From left to right: Keynote speaker Dr. Adam Tooze of Columbia University and panelists Dr. Gita Gopinath of the IMF, and Dr. Caroline Atkinson of Google and Mr. Robert Zoellick of Alliance Bernstein. Photo Credit: SFS
By: Dakota Cary, Reporter
The future of the global economy reportedly does not include Modern Monetary Theory, nor is it advisable to entertain the idea beyond the chuckles it solicits from serious professors of economics. So, if you are reading this report to determine whether MMT is a viable approach for dealing with our national debt, it’s not—sorry, fellow millennials.
On Wednesday, March 13th, the School of Foreign Service’s Lloyd George Centennial Lecture Series hosted keynote speaker Dr. Adam Tooze of Columbia University and panelists Dr. Gita Gopinath of the IMF, Mr. Robert Zoellick of AllianceBernstein, and Dr. Caroline Atkinson of Google. The speakers, all arresting in their own right, together contributed to an engaging panel about the future of the global economy. But before the panel began, Dr. Tooze captivated the audience with an engaging discussion of the world at the cusp of World War I.
What Dr. Tooze labeled a “parkour of the last century of history” started with an homage to David Lloyd George, the statesman for whom the SFS centennial lecture series is named. Acknowledging the American proclivity to gravitate toward the post-WWII era characterized by US dominance, Dr. Tooze highlighted two conferences that took place in 1921 and 1922 and decisively impacted global governance and order. Consequently, they have a significant bearing on the challenges that we face in today’s international arena.
The 1921 conference was none other than the Washington Naval Conference. The gathering of great powers in Washington was, fundamentally, an attempt by the administration of President Harding to recover the initiative lost after Congress refused to support American accession to the League of Nations. The U.S. also sought to curb international arms racing so that a greater percentage of European countries’ income could be used to repay the significant debts they owed American financiers. In the first truly global summit hosted in the US, President Harding proposed massive naval disarmament—David Lloyd George’s government acquiesced to parity with the United States and therefore succeeded in avoiding a costly naval race. The US government also achieved its economic objectives, as other nations bucked the idea of antagonizing the paymaster for the foreseeable future. Naval disarmament was a way to ensure revenues were spent on debt servicing, not an arms race in Europe.
For David Lloyd George and the British, ensuring stability on the European continent was key to avoiding war and increased armament spending, so the second conference, which the U.S. did not attend, was held in 1922. Lloyd George envisioned a massive peace-pact with an economic plan that would provide indebted nations with revenues with which to meet their debt obligations. In contrast to the first conference, this was a fiasco. While the details are entertaining, the lesson was simple: Due to Britain’s diminished status and inability to enforce its hegemonic vision for the continent, the post WWI order could not be effectively maintained. With the passive American hegemon across the Atlantic consciously avoiding entanglements and collecting its war debts, it was impossible to secure the stability of the international system. Fast forward to 2019, and the parallels become apparent.
The brochures for this panel clearly highlighted the tone of the event. An image of a trading-floor stock ticker with Mandarin Chinese oriented the event toward a discussion of the relationship between the U.S. and China, a topic that dominated the panel conversation. Dr. Gopinath of the IMF noted the central issue of globalization: Its benefits are diffuse, but its negative impacts are acutely local. Moreover, labor is not as mobile as economists argued that it would be, which limits workers’ ability to adapt by switching between jobs. Dr. Gopinath encouraged governments to search for policies that re-educate and re-train workers while seeking to combat unfair industrial subsidies. Mr. Zoellick argued that the U.S. should work to better grasp the nuances of China and understand that the country is not a monolithic cult of President Xi. He also argued that recognizing China’s inner workings is much more useful to the US than one-on-one trade negotiations, stating that “trade is systems-based” and does not take place in a vacuum. While China drove much of the panel discussion, questions from the audience and the moderator, Dr. Caroline Atkinson, pushed the presenters into other topics.
Who else besides China would be a focal point over the next few decades? India was a resounding answer. Will the current low-interest rate environment prevail? Perhaps; the lack of inflationary pressures may mean a broken Phillips curve, or, as monetary policymakers might be inclined to believe, it just means that they are doing their job well. Could the United States ask the Federal Reserve to print a bunch of money to pay down the national debt and redistribute wealth in accordance with Modern Monetary Theory? Rolled eyes, stifled laughs, and a resounding ‘no’ was the response from the panelists. The discussion might have been focused on the future of the global economy, but the answers to our questions were rightly grounded in an understanding of our past and the application of economic orthodoxies. That’s something you can take to the bank.