2019-09-03 —

What has investors so rattled? There are long-term factors in play, like demographic trends and a slowdown in technological change. But what seems finally to have dawned on the markets is that globalization is no longer supported by the combination of investor-friendly economic policy and congenial politics they have long taken for granted.


So incoherent is the Trump administration's economic policy that no lesser a figure than Bill Dudley, a former president of the Federal Reserve Bank of New York, has said that America's central bank should treat the prospect of President Trump's re-election as a threat to the United States and the world economy. Mr. Dudley argued that the Federal Reserve chair, Jerome Powell, should refuse to cushion the effects of Mr. Trump's protectionism through further interest rate cuts. If the president's bluster sets off a recession, so be it. At least the Fed would not help usher in a second Trump term.


Though the West still pays lip service to the cause of "market reform," it has come to depend on Beijing's maintaining its grip. But there's an unavoidable question: What are the political consequences of a growing reliance on Beijing's control over the Chinese economy? The question could be dodged when it was assumed China would converge with the West. Now both parties in Congress pose it in geopolitical terms -- key Democrats have pivoted to viewing China's economic growth as a threat to American security.


Even if a bloody showdown is avoided, the outlook is disconcerting. Beijing has made clear with its bullying of the management of Cathay Pacific that Hong Kong-based multinationals are no longer exempt from Chinese pressure. Large corporations that chose to locate in Chinese territory and profit from China's growth will be expected to play by the Communist Party's rules.

The prospect of a world economy divided among a sclerotic Europe, a nationalist United States and an authoritarian China is a gloomy one.

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