Mercantilism and its consequences

I find this article by Yves Smith of Naked Capitalism very insightful, although as she writes, the core of this analysis goes back to at least Michael Kalecki. The final paragraph sums up the article quite well and refers to the problems ahead for e.g. Germany and China. The post also deals with the obsession of countries to want to have a trade surplus (Germany and Finland come to mind.)

[But] The mercantilist ideal of exporting one’s way to economic power isn’t as simple or risk free as it seems. And as we’ve discussed separately, no country in modern times has made a crisis-free transition from being export-driven to having a large domestic consumer base. Development economists, late to recognize this issue, now recommend a more balanced growth model that places less emphasis on exports and more on building internal markets. But the current export champions seem unwilling or unable to abandon their past successful formula, even when it’s not working as well for them as it once did.

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