I’m not the world’s biggest fan of Brad de Long; he’s a liberal, and he announces it, as when he reposts, in criticism of Occupy Seattle, Matthew Iglesias’ flat claim, using an opportunistically-myopic historical viewpoint, and a decidedly non-class disaggregated viewpoint, that capitalism is a boon to the world. Hell, Iglesias even goes so far as to assert that Africa has prospered under capitalism. It seems the economist right hand of liberalism is never in touch with the on-the-ground NGO/charity/anthropology/military left hand of liberalism. According to Iglesias, the only, really–technical, issue for these econ liberals is that the global elite has lied once too often to the American middle class. …I wonder why! Could it be that capitalism is not actually a boon to everyone, and Occupy Seattle’s analysis is in fact superior? Don’t say it’s so!
However, I do like to keep an eye on de Long, because a liberal will post some figures and occasionally even an analysis of utility to a marxist. Here in his post “A Note on the US Comparative Advantage in the Sale of Political Risk Insurance,” de Long briefly engages the problem of how the US comes by its trade deficit. He speculates that half of the trade deficit is basically the world elite’s insurance policy against revolution in their own countries, and he cites statistics from China. This global elite causes the US to financialize/militarize, and thereby innocently, inadvertently gut its own middle class.
Now I think that for much of the world’s elite, de Long’s attribution of motivation is correct. But for a number of reasons, it’s not correct with regard to the largest components of the strategy: Chinese and Indian elites. They are not buying dollars to the US’s profit because they are insuring against a bad revolutionary turnout in their countries. They have another, perhaps longer-term strategy in mind, although, say Minqi Li and John Gulick, one that may be complicated by the historical decline in capitalism-fueling fossil fuels.
De Long also provides the EMRATIO:
Given this data, here‘s his Keynesian argument.
For the record, however, and in direct refutation of the romantic, churlish defenders of neoclassical economics and rabid liberals, the world would be a better place if the neoclassical economists and liberals were to some day develop humility in proportion to their achievements.