Jonathan B. Wight

Whether you like Keynes or not, he had a genuine knack for prescience.  This week President Obama appointed the head of GE to lead the new Council on Jobs and Competitiveness—presumably aimed at fighting off our international challengers, especially China.  This portrays a view of trade as a game of win-lose.

The failure of macro policy to maintain full employment was the subject of Keynes’ book, and here’s a timely quote on trade from the concluding chapter of The General Theory (1936):

But if nations can learn to provide themselves with full employment by their domestic policy… there need be no important economic forces calculated to set the interest of one country against that of its neighbours.

There would still be room for the international division of labour and for international lending in appropriate conditions.

But there would no longer be a pressing motive why one country need force its wares on another … with the express object of upsetting the equilibrium of payments so as to develop a balance of trade in its own favour.

International trade would cease to be what it is, namely, a desperate expedient to maintain employment at home….

Can anyone doubt that China is using trade as “a desperate expedient to maintain employment at home….”?  The question is whether President Obama, in his declarations over the past year, is also heading in that direction.