2/14 "Why were we so quick", Nocera asks, "to label anyone who even flirted with the idea that maybe the U.S. should be protecting its industrial base, just as other countries did, as a Pat Buchanan-like fool?"

3/14 But two corrections: First, I don't support protectionism. I support a world of free trade in which countries specialize in sectors where they are especially efficient, and in which they export in order to maximize imports for the welfare of their households.

4/14 Like Keynes, I also oppose the unfettered flow of capital. But because we don't live in such a world, I always expected that countries would eventually be forced to intervene against distortions in the global trading system.

5/14 Second, I don't agree that China is the main problem with the global trading and capital regime. It is merely exacerbating a bad system based on a decades-old decision by US elites that the role of the US should be to accommodate savings imbalances elsewhere.

6/14 This decision was great for Wall Street, of course, and for owners of movable capital, and it gave Washington additional global clout, but all of this came at the expense of American manufacturers, workers and farmers, and it exacerbated inequality and rising debt levels.

7/14 The US did this by opening its capital account to the unfettered accumulation of US assets by countries that boosted domestic growth through mercantilist industrial policies, and that needed to acquire US demand and US assets to balance the resulting demand deficiency.

8/14 This meant, among other things, that US "industrial policy" was designed abroad as the obverse of industrial policies in other countries whose purpose was to expand their shares of global manufacturing at the expense of domestic demand. https://carnegieendowment.org/...

9/14 If other countries sought to expand manufacturing, in other words, and the US decided to accommodate the resulting imbalances, it meant that their expanding shares of global manufacturing must at least partly be balanced by a decline in the US manufacturing share.

10/14 American economists insisted, however, that whatever happened in the US could only be the result of US policies. Their idea that even closed, highly controlled economies had no choice but to force up their domestic savings and to increase their shares of...

11/14 manufacturing in order to accommodate the domestic-policy induced decline in US manufacturing and low US savings implied that only the US had agency, and that countries like China, Germany, and Japan have no choice but to reflect American imbalances.

12/14 This is not to say, of course, that domestic American policies have no effect on the US economy (and contrary to what the globalists say, no on has ever made that argument), but it does mean that open economies like the US can be affected by policies abroad.

13/14 Keynes proposed a global trade and capital regime in which every country can follow its own development path, whatever that path, as long as it resolves the associated costs domestically, rather than by externalizing them through their trade and capital accounts.

14/14 He was right. A globalization inconsistent with his vision, and that rewards beggar-thy-neighbor policies by accommodating the resulting savings imbalances, is ultimately unsustainable. That is why we are where we are today.