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76 | <h1><a name="keynesian-compromise" href="index.html">Keynesian compromise</a></h1> | <h1><a name="keynesian-compromise" href="index.html">Keynesian compromise</a></h1>
77 | </div> | </div>
78 |  | <div class="update-prepend rss-description-exclude">
79 |  | <ul>
80 |  | <li>This post was meaningfully revised at 2026-06-12 @ 02:35 PM EDT. The previous revision is <a href="index-oldcommit-b96c8d4a4f5297d24a1e50e7cf502ddda33c02a4.html">here</a>. (See <a href="index.html#update-history">update history</a>.)</li>
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84 | <div class="entry-body"> | <div class="entry-body">
85 | <div class="flexmark markdown"> | <div class="flexmark markdown">
86 | <p>In 2000, Dani Rodrik <a href="https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.14.1.177">proposed</a> the "<a href="https://en.wikipedia.org/wiki/Political_trilemma_of_the_world_economy">political trilemma of the world economy</a>":</p> | <p>In 2000, Dani Rodrik <a href="https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.14.1.177">proposed</a> the "<a href="https://en.wikipedia.org/wiki/Political_trilemma_of_the_world_economy">political trilemma of the world economy</a>":</p>
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105 | <p>Surplus countries — think Germany with respect to <a href="https://www.interfluidity.com/v2/5965.html">Greece</a> during the 2010s Eurocrisis — perceive themselves as prudent and generous, as innocents betrayed and sinned against when, inevitably, deficit countries suffer crises, and seek to devalue or default upon obligations that surplus countries accumulated in exchange for laboriously produced goods and services.</p> | <p>Surplus countries — think Germany with respect to <a href="https://www.interfluidity.com/v2/5965.html">Greece</a> during the 2010s Eurocrisis — perceive themselves as prudent and generous, as innocents betrayed and sinned against when, inevitably, deficit countries suffer crises, and seek to devalue or default upon obligations that surplus countries accumulated in exchange for laboriously produced goods and services.</p>
106 | <p>Deficit countries perceive themselves as having been led down a primrose path by eager sellers, then drained of both their financial net worth and their vigor. They are left emasculated, enervated, bereft of lost ability and capability to compete. Angry.</p> | <p>Deficit countries perceive themselves as having been led down a primrose path by eager sellers, then drained of both their financial net worth and their vigor. They are left emasculated, enervated, bereft of lost ability and capability to compete. Angry.</p>
107 | <p>Both parties have a point. But then, of both parties, it is rather an infantile point. No one forces a trade surplus country to sell goods and services for potentially dodgy financial claims. No one forces a trade deficit country to borrow, or to tolerate borrowing by its public, in order to import goods and services.</p> | <p>Both parties have a point. But then, of both parties, it is rather an infantile point. No one forces a trade surplus country to sell goods and services for potentially dodgy financial claims. No one forces a trade deficit country to borrow, or to tolerate borrowing by its public, in order to import goods and services.</p>
108 | <p>No one forces these things. But countries may have been, if not forced, then strongly encouraged, to overlook imbalance by Rodrik's "golden handcuffs" regime, under which the price of economic integration becomes accepting free flows of both goods and capital. In my view, after the world <a href="https://en.wikipedia.org/wiki/Nixon_shock">abandoned Bretton Woods</a>, it drifted toward an order — pick your pejorative, "neoliberal", "Washington Consensus" — that effectively required countries to abstain from tools by which they might have enforced trade balance.</p> | <p>No one forces these things. But countries may have been, if not forced, then strongly encouraged, to overlook imbalance by Rodrik's "golden straitjacket" regime, under which the price of economic integration becomes accepting free flows of both goods and capital. In my view, after the world <a href="https://en.wikipedia.org/wiki/Nixon_shock">abandoned Bretton Woods</a>, it drifted toward an order — pick your pejorative, "neoliberal", "Washington Consensus" — that effectively required countries to abstain from tools by which they might have enforced trade balance.</p>
109 | <p>It is perhaps ironic, perhaps you think it poetic justice, that the country usually seen as cheerleader of this consensus is now blowing up its own economy and hegemony via less-than-deliberate reaction to the consequences of what it advocated. The American partisan I still harbor will object and point out that the architects of the EU were every bit as blind and foolish. One thing you can say for Western elites on both sides of the Atlantic during this period from, say, 1983 until quite recently, is they were sincere in their error. The medicine they prescribed to the global South they also guzzled down themselves. As Nayib Bukele <a href="https://xcancel.com/nayibbukele/status/1901238762614517965">might say</a>, "Oopsie..."</p> | <p>It is perhaps ironic, perhaps you think it poetic justice, that the country usually seen as cheerleader of this consensus is now blowing up its own economy and hegemony via less-than-deliberate reaction to the consequences of what it advocated. The American partisan I still harbor will object and point out that the architects of the EU were every bit as blind and foolish. One thing you can say for Western elites on both sides of the Atlantic during this period from, say, 1983 until quite recently, is they were sincere in their error. The medicine they prescribed to the global South they also guzzled down themselves. As Nayib Bukele <a href="https://xcancel.com/nayibbukele/status/1901238762614517965">might say</a>, "Oopsie..."</p>
110 | <p>Here is the United States' balance of payments as a share of GDP, from the end of World War II to the present.</p> | <p>Here is the United States' balance of payments as a share of GDP, from the end of World War II to the present.</p>
111 | <div style="text-align: center;"> | <div style="text-align: center;">
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159 | <a href="../../24/balance-as-a-norm/index.html">Balance as a norm</a> → | <a href="../../24/balance-as-a-norm/index.html">Balance as a norm</a> →
160 | </div> | </div>
161 | </div> | </div>
162 |  | <div id="update-history" class="update-history">
163 |  | <h3 class="update-history-title"><a id="major-updates" href=""></a>Major revisions:</h3>
164 |  | <ul>
165 |  | <li><span class="update-timestamp"><i>2026-06-12 @ 02:35 PM EDT</i></span> — The previous version accidentally misquoted Rodrik, used the phrase "golden handcuffs" rather than "golden straitjacket". (<a href="index-diff-b96c8d4a4f5297d24a1e50e7cf502ddda33c02a4-to-current.html">diff</a>)</li>
166 |  | <li><span class="update-timestamp"><i> <a href="index-oldcommit-b96c8d4a4f5297d24a1e50e7cf502ddda33c02a4.html">2025-04-20 @ 07:30 PM EDT</a></i></span> — Initial publication.</li>
167 |  | </ul>
168 |  | <div class="update-history-note">
169 |  | Timestamps represent "major", substantative revisions. There may have been subsequent typo fixes and language reworkings within a major revision, after the time displayed. For a more complete and fine-grained update history, you can view the <a href="https://github.com/swaldman/drafts.interfluidity.com/commits/main/">git repository commit history</a>.
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172 | </article> | </article>
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