Hegelian Macroeconomics : The Dialectics of Global Imbalances
Traditional narratives of external imbalances have focused on the analysis of national accounts, trade flows, and financial flows. They have generated two opposing views of the current situation of the world economy: on one side, a prudent, if not pessimistic view considers large imbalances as evidence of problems with the international monetary and financial system, and symptoms of domestic distortions (mainly in the United States and China). On the other side, a relaxed, if not optimistic view suggests that global imbalances are not anomalies but simply the predictable outcome of a world with increasingly globalized financial flows in search of the right mix of risks and returns. The former view prescribes that the two largest countries in the world rebalance their economies to avoid the potentially painful cost of disruption and adjustment. The latter contends that global imbalances will be corrected through time by the normal functioning of market forces. This paper offers a critical analysis of these competing explanations of the United States-China imbalances and suggests a way of reconciling them. Starting with an exploration of the accounting frameworks that underpin any discussion of current account deficits and surpluses, the paper argues that China and the United States have become economically so interdependent that fears of any abrupt change in their current Nash equilibrium situation may be exaggerated. The paper also uses Hegel s parable of the development of self-consciousness to explain the dynamics between the two countries. Hegel may not have been a great philosopher of history but his analysis of lordship and bondage (also known as the master-slave dynamics) provides a good framework for analyzing the dialectics of recognition and acknowledgement that currently characterizes the macroeconomic relationships between the United States and China.
| Main Author: | |
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2010-01
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| Subjects: | ACCOUNT DEFICITS, GLOBAL IMBALANCES, HEGELIAN MACROECONOMICS, INTERNATIONAL CAPITAL MARKETS, INTERNATIONAL MONETARY AND FINANCIAL SYSTEM, SUSTAINABILITY, US AND CHINA ECONOMIES, |
| Online Access: | http://documents.worldbank.org/curated/en/2010/01/11640482/hegelian-macroeconomics-dialectics-global-imbalances https://hdl.handle.net/10986/19944 |
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| Summary: | Traditional narratives of external
imbalances have focused on the analysis of national
accounts, trade flows, and financial flows. They have
generated two opposing views of the current situation of the
world economy: on one side, a prudent, if not pessimistic
view considers large imbalances as evidence of problems with
the international monetary and financial system, and
symptoms of domestic distortions (mainly in the United
States and China). On the other side, a relaxed, if not
optimistic view suggests that global imbalances are not
anomalies but simply the predictable outcome of a world with
increasingly globalized financial flows in search of the
right mix of risks and returns. The former view prescribes
that the two largest countries in the world rebalance their
economies to avoid the potentially painful cost of
disruption and adjustment. The latter contends that global
imbalances will be corrected through time by the normal
functioning of market forces. This paper offers a critical
analysis of these competing explanations of the United
States-China imbalances and suggests a way of reconciling
them. Starting with an exploration of the accounting
frameworks that underpin any discussion of current account
deficits and surpluses, the paper argues that China and the
United States have become economically so interdependent
that fears of any abrupt change in their current Nash
equilibrium situation may be exaggerated. The paper also
uses Hegel s parable of the development of
self-consciousness to explain the dynamics between the two
countries. Hegel may not have been a great philosopher of
history but his analysis of lordship and bondage (also known
as the master-slave dynamics) provides a good framework for
analyzing the dialectics of recognition and acknowledgement
that currently characterizes the macroeconomic relationships
between the United States and China. |
|---|