The US has 330 million citizens, which is less than 5% of the world’s population. Yet its GDP footprint is around 25% of global GDP. How is that possible? While leading-edge technological innovation and a giant military undoubtedly help, what’s really been the secret sauce for the past 30 plus years is the global role of the dollar. The rest of the world needs a savings asset and the US provides it through massive debt issuance and the global role of the dollar in international trade. This has enabled the US to import vast quantities of TVs, Cars, Computers, and everything else you can think of, while paying for it all with digital IOU'S that bear 2% called Treasury bills.
The problem with this model is that if you import everything you stop making your own things and you hollow out your industrial base. Both Biden and Trump saw this. Biden sought green re-industrialization through the IRA. Trump seeks re-industrialization through doubling down on the carbon-economy, which constitutes the growth model of GOP states in the US.
If a Trump administration doubles down on carbon, the short term boost to growth through lower input prices plus deregulation will be huge. Possibly enough to propel a two-term administration. Climate denial can be profitable. But the rest of the world, China, Europe and East and South Asia, will continue to develop the green technologies needed to survive in the 21st century. The US will fall behind in this critical area as the countries involved in the green transition trade more intensely with each other. The knock-on effect will be that the global role of the dollar shrinks. First, because the issuer doesn’t like the side effects any more. Second, because in a post carbon world, who needs a currency that denominates and is backed by carbon assets that no one else uses any more? In short, the US’s addiction to carbon and the politics that it produces risks burning down the house.
Meet our speaker and chair
Mark Blyth is the William R. Rhodes ’57 Professor of International Economics and the Director of the Rhodes Centre for International Economics and Finance at the Watson Institute for International and Public Affairs at Brown University. He holds a joint appointment in the department of political science. He is the author many award-winning books including, Austerity: The History of a Dangerous Idea (New York: Oxford University Press 2015), Angrynomics (New York: Columbia University Press 2020), Diminishing Returns: The New Politics of Growth and Stagnation (Oxford University Press 2022), and forthcoming in 2025, Inflation: A Guide for Users and Losers. He writes about the politics of growth, distribution and decarbonization and why people continue to believe dubious economic ideas despite buckets of evidence to the contrary.
Benjamin Braun is Assistant Professor in Political Economy, LSE European Institute
More about this event
The European Institute (@LSEEI) is a centre for research and graduate teaching on the processes of integration and fragmentation within Europe.