These Twitter posts by Prof. Michael Pettis reveal one of the most enlightening thoughts I’ve seen recently that are related to globalization, not only to global economies but also international relations.
I don’t think many politicians today understand this. Few economists even understand this.
The reason why I think Prof. Pettis’ theory is important is probably not what he had intended, but is nonetheless a natural extension:
Once people realize that the existing imbalance of the trade surplus and trade deficits between major nations is objectively impossible to be sustained any longer, and that it is not merely a result of antagonism (which is subjective) of other relevant nation(s), there might be at least a theoretical basis for the countries to sit down, look at the problem and come up with a reasonable solution on an amicable basis. At least not having to resort to wars for just economic reasons.
Currently, no solutions are possible. Not even bona fide calm negotiations. This is because each side is assuming that the other side is simply trying to take advantage of or even destroy the other, and then acts likewise accordingly, while the truth is that the current global trade imbalance simply cannot last any longer due to an inherent systemic problem.
It is not a mere matter of who is willing to do what, but whether the global economy as a system can actually exist any longer in its current form. If Prof. Michael Pettis is right, it simply can’t, even if nations honestly try.
Note, I’m not suggesting that nations should aim to continue or restore globalization as it was. I doubt that would be the solution. I’m just saying that, once people understand the nature of the real causes of the matter, there is at least a mutual sympathetic understanding of what has necessitated such an unfortunate result. Even if the conclusion is still that deglobalization is necessary, or even that nations should decouple in order for the national economies to sustain, the sympathetic understanding of what has caused such an unfortunate result helps. The parties that are separated could still end up being some kind of ‘friends’, leaving room for gradually rebuilding a more peaceful and more productive relation in the future.