Friday 03 Apr 2020 | 00:41 | SYDNEY
Friday 03 Apr 2020 | 00:41 | SYDNEY

The trading gap shuffle


Sam Roggeveen


15 January 2009 13:48

Paul Kennedy has had a rough couple of decades. He published his The Rise and Fall of the Great Powers in 1987, in which he saw signs of a decline of US power. When Soviet communism collapsed just a few years later, ushering in a sustained period of US global hegemony, Kennedy's book started to look a little foolish. Anti-declinists to this day cite Kennedy for his misjudgment of US strengths.

Well, Paul Kennedy is now getting some of his own back in the Wall Street Journal. As you'll read, what really frightens Kennedy about America's predicament are its budgetary and trade deficits.

There is nothing else in the world like them in absolute measures and, even when calculated in proportion to national income, the percentages look closer to those you might expect from Iceland or some poorly run Third World economy.

Kennedy also fears that Obama's proposed massive stimulus package will be misallocated, due to the power of lobbyists and rent-seekers. Yesterday I linked to a blog post by economist Tyler Cowen on this very issue, citing the appalling waste in Japanese infrastructure spending as a warning of what could go wrong in the US. It's worth quoting the final line from that post:

...I am pondering the question of whether government in the United States is of higher quality than government in Japan. I believe it can be argued either way.