RE: [OPE] class illusions about the crisis and the state

 Jurrian
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 it is possible for a country to run a trade surplus, while its debt levels escalate nevertheless.
 
Paul
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Please give a worked example.
 
 
Jurrian
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  longterm exchange rate movements tend to reflect the relative productivity, the productive power of a country, but even this is distorted or masked by debt-driven accumulation and speculation. In part, the strength of the pound was simply a result of the fact that the UK has been one of the largest "clearing houses" for international capital transactions.
 
Paul
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In the very long term yes you are right, but we have had a diversion from this for 10 years or
more driven by capital inflows. These have largely been channelled into house purchases
producing an inflation in house prices in the main. Only a relatively small part of that, I would guess, has been backed by new real assets in housing stock. Another large part has gone into
'equity release' and hence higher personal consumption.
Jurriann
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Obviously you can say that, if the national currency falls in value, this can stimulate production for export and ease current account deficits, but if production for export expands, this does not mean necessarily that the national economy as a whole is better off. In fact it may be worse off,
 
 
Paul
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Well it will clearly be worse off in terms of current consumption since it is no longer consuming so many goods produced abroad.
 
Jurrian
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 to the extent that goods and services locally produced are no longer integrated in the local economy or benefiting the local population, making balanced economic growth process and balanced development of the local infrastructure even more difficult, if not impossible. The "race to the bottom" metaphor refers precisely to the phenomenon where, in a hierarchy of nations, poorer countries try to "trade up" and sell to richer countries, while in fact locally real wages stagnate or even fall. In this way, the competitive "export-led development" generates ever greater differentials in income and wealth.
 
Paul
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Well half of what you say is true for China -- ever greater income differentials, but not the other
half, real wages have not stagnated. For Britain in the 1940s the reverse was the case, the
redirection of the economy towards exports went along with greater social equality. So I dont see
that any general rule can be drawn here. One could also argue that in Taiwan and Japan export success went along with relatively narrow income differentials for a capitalist economy.
 
  

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