The fragile web of foreign trade - United Kingdom

The recession makes globalisation more necessary, but more precarious

A FEW years ago, Niall Ferguson and Moritz Schularick, two economic historians, coined the term “Chimerica” to describe the symbiosis between the world’s two great powers. Chinese people save, they observed, allowing Americans to borrow and spend more than they earn. American consumers buy gizmos made in China, keeping Chinese workers in jobs. Both countries benefit.

But the financial crisis has caused many people to rethink this comfortable arrangement. Protectionists have long blamed Chinese imports for destroying American jobs. A new gripe is that, by lending America so much money, China helped inflate the asset bubble that has now burst so painfully. Although no one forced Americans to borrow so much, nor to gamble the money on property, the crisis has fuelled nativist anger. Lawmakers added “Buy American” clauses to this year’s stimulus package, and there are still absurdly tight limits on the number of skilled foreigners who can work in America. ...