In Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace (Amazon,) authors Matthew Klein and Michael Pettis argue that a handful of elites have captured the financial benefits of open global trade and finance. This has caused a global savings glut and a hunt for safe assets that has resulted in a series of boom-busts in American asset prices and an hollowing-out of its manufacturing base. These underlying income and wealth inequalities have manifested themselves as trade wars.
Trade war is often presented as a conflict between countries. It is not: it is a conflict mainly between bankers and owners of financial assets on one side and ordinary households on the other—between the very rich and everyone else. Rising inequality has produced gluts of manufactured goods, job loss, and rising indebtedness. It is an economic and financial perversion of what global integration was supposed to achieve.
America’s openness to international trade and finance means that the rich in Europe, China, and the other major surplus economies can squeeze their workers and retirees in the confidence that they can always sell their wares, earn their profits, and park their savings in safe assets.
The world’s rich were able to benefit at the expense of the world’s workers and retirees because the interests of American financiers were complementary to the interests of Chinese and German industrialists. Both complemented the interests of the wealthiest throughout the world, even from the poorest countries.
The book is an easy read and anyone who is interested in understanding the current macro environment should read it.
Recommendation: Read it Now!