Imbalances in the current account of the balance of payments – global imbalances, as economists call them – which divide the world into debtor countries and creditor countries, are explained by more than one factor; recently, in a 2010 work, Célestin Monga of the World Bank even used the Hegelian scheme of the master-slave dialectic to offer a further interpretative key.
The case of United States (The largest debtor country), with a negative balance of trade why the level of aggregate spending is higher than total income, and of China (The major creditor country), with instead a active balance why aggregate income exceeds aggregate spending, are the most telling example.
Why the United States, the richest country in the world, is a loan taker on international markets, instead of a lender as would seem more logical? AND why China use your savings for hold American financial assets, rather than investing in less developed countries that may offer higher yields?
The answer, according to the World Bank economist, is that the world's two major dominant powers find themselves in what philosophers call "the politics of recognition”. Just like in the master-slave dialectic of the parable of Hegel, the two countries have reached the point where each perceives itself only through the recognition of the other: the creditor (China) assumes its identity only by recognizing its role and the same happens for the debtor (the USA). The two destinies are inseparable and the level of interdependence is such as to make a substantial disagreement or even a conflict between the respective choices of economic policy unthinkable and improbable.
Currently, the United States lacks the incentive (and reasons) to pursue a policy aimed at reducing the public deficit and the trade deficit; high private consumption and massive cheap imports from China are a major part of the US growth model. On the other hand, China is a creditor country by choice: it has decided to acquire the enormous quantities of public debt securities issued by the USA in exchange for the possibility of supplying the American market with low-priced consumer goods.
On the horizon, therefore, the scenario appears neither changed nor mutable: China will remain largely dependent on the US for its exports and will need Treasury bonds to use the enormous amount of dollars in its reserves. The same goes for the United States which can buy consumer goods (mainly Chinese), because China finances a public deficit that cannot be reduced immediately. In this sense, the two countries are in thatequilibrium, which economists call by Nash, Where neither "player" has any incentive to change their position.
For China, changing the growth model - driven by private consumption instead of exports - would require re-orienting production towards the domestic market; but the costs of adjustment, in social and economic terms, would be of gigantic proportions (among other things, it would be necessary to transfer an enormous number of low-skilled workers from production for export to that of goods and services for domestic consumption). For the United States, an equally dramatic change in spending habits and an impossible reduction in social programs (Medicare and Social Security) which are the basis of the American public deficit would be required.
US and Chinese heads of state have admitted this reality in recent talks; for Barack Obama the global challenges are such that "neither of the two nations can think of facing them by acting alone" and Hu Jintao replied that this happens because "today's world is becoming more and more interdependent". Politics is mutual recognition, Hegel would have said.
