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>the West keeps falling for it for some reason The west acted as if mercantilism basically couldn't work. Ricardian theory of comparative advantage was elevate
by crdoconnor 9y ago
>the West keeps falling for it for some reason
The west acted as if mercantilism basically couldn't work. Ricardian theory of comparative advantage was elevated to near-religion status in the 90s and early 00s.
China not opening up fully was seen as an aberration that would ultimately only harm China rather than a potential long term threat. That was the prevailing attitude among policymaking circles (you can see this attitude reflected by checking old issues of The Economist).
Ultimately the fact that lots of profit could be made out of managed Chinese trade kept western countries from reacting in a sensible, self-interested manner.
- wwweston 9y agoI got some lessons in that religion in the early 00s, and think it's still gospel in a lot of circles (I certainly know a few vigorous proponents). Is there a school of thought that's superseded the Ricardian theory?
- barrkel 9y agoMercantilism still doesn't work, but like most bad things in capitalism, the corrections can take so long they may not be worth the pain they cause. The idea is that we take advantage of China's willingness to make stuff for us (west) cheaply while they grow their exports, then when they try to raise prices, we switch away. The risk is the switching costs are expensive.