Royal Holloway, University of London
The main thesis of this book is that trade wars are not caused by irreconcilable national characters or interests, but rather by inequality within nations. The rich orchestrate policies to increase national savings for accumulation and lower wages for higher profits. This inevitably depresses consumption for the vast majority of the population. As production rises faster than consumption, a commodity glut appears, which must be dumped beyond national borders. While countries like China and Germany experience a trade surplus, many others are forced to absorb a surplus and experience a deficit. The capital raised from the trade surplus seeks out financial investment opportunities, as evident from massive financial flows to the United States and across Europe, encouraging unsustainable levels of spending. While the financial elite in deficit countries gains, the disposal of surplus affects manufacturing, for instance in the United States, and leads to unemployment and worsening living standards for the working classes. This situation is then exploited by some political groups to stoke ethnic, racist and national tensions and press for trade wars. The authors do not oppose globalization but advocate a more regulated version. An economic regime characterized by higher equality will expand domestic markets and allow the domestic consumption of the surplus and raise living standards and productivity in the long run. Deficit countries will not gain from imposing tariffs, which will be self-defeating in the long run; yet some degree of capital control is necessary. This timely analysis should be of interest to policymakers as well as to scholars in economics, political science and international relations.