This work on trade policy begins with a description of charred corpses. It is a visceral image, not typical of works of economics.
They were the casualties of protests that led to the overthrow of the Indonesian ruler, Suharto, after decades in power. This is a reminder that charged debates about living standards can spill over to the street.
At time of writing, Jakarta is again gripped with unrest. The causes of this, once more, include living standards. The debate on how economies can meet the needs of societies is simmering with urgency and passion.
David J Lynch is eminently qualified to tell the story of how we got to this point. He is the global economics correspondent for the Washington Post and the author of a book on the Irish economic crisis.
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In The World’s Worst Bet, he argues that the drive to increase global commerce was motivated by a strategic misjudgment by the United States. The aim was to “generate widespread prosperity at home while encouraging political liberalisation abroad”.
Instead, living standards have not grown for many and the political systems of China and Russia are largely unchanged. This is compounded by the growth of global supply chains that increase the vulnerability of individual states.
Lynch brings to life recent decades of global trade policy. The early chapters of this book recount the efforts of successive American presidents to increase global trade through the opening of national economies.
The practised pen of a journalist is obvious in this well told story. It includes the Seattle trade negotiations that were conducted amid wide-scale rioting, the Global Financial Crisis and the failure of the 12-nation Pacific Trade Agreement.
This is not a dry or technical read. Stories of individual workers or employers are utilised to explain policy issues.
A constant thread is the economic relationship between China and America. The author lucidly analyses the importance of Chinese savings to the financing of American investment and the trade dynamics between these countries.
This book assesses the motivation behind efforts to increase global trade. Benefits were widespread, however the importance of the distribution of social costs was underappreciated.
Lynch writes that “Everyone benefited from cheaper goods and the ready availability of more capital for mortgages and business loans. But the losses were concentrated among particular groups – those with the least education and skills – and in particular places, those that were the most dependent upon manufacturing”.
A fierce sense developed within these communities that those who made the rules of international commerce did not prioritise their interests. Decisions, it was felt, were made to prioritise wealthy elites.
This sentiment aroused the political interests of Donald Trump. In response to questions by Washington Post reporters on why he developed ambitions for public office he said: “I would say in my case, more than anything else, the stupidity of the trade deals that we have with China, with Japan, with Mexico…Because that’s something that I see. And I didn’t know that it would hit such a chord."
The Biden presidency also reassessed trade strategy. He ruled out further trade agreements without strengthening the guard rails of education, domestic manufacturing and infrastructure.
Lynch contends that “trade liberalisation was to have produced shared prosperity and a harmonious US-led international system”; instead with “uneven benefits at home and unexpected reversals abroad, that formula has lost its appeal”.
Despite the measured tone, this book does not address the counterfactual.
Would the judgment of history not have been harsh on leaders who did not pursue the opportunity to deepen global economic integration and political liberty in the moderate political climate that followed the fall of the Berlin Wall? This point is made with some power by Ben Chu in his recent book Exile Economics.
A strength of this book is the rejection of simple solutions. A decoupling of trade between China and America could produce a jobs shock in both economies. Instead, the author makes the case for investment in skills, in regional development and support for the growth of the services sector.
A wistful final chapter, where Lynch interviews Bill Clinton, laments the lack of progress in these areas. The political consequences are clear, with communities previously loyal to him now swapping their allegiance to President Trump.
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Given the abundant expertise of the author, the reader would have benefited from a deeper exploration of any policies that can respond to grievance without creating further risks for global trade.
However, this is a punchy and expert analysis of the fractures in our global economy. The coming years will be equally dramatic. I hope that this book has a sequel, as the need for explanation and wisdom will only grow.
Paschal Donohoe is Minister for Finance and president of the Eurogroup
