The US Economy, Global Imbalances and Recent Development: A Critical Review Kalim

Abstract

The United States has been running deficits on current accounts since the early 1990s. The current account deficits and surplus have caused dislocations in both developing and advanced economies. A recent study by Bullard et al. (2017) noted that the US economy is still the world’s largest economy and, according to the authors, between 2008-15 there was an average annual shortfall of 20% in fixed capital investment due to the 2008 crisis which also adversely impacted GDP growth and output (Bullard et al., 2017). This study will discuss the recent development in the US economy and also global imbalances in a historical perspective in order to try to understand the current situation. The discussion also includes the recent rise in China’s economy and the international trade. The study concludes that the trade deficits on the current scale cannot continue forever. Closing the trade deficit will require a more equal distribution of world spending, meaning a fall in US spending and a rise in spending from the rest of the world. Policy measures should be taken to increase state spending rather than rely on debt-fuelled private consumption to resolve inadequate aggregate demands. The reform should be made so as to seek profits in the real economy rather than ‘finance financing finance’. Finance should be made less globalised.

Keywords

• Global imbalances
• capitalism
• neoliberalism
• US
• China and instability

The US Economy, Global Imbalances and Recent Development: A Critical Review

Abstract

The United States has been running deficits on current accounts since the early 1990s. The current account deficits and surplus have caused dislocations in both developing and advanced economies. A recent study by Bullard et al. (2017) noted that the US economy is still the world’s largest economy and, according to the authors, between 2008-15 there was an average annual shortfall of 20% in fixed capital investment due to the 2008 crisis which also adversely impacted GDP growth and output (Bullard et al., 2017). This study will discuss the recent development in the US economy and also global imbalances in a historical perspective in order to try to understand the current situation. The discussion also includes the recent rise in China’s economy and the international trade. The study concludes that the trade deficits on the current scale cannot continue forever. Closing the trade deficit will require a more equal distribution of world spending, meaning a fall in US spending and a rise in spending from the rest of the world. Policy measures should be taken to increase state spending rather than rely on debt-fuelled private consumption to resolve inadequate aggregate demands. The reform should be made so as to seek profits in the real economy rather than ‘finance financing finance’. Finance should be made less globalised.

Keywords

• Global imbalances
• capitalism
• neoliberalism
• US
• China and instability

References

1. Amin, S. (2009). “Seize the Crisis!” Monthly Review, December. Retrieved from https://monthlyreview. org/2009/12/01/seize-the-crisis/
2. Amin, S. (2015). “Contemporary Imperialism”, Monthly Review, July. Retrieved from https:// monthlyreview.org/2015/07/01/contemporary-imperialism/
3. Ashman, S., & A. Callinicos. (2006). Capital Accumulation and the State System: Assessing David Harvey’s New Imperialism. Historical Materialism, 14(4): 107 –131.
4. Baran, P., & P. Sweezy. (1966). Monopoly Capital. New York City, New York: Monthly Review Press.
5. Bullard, S., Silvia J. E., & Iqbal, A. (2017). “Can We Estimate the Cost of a Recession?” American Economic Association Conference. (Accessed on 6 June 2018). Retrieved from www.aeaweb. org/conference/2017/preliminary/paper/bzQ4bKGK
6. Callinicos, A. (2009). Imperialism and Global Political Economy, Cambridge-Massachusetts: Polity Press.
7. De Cecco, M. (2012). Global Imbalances: Past, Present, and Future. Contribution to Political Economy, 31, 29–50.
8. Fine, B. (2013). Financialization from a Marxist Perspective. International Journal of Political Economy, 42(4), 47–66.

9. Ghosh, J. (2018). “Global Instability and the Development project: Is the Twenty-first Century Different?” European Journal of Economics and Economic Policies: Intervention, 15(2), 193–207.
10. Glyn, A. (2005). Imbalances of the Global Economy. New Left Review, 34, 5–37.
11. Harvey, D. (2004). The New Imperialism, Oxford, UK: Oxford University Press.
12. Harvey, D. (2005). A Brief History of Neoliberalism, Oxford, UK: Oxford University Press.
13. Hilferding, R. (2010). [1910]. Finance Capital, London, UK: Routledge & Kegan Paul. Itoh, M., & Lapavitsas C. (1999) Political Economy of Money and Finance, London, UK: Macmillan.
14. Kautsky, K. [1914]. Ultra-imperialism. (Accessed on 22 December 2018). Retrieved from https:// www.marxists.org/archive/kautsky/1914/09/ultra-imp.htm
15. Keynes, J. M. (1973). [1936]. The General Theory of Employment, Interest and Money, London, UK: McMillan/Palgrave.
16. Keynes, J. M. (1980). The Collected Writings of John Maynard Keynes, Volume XXV: Activities 19401944: Shaping the Post-War Economy, London, UK: Macmillan.
17. Kotz, D. (2018). “End of Neoliberal Era?” New Left Review, 113, 29–55, September-October.
18. Lenin, V. I. (1964). “Imperialism, the Highest Stage of Capitalism,” in Collected Works, vol. 22 Moscow, Russia: Progress Publishers, 1964; originally published [1916].
19. Luxemburg, R. (1951). [1913]. The Accumulation of Capital, London, UK: Routledge and Kegan Paul.
20. Maddison, A. (1998). Chinese Economic Performance in the Long Run, Paris, France: OECD.
21. Marx, K. (1991). Capital, Volume 3, London, UK: Penguin. McBride, J. (2017). “The US Trade Deficit: How Much Does It Matter?,” Council on Foreign Relations, 17 October. Retrieved from https://www.cfr.org/backgrounder/us-trade-deficit-how-much-does-it Norfield, T. (2016). The City: London and the Global Power of Finance, London, UK: Verso.
22. Patnaik, P. (2009). The Value of Money, New York City, New York: Columbia University Press.
23. Patnaik, U., & P. Patnaik. (2016). A Theory of Imperialism, New Delhi, India: Tulika Books.
24. Robinson, W. (2004). The Theory of Global Capitalism: Production, Class and |State in the Transnational World, Baltimore, Maryland: John Hopkins University Press.
25. Siddiqui, K., & T. Dahle. (1989). “World Economy Heading Towards Recession”, Bergens Tidende, (in Norwegian) 3rd July, Bergen.
26. Siddiqui, K. (2016). “International trade, WTO and economic development”. World Review of Political Economy, 7(4), 424–450.
27. Siddiqui, K. (2017a). “The Bolshevik Revolution and the Collapse of the Colonial System in India”, International Critical Thought, 7(3), 418–437. Routledge Taylor & Francis. doi.org/10.1080/2159 8282.2017.1355743.
28. Siddiqui, K. (2017b). “Financialization and Economic Policy: The Issues of Capital Control in the Developing Countries”, World Review of Political Economy, 8(4), 564–589, winter, Pluto Journals.
29. Siddiqui, K. (2018a). “Capitalism, Globalisation and Inequality”, World Financial Review, November/ December, pp. 72-77. ISSN 1756-3763. Retrieved from http://www.worldfinancialreview. com/?p=36382
30. Siddiqui, K. (2018b). “U.S. – China Trade War: The Reasons Behind and its Impact on the Global Economy”, The World Financial Review, November/December, pp. 62-68. ISSN 1756-3763. Retrieved from http://www.worldfinancialreview.com/?p=36411
31. Siddiqui, K. (2019). “The US Dollar and the World Economy: A critical review”, Athens Journal of Economics and Business. Forthcoming.
32. SIPRI. (2018). The independent Resource on Global Ssecurity, Stockholm. Retrieved from https:// www.sipri.org/research/armament-and-disarmament/arms-transfers-and-military-spending/ military-expenditure
33. Wade, R. (2009). From Global Imbalances to Global Reorganisations. Cambridge Journal of Economics, 33(4), 539–562. DOI: 10.1093/cje/bep032.
34. Wade, R. (2017). The American Paradox: Ideology of Free Markets and the Hidden Practice of Directional Thrust. Cambridge Journal of Economics, 41: 859–880. DOI: 10.1093/cje/bew064.
35. Wien, B. R. (2010). “US Capital Productivity Decline Must be Reversed”, Financial Times, 17 February, London.
36. Willett, T. D., & E. M. P. Chiu. (2012). “Power Relations and the Political Economy of Global Imbalances”, Global Economic Review, 41(4), 341–360.
37. Wolf, M. (2008a). “Comments on Global Imbalances”, Financial Times, p. 13, 7 October, London.
38. Wolf, M. (2008b). “Why It is So Hard the Keep the Financial Sector Caged”, Financial Times, 6 February, London.
39. World Bank. (2017). Global Economic Prospects: A Fragile Recovery, June. World Bank: Washington DC-USA.