized tractors roll over thousands of acres like military tanks, fueled by government subsidies and Wall Street financing. And yet, somehow, it’s India that’s accused of protectionism.

The WTO: Flawed, but Foundational

Critics of the WTO—both from the left and right—aren’t wrong to highlight its inequities. But to tear it down without offering a credible alternative is like demolishing a hospital because the waiting times are too long. You don’t destroy the foundation of global trade because you’re angry about steel imports.

Yes, the WTO needs reform. Yes, developing nations deserve fairer rules. But tariffs are not a solution. They are a weapon. And in this case, they are being fired blindly.

What Keynes Knew in 1944

The irony of all this is that the West had its chance to create a balanced global trade architecture—in 1944. John Maynard Keynes, the brilliant British economist, proposed the creation of a global clearing union and a neutral international currency called the bancor. This would have prevented imbalances by discouraging both trade deficits and surpluses. But the U.S., flush with postwar industrial might, dismissed the idea in favor of dollar dominance.

Now, decades later, that short-term thinking has come full circle. The American middle class has been hollowed out. Manufacturing has fled. And we're trying to reassert control not through innovation or cooperation, but through tantrums and tariffs.

The Real Way Forward: A New Trade Paradigm

We need a reset. Not a retreat.

The only sustainable path forward is multilateral. It requires all countries to come together, not to impose demands or extract concessions, but to co-design a just, sustainable, and thriving global economy. That includes fair rules for agriculture, climate-aligned trade policies, and the empowerment of the Global South.

A starting point? The book Rethinking Trade: A Blueprint for a Just and Thriving Global Economy offers a timely framework. It doesn’t rely on nostalgia for past power, but on building an inclusive system for the future—one where trade serves people, not just profits.

Final Word

The current approach isn’t policy. It’s a train wreck in progress. The longer we delay course correction, the deeper the damage will be. If we want a trading system that works for workers, farmers, and future generations, we need to build it—together.

Before it’s too late.





व्यापार की पुनर्कल्पना इस अराजक युग में: क्यों ट्रंप की टैरिफ नीति एक वैश्विक खाका नहीं है

लेखक: परमेंद्र भगत

ट्रंप प्रशासन की व्यापार वार्ताएं कभी भी किसी ठोस आर्थिक सिद्धांत पर आधारित नहीं रही हैं। मैं एक प्रशिक्षित अर्थशास्त्री नहीं हूँ, लेकिन मैंने महीनों तक समाचारों का अध्ययन किया है यह देखने के लिए कि क्या विश्व व्यापार संगठन (WTO) को नष्ट करने के पीछे कोई वैकल्पिक आर्थिक सिद्धांत है। मुझे ऐसा कोई सिद्धांत नहीं मिला।

जो कुछ हम देख रहे हैं, वह व्यापार नीति नहीं है — यह आर्थिक रूले है। और पिस्तौल में गोली भरी हुई है।

ट्रंप की टैरिफ और व्यापार समझौतों की रणनीति अटलांटिक सिटी के कैसीनो जैसी अराजकता को दर्शाती है, न कि किसी रणनीतिक आर्थिक सोच को। यहाँ कोई स्पष्ट सिद्धांत नहीं है, कोई व्यापक दृष्टिकोण नहीं है। यह एक खोखला व्यापारवाद है — अनिश्चित धमकियों और फोटो-ऑप कूटनीति से भरा हुआ। यह कोई वास्तविक वार्ता नहीं, बल्कि राजनीतिक नाटक है। और यह सबको नुकसान पहुँचा रहा है।

कागज़ की मुद्रा बनाम वास्तविक वस्तुएँ

अमेरिकी डॉलर, चाहे वह वैश्विक रिज़र्व मुद्रा क्यों न हो, अंततः सिर्फ़ कागज़ ही है — जब तक उसके पीछे वस्तुएँ और सेवाएँ न हों। आप प्रिंटेड डॉलर खा नहीं सकते। आप अर्थव्यवस्था को केवल ट्रेजरी नोट्स के बल पर नहीं चला सकते। जब बाकी दुनिया के पास केले, चावल, लिथियम, चिप्स और सोलर पैनल हों — और अमेरिका के पास सिर्फ़ कर्ज़ के कागज़ — तो असली ताक़त किसके पास है?

टैरिफ से नियंत्रण की यह मृग-मरीचिका अब टूट रही है। अमेरिकी कंपनियाँ कुछ समय के लिए झटका झेल चुकी हैं — पहले से आयात करके, आपूर्ति श्रृंखला को शिफ्ट करके, या स्टॉक जमा करके। लेकिन यह एक अस्थायी उपाय है, कोई दीर्घकालीन रणनीति नहीं। अब यह संकट लागतों में वृद्धि, आपूर्ति संकट, और मुद्रास्फीति की सुनामी के रूप में प्रकट हो रहा है। यह केवल मुद्रास्फीति नहीं है। यह विस्फोटक मुद्रास्फीति है।

जब किसान नहीं, मशीनें खेती करें

भारत पर दबाव डालना कि वह अपनी कृषि प्रणाली को "खोले", इस तमाशे का सबसे हास्यास्पद हिस्सा है। भारत की लगभग 40% जनसंख्या कृषि में कार्यरत है — यानी भारत में अमेरिका की पूरी जनसंख्या से भी अधिक किसान हैं। ये छोटे किसान हैं, जिनकी आजीविका और अस्तित्व खेती पर निर्भर है।

इसके विपरीत, अमेरिका की कॉर्पोरेट कृषि — जो शायद दुनिया की सबसे अधिक सब्सिडी प्राप्त क्षेत्र है — किसानों द्वारा नहीं, बल्कि विशाल मशीनों द्वारा संचालित होती है। ये "किसान" नहीं हैं — ये मशीन ऑपरेटर हैं, और इन मशीनों का आकार राक्षसों जैसा है। फिर भी अमेरिका भारत को संरक्षणवादी कहता है?

WTO: दोषपूर्ण, फिर भी आवश्यक

WTO की आलोचना उचित है — वाम और दक्षिण दोनों पक्षों से। लेकिन बिना किसी वैकल्पिक व्यवस्था के इसे तोड़ देना, जैसे अस्पताल को इसलिए गिरा देना कि इंतज़ार लंबा है। आप वैश्विक व्यापार की नींव को नष्ट नहीं करते क्योंकि आप स्टील आयात से नाराज़ हैं।

हां, WTO को सुधार की ज़रूरत है। हां, विकासशील देशों के लिए नियमों को और न्यायपूर्ण बनाना होगा। लेकिन टैरिफ इसका हल नहीं हैं। वे हथियार हैं। और इस मामले में, उन्हें अंधाधुंध चलाया जा रहा है।

1944 में केन्स ने जो समझाया था

विडंबना यह है कि पश्चिम के पास एक न्यायपूर्ण व्यापार व्यवस्था की रचना का अवसर 1944 में ही था। ब्रिटिश अर्थशास्त्री जॉन मेनार्ड केन्स ने एक वैश्विक क्लियरिंग यूनियन और एक अंतरराष्ट्रीय मुद्रा "बैंकोर" का प्रस्ताव रखा था। यह न केवल व्यापार घाटे बल्कि अधिशेष को भी हतोत्साहित करता। लेकिन अमेरिका, उस समय की औद्योगिक शक्ति से घमंड में चूर, ने उस विचार को ठुकरा दिया और डॉलर की प्रधानता कायम रखी।

अब दशकों बाद, उसी सोच के कारण अमेरिका की मध्यम वर्गीय रीढ़ टूट चुकी है। विनिर्माण समाप्त हो गया है। और हम नवाचार या सहयोग के माध्यम से नहीं, बल्कि गुस्से और टैरिफ के ज़रिए नियंत्रण फिर से हासिल करने की कोशिश कर रहे हैं।

असली समाधान: एक नई व्यापार व्यवस्था

हमें पुनरारंभ की ज़रूरत है, पीछे हटने की नहीं।

स्थायी समाधान केवल बहुपक्षीय हो सकता है। इसके लिए सभी देशों को एक साथ आना होगा, ताकि वे जबरदस्ती नहीं, बल्कि एक न्यायसंगत, टिकाऊ और समृद्ध वैश्विक अर्थव्यवस्था की सह-रचना कर सकें। इसमें कृषि के लिए न्यायपूर्ण नियम, जलवायु-संरेखित व्यापार नीति, और वैश्विक दक्षिण को सशक्त बनाना शामिल होगा।

एक आरंभिक बिंदु? यह पुस्तक Rethinking Trade: A Blueprint for a Just and Thriving Global Economy इस दिशा में एक उपयुक्त खाका प्रस्तुत करती है। यह अतीत की शक्ति के प्रति मोह नहीं, बल्कि भविष्य की समावेशी संरचना के निर्माण पर केंद्रित है — जहाँ व्यापार लोगों की सेवा करे, सिर्फ़ मुनाफे की नहीं।

अंतिम विचार

वर्तमान नीति कोई दीर्घकालीन योजना नहीं है। यह एक धीरे-धीरे होता हुआ रेल हादसा है। यदि हम समय रहते दिशा नहीं बदलते, तो नुकसान गहरा होगा। यदि हम एक ऐसी व्यापार प्रणाली चाहते हैं जो श्रमिकों, किसानों और आने वाली पीढ़ियों के लिए कारगर हो — तो हमें उसे मिलकर बनाना होगा।

जब तक बहुत देर न हो जाए।


 


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Monday, June 02, 2025

Going Back To Keynes On Global Trade

 


John Maynard Keynes, the influential British economist, proposed a revolutionary idea at the 1944 Bretton Woods Conference that was not adopted but has gained renewed relevance in modern economic discussions. His proposal centered on the creation of an International Clearing Union (ICU) and a global reserve currency called the Bancor. Below is a detailed explanation of the proposal, its relevance today, and the reasons it was rejected despite its merits.

Keynes' Proposal: The International Clearing Union and Bancor
At the Bretton Woods Conference, which aimed to establish a new international monetary system post-World War II, Keynes proposed a system to address global trade imbalances and promote economic stability. His key ideas were:
  1. International Clearing Union (ICU):
    • The ICU would function as a global central bank to manage international payments and trade balances.
    • Countries would hold accounts in the ICU, denominated in a new international currency called Bancor, which would be used for settling trade balances between nations.
    • Bancor would be fixed in value to a basket of commodities (e.g., gold, oil, or other goods), ensuring stability and neutrality, unlike a currency tied to a single nation's economy.
    • Nations with trade surpluses (exporting more than they imported) would accumulate Bancor credits, while those with trade deficits would run Bancor debits.
  2. Symmetrical Adjustment Mechanism:
    • A core feature of Keynes' proposal was its symmetrical treatment of trade surpluses and deficits. Countries with persistent trade surpluses would face penalties (e.g., taxes on excess Bancor credits), just as deficit countries would face pressure to reduce deficits (e.g., through interest charges on overdrafts).
    • This mechanism aimed to incentivize both surplus and deficit countries to adjust their economic policies, preventing chronic imbalances that could destabilize the global economy.
    • For example, surplus countries might be encouraged to increase imports or invest abroad, while deficit countries might devalue their currencies or implement austerity measures.
  3. Global Economic Stability:
    • The ICU would provide liquidity by allowing countries to borrow Bancor to finance temporary deficits, reducing the need for deflationary policies (e.g., severe spending cuts) that often exacerbate economic downturns.
    • The system would prevent the accumulation of unsustainable debts and reduce reliance on a single nation's currency (e.g., the US dollar) as the world's reserve currency, which Keynes saw as a source of instability.
Keynes envisioned this system as a way to foster global economic cooperation, prevent competitive devaluations, and avoid the economic crises of the interwar period, such as the Great Depression.
Relevance Today
Keynes' proposal has gained renewed attention in recent decades due to persistent global economic challenges that his system was designed to address. Its relevance today stems from the following issues:
  1. Persistent Trade Imbalances:
    • Chronic trade surpluses (e.g., in countries like China and Germany) and deficits (e.g., in the United States and other developed economies) have led to tensions in the global economy, including trade wars and currency disputes.
    • Keynes' symmetrical adjustment mechanism would encourage surplus countries to boost domestic demand or invest abroad, reducing global imbalances. For instance, China's large trade surpluses and the US's persistent deficits mirror the imbalances Keynes sought to address.
  2. US Dollar Dominance:
    • The current global monetary system relies heavily on the US dollar as the world's reserve currency, giving the United States significant influence over global finance (the so-called "exorbitant privilege"). This creates vulnerabilities, as US monetary policy decisions (e.g., interest rate hikes) can destabilize other economies.
    • Keynes' Bancor, as a neutral international currency, would reduce dependence on any single nation's currency, a concern echoed in recent discussions about "de-dollarization" by countries like China, Russia, and others seeking alternatives to the dollar.
  3. Global Financial Crises:
    • The 2008 financial crisis and subsequent global economic challenges highlighted the fragility of the current system, where liquidity shortages in deficit countries can lead to severe recessions. The ICU's ability to provide Bancor liquidity could mitigate such crises.
    • For example, during the Eurozone debt crisis (2010–2012), a mechanism like the ICU could have provided liquidity to struggling economies like Greece without imposing harsh austerity measures.
  4. Cryptocurrencies and Digital Currencies:
    • The rise of cryptocurrencies and central bank digital currencies (CBDCs) has sparked interest in alternative global monetary systems. Bancor’s concept of a supranational currency resonates with proposals for a global digital currency to facilitate trade and reduce reliance on national currencies.
  5. Climate and Development Financing:
    • Keynes' idea of a neutral reserve asset tied to commodities could be adapted to address modern challenges like climate change. For instance, a Bancor-like system could finance green investments or support developing nations, aligning with calls for a reformed international financial architecture to address global public goods.
Recent discussions among economists and policymakers, including proposals from figures like Zhou Xiaochuan (former governor of the People's Bank of China) in 2009, have revived interest in a Bancor-like system to reform the International Monetary Fund's Special Drawing Rights (SDRs) or create a new global reserve asset.
Why Keynes' Proposal Was Rejected
Despite its forward-thinking design, Keynes' proposal was rejected at Bretton Woods in favor of the US-led system, which established the US dollar as the global reserve currency, pegged to gold, and created the International Monetary Fund (IMF) and World Bank. Several factors contributed to this outcome:
  1. US Economic and Political Dominance:
    • In 1944, the United States was the world’s preeminent economic and military power, contributing the majority of resources to the Allied war effort and holding significant gold reserves. The US delegation, led by Harry Dexter White, prioritized a system that reinforced American influence.
    • The US preferred a system where the dollar, convertible to gold at a fixed rate ($35 per ounce), served as the global reserve currency. This gave the US significant control over international finance, as other currencies were pegged to the dollar.
  2. Resistance to Symmetrical Adjustments:
    • Surplus countries, particularly the US at the time, opposed Keynes' symmetrical adjustment mechanism, which would have penalized them for running large trade surpluses. The US, as a major exporter post-World War II, benefited from accumulating reserves without facing penalties.
    • The US delegation argued that deficit countries should bear the primary responsibility for adjusting their economies, aligning with a more traditional view of fiscal discipline.
  3. Complexity and Skepticism:
    • Keynes' proposal was seen as complex and radical, requiring unprecedented international cooperation to establish and manage the ICU. Many countries were skeptical about ceding sovereignty to a supranational institution.
    • The Bancor concept, as a non-national currency, was unfamiliar and faced resistance from countries accustomed to gold or national currencies as reserves.
  4. Geopolitical Tensions:
    • The Bretton Woods negotiations occurred during World War II, with the US and UK as key allies but with differing economic priorities. The UK, heavily indebted and economically weakened, sought a system to support reconstruction, while the US aimed to cement its postwar dominance.
    • Harry Dexter White’s plan, which emphasized the dollar’s role and created the IMF with limited powers compared to the ICU, was more palatable to the US and its allies.
  5. Keynes' Limited Bargaining Power:
    • Although Keynes was a brilliant economist, the UK’s weakened economic position (due to war debts and reliance on US aid through Lend-Lease) limited his negotiating leverage. The US, as the dominant creditor nation, held the upper hand in shaping the agreement.
Why Keynes Was Correct
Keynes' proposal was prescient in anticipating the flaws of a dollar-centric system and the risks of global imbalances:
  1. Avoiding Deflationary Pressures:
    • Keynes recognized that forcing deficit countries to bear the full burden of adjustment (through austerity or devaluation) could lead to deflationary spirals, as seen in the 1930s. His system would have provided liquidity and shared responsibility, promoting global growth.
  2. Preventing Currency Weaponization:
    • A neutral reserve currency like Bancor would have reduced the ability of any single nation to use its currency as a geopolitical tool, a concern today with US sanctions and dollar dominance.
  3. Long-Term Stability:
    • The symmetrical adjustment mechanism would have discouraged persistent imbalances, which have contributed to modern crises like the Eurozone debt crisis and US-China trade tensions.
  4. Flexibility for Crises:
    • The ICU’s ability to create Bancor liquidity could have mitigated financial crises by providing a buffer for struggling economies, unlike the IMF’s often conditional lending.
Conclusion
John Maynard Keynes’ proposal for an International Clearing Union and Bancor at Bretton Woods was a visionary attempt to create a balanced, cooperative global monetary system. It was rejected due to US dominance, resistance to symmetrical adjustments, and the complexity of the plan, but its principles remain highly relevant today amid persistent trade imbalances, dollar dominance, and calls for monetary reform. Keynes lost the debate due to geopolitical realities, but his foresight in addressing systemic flaws continues to inspire discussions about reforming the global financial architecture, including proposals for enhancing the role of SDRs or exploring digital global currencies.
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