Trade wars are negative-sum games and the Western world needs to work closer with China, renowned British expert on global economics Martin Wolf has said.
“Trade wars in general (are) a negative-sum for countries, unless they are able to improve their terms of trade by imposing barriers,” Wolf, chief economics commentator at the London-based Financial Times and author of the new book “The Crisis of Democratic Capitalism,” told Xinhua in a recent exclusive interview.
He warned that the politicization of trade usually leads to wasteful outcomes because decisions on what to produce are made by politicians rather than by competitive markets.
The expert, whose latest book has been described as a wake-up call to the world of economics, also commented on whether a world of self-sufficiency was a foolish goal.
“The risk is that of an immense loss of opportunities to buy a wider range of cheaper and higher quality goods and services,” he said, adding, “Global supply in global markets will always generate greater competition and exploitation of economies of scale and scope than national supply.”
“The costs of self-sufficiency are greatest for smaller countries, but even bigger countries would suffer substantial costs,” he said.
He called on Britain and the Western world to work closer with China, believing that it is perfectly plausible that China will continue to grow much faster than the rest of the world, and rise to become the biggest economy in the world.
Western countries “have to find a way of peaceful cooperation with systems that are different from us. And the most important of those systems by far is the Chinese system. And that means we need to cooperate in trade and economy, we need to cooperate on the environment, and we need to cooperate on sustaining peace, without which there will be no future for humanity.”
“My biggest concern, apart from the weakness of democratic capitalism, is that we will not be able to sustain the necessary cooperation to preserve the planet’s peace and prosperity … And that will depend on both sides, the West and China, to reach a modus vivendi which works in a very different world, one we had, and expected 15 years ago,” he said.
Talking about what he calls the crisis in democratic capitalism and the massive growth in other parts of the developing world, he said “it’s a very important part of the shift of the world economy away from the old developed countries over the last 20 years. It started in the early 90s, but it was a huge economic and political and environmental fact, a reality.”
“It was not only inevitable, I think it’s desirable. You can’t imagine that a just world would see such enormous inequalities forever,” said Wolf, adding however, “it’s creating some very, very large and threatening problems for the world, including the threat of war.”
Looking ahead into the next decades, Wolf told Xinhua: “It’s very difficult to predict the future. I don’t think there’s going to be another China. India is clearly on the rise, but its rise is much slower and its potential is, I think, somewhat limited.”
He also said, “the West is not going to grow much faster than it has been.” ■