Availability bias: it’s one of the great errors of the human mind, from selection of romantic partners to the decisions of statesmen on whether to enter major geopolitical wars. We get cross because a Minister says this, or a football manager makes that decision. So it’s refreshing to come across an article that puts the stories flickering across our screens into a broader context. And this(uncredited) opinion piece from the Guardian does exactly that. Weaving threads of tariffs, Supreme Courts, President Trump, China, and economics it finds a historical parallel for all that’s going on-and why it matters.[1]
The writer asseverates that Mr Trump is trying to restore a lost America of the 1970s when its manufacturing and technological capacities were unchallenged. Now China, which has concentrated on manufacturing, has obtained an edge which increasingly threatens the US global position. And once that happens, the consequences for powers that go down are not nice. The historical parallel is clear: Britain neglected its manufacturing base from the 1870s onwards, relying on financial services and the strength of sterling to maintain its dominance. In the end it was displaced by the manufacturing strength of the USA, and the inevitable loss of reserve currency status was the final nail in the coffin of British Power.[2]
Unlike many, we do not question Mr Trump’s intelligence, nor patriotism by his own lights at least. But these qualities may not ensure optimal decisions. Nostalgia is a dangerous force. For often the golden ages it longs for were exactly the times when the fatal decisions were made. America chose the path of financialisaton over manufacturing in the 1980s : so to want to go back there is to want to repeat that mistake. Mr Trump has come too late to arrest America’s decline, whatever he decides about tariffs, immigrants or anything else. The basic problem of the United States is a hopelessly skewed balance of money and information between rich and poor, Until that is fixed, the trajectory will continue one way.
[2] Barnett, Correlli. The Collapse of British Power. New York: William Morrow, 1972. ISBN: 0688000010
#economics #history #USA #china #great britain #reserve currency #financialisation #manufacturing
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