The coming economic war with China

Context: The economic war with China is inevitable because closeness is now a basic need for domestic politics. 

Reversal of economic openness: is likely to be seen in the next three years similar to post World War 2.

• Employment no longer just an economic outcome: it has become the most important political objective

• Plotting the trajectory from openness to closedness: post-1945

• John Maynard Keynes provided the intellectual tool in the form of government fiscal interventions to shore up economic activity during high unemployment.
• Harry Dexter White, provided financial tools for openness through the creation of an International Bank for Reconstruction and development, the IMF and the GATT.
• After 1991 till 2016: the world opened up as had been in 1914 to money and goods but not labor.
• While it was openness which led to the demise of the Soviet Union in 1991, its reversal is what will lead to the demise of China.

• Unsustainable monetary fluff: created by the US after 1985 has led to too much debt, risking the danger of another 2008 like a crisis.
• Goodbye to capital account convertibility: The closedness will lead to trapping of domestic savings within the national boundaries.
• China subjected to Triffin’s Dilemma: which means a country can’t provide the reserve currency to the world and yet run a current account surplus.

India’s Options:

• No option but to shut China out: 

• The award for projects should entirely stop.
• Aim to halve the imports from China.
• Tackle China’s inflexible politics and flexible economics by restoring flexible markets with flexible politics, what India has.