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A lot of your links seem to be broken and affixing themotte's url in front of them.
I guess I should have noted that I oppose Trump/American Autarky designs in the strongest terms. The man is without vision or sense and deviates wildly from decades of American policy.
It should probably be noted that this policy of autarky didn't exactly turn out well for China over the following two centuries ending in their century of humiliation. The period itself was also an aberation as China was center to a vast trade network before the Qing. Do you have some theory of the recent rise of China that does not require the liberalization of its markets? Explanations for its backwardness coinciding with their close? I suppose this time could be different, China woke for a few decades, learns all the world's secrets and then returns to slumber dead to the rest of the world. But I think the Chinese are smart people, they won't repeat that mistake.
And no, the American hegemony has not historically been about autarky, We've historically traded security guarantees for access to international markets.
Tariffs are industrial policy and of course China imposes tariffs and had before the trade war. This is simply a game of Russel conjugates. I again oppose Trump's buffoonish actions but to think the CCP doesn't employ coercive tactics in trade is pretty surprising. This is a place with a habit of outright banning outside competitors, not just tariffing them. market access for IP bargains, forced technology transfer, straight up state sponsored industrial espionage and Cyber theft(APT10, PLA Unit 61398, Equifax hack, ect). It's just not the case that China has risen in some saintly within the rules manner.
This conflates a few different worlds. My model for an ai future if ai drops marginal labor cost to the base electricity needed to complete the task(but doesn't go infinite intelligence like the yuddites expect) isn't every nation turning inwards, like civilizational wire headers. I find that a bleak image frankly but I suppose some may and China may be one that does if that comes to pass. I don't find that future particularly likely really. And if it goes all the way to AGI then all I know is I want someone with my interests to have been the one to do the alignment work.
This map just seems to be a measure of economy size relative to nearest neighbors, no? Mongolia isn't a huge player in the international trade Arena, it's just landlocked between two countries with economies that are much much larger than its.
this is an interesting point and framing, thanks. I hadn't been thinking of the precise scenario where labor costs drop to marginal much. It does seem far-fetched but we are in the time where far-fetched things happen. I still find things shaking out this way unlikely and if they do I think the world would be unstable. When labor is very cheap and raw materials, even if they can be harvested much more efficiently, are the scarce thing then what is the offense/defense equilibrium?
also replying to this comment
The CF40 piece is interesting but doesn't address my point. They're arguing PPP calculations understate Chinese purchasing power, that Chinese people get more stuff per yuan than World Bank stats suggest. I'll grant it all for the sake of argument because the PPP discussion is boring and one can look elsewhere for it. My claim was about income distribution, not purchasing power. Household consumption being 40% of GDP means households receive 40% of national income to spend. The rest goes to the state and corporate sectors, funding the investment-heavy model. Even if every yuan buys more calories than we thought, that doesn't change the share going to households versus the share going to industrial buildout.
This matters because the investment heavy model requires external demand. Household savings fund the investments through financial repression - artificially low interest rates transfer wealth from savers to state-favored borrowers. The resulting production has to go somewhere, and domestic consumers don't have the purchasing power to absorb it because their savings were the input. Rebalancing toward consumption has been official CCP policy since 2006. In that time, household consumption has moved from
35% to38% of GDP. They know the problem. They haven't solved it because the mechanisms that suppress consumption are load-bearing for the political economy.He has a vision, though we can debate the merits of that vision, I agree he's a pretty vulgar individual and his execution is often appalling. But was “decades of American policy” sustainable? The permanent deficit only makes sense if you can serve the growing debt indefinitely. Why should we assume that this can hold? As I've said multiple times, Trump is correct in his diagnosis even if ham-fisted with treatment. If America becomes materially productive, it will diminish European share of the pie, you can't sustain your consumption with just soy and LNG exports, something has to give. Or what is the idea, make AGI and sell tokens instead of IOUs, in exchange for TRUMPF machines? I guess that can be argued, but far as I can see, nobody argues for this. Do you argue for this?
It wasn't so much about trade autarky as about comprehensive intellectual isolation and stagnation, the Qing did not understand the world outside China's borders and honestly bought into the idea that they'll naturally be productive enough to not worry. Qianlong still had some clue, thanks to Heshen, who was ultimately executed for vast corruption, leaving the Qing blind for decades. Then, it was too late and they grew too dysfunctional to modernize like Japan. By First Opium War, Daoguang emperor didn't know where Britain is. It was a pathological regime preoccupied with managing a quaint and unnatural arrangement of Manchu superiority. I definitely won't say their trade policies made sense but it is just a small part of overall Manchu awfulness. Though to be fair, Manchus were following the Ming with their tryhard Confucian disdain for trade. By 1736, China had mostly lost its ironworking. Insularity is the dominant Chinese policy for many centuries. We need to go back like 1000 years to see China that's even remotely as trade-oriented as the modern one. And yes, none of this is plausible in the modern world with high-density information flow.
Anyway, what does it matter? People complaining that “China is making trade impossible” don't mean anything like Ming-style ban of maritime commerce. They mean precisely the opposite, that Chinese exports are too cheap and abundant, and call it unfair. What exactly do you want them to do? Enforce the internal demand for more expensive foreign goods, such as subsidizing private consumption of Macbooks? Get worse at manufacturing? Make their subsidies as ineffectual as European ones? Focus on welfare spending, until they get old, slow down their value-add climb, and fall behind far enough to balance trade? It's just hopeless demands to change their value system, they won't change it. Keep raising tariffs if you don't want to compete on prices. 100% on EVs, 200% or whatever on solar panels, outright ban on Huawei… seems to work, keep going. American deficit with China is already shrinking.
American hegemony itself is a very recent phenomenon, and may have run its course. America was a relatively prosperous and absolutely powerful nation before it became “a hegemon” and so massively involved itself in Old World affairs, for intrinsic reasons of having a large internal market, little red tape, and good geography.
Your security guarantees don't look very credible and monetizable now.
I don't oppose any of that, it's fair game so long as it works. By coercion I mean buffoonery like forcing allies to invest in American production or Lutnick's machinations around TSMC (again, “security guarantees” come into play). China simply can't do any of that, irrespective of morals. It can only offer terms of the deal and expect consent. JVs were not coercion. Expropriation of Trina Solar, meanwhile, is coercion with extra steps. But whatever, this is sliding into moralism, everyone will price in those tactics and act rationally.
Pretty much, but that doesn't change the conclusion. The US is a vast economy. China is becoming comparably vast (or is already bigger depending on how you count), and specifically on goods production it's just no contest. Such economies gravitate towards autarky, both for security and macroeconomic reasons and because of basic logistics.
I repeat that Chinese household consumption is underrated due to in-kind transfers (such as all this public infrastructure), while American consumption is overrated due to Baumol disease. CF40 doesn't just argue that they're even richer than PPP suggests, and consume on par with developed economies (just not the US). It argues that they spend 20 times less on healthcare and get comparable outcomes. Americans cannot not consume some of these items, their floor for cost of living is just too high, you physically cannot survive in a modern city for $137 a month for two people over 3 years, and for the Chinese the ability to do that is subsidized by in-kind transfers. There can be a spirited defense of American consumption pattern, about allocation efficiency or whatever, but the crux is that while the Chinese are directly extracted from to build up physical capital and trade competitiveness, Americans are indirectly extracted from to make pharma/hospital/insurance company etc. stonk go up, charitably – fund R&D and reinvest into tech. The latter is accounted for as “consumer spending”, the former is not, both are effectively non-optional capital transfer from civilians to the national backbone, largely physical in their case and largely financial in yours. I think that when all is considered fairly, both nations have about 50% “real consumption” share of GDP.
Right. That's the big question, isn't it.
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