Reference News Network July 1 report: The U.S. "Atlantic" monthly magazine website published an article titled "The World Economy Faces a Paradigm Shift" on June 28, authored by Mark Blyth, a political economist at Brown University in the United States. Excerpts are as follows:

The world economy is like a supercomputer, constantly performing massive calculations on prices and quantities, then outputting information on income, wealth, profits, and employment. This is essentially how capitalism works—a highly efficient information processing system. To fulfill this function, like all computers, capitalism relies on both hardware and software. Hardware refers to the markets, institutions, and regulatory systems that make up the economy; software refers to the dominant economic ideas—the fundamental social concepts about what the economy serves.

Most of the time, this "computer" runs well, but it occasionally crashes. Usually, when a crash occurs, the world economy only needs a "software update"—introducing new ideas to deal with new problems. But sometimes major hardware overhauls are also required. Now, we are at a moment when we need to press the "reboot" button. Amid ongoing tariff wars, market concerns about U.S. debt, plummeting consumer confidence, and the continuous weakening of the dollar under reckless regulation, an era of free trade and open society led by the United States in the process of globalization is coming to an end.

Or a complete reboot

The global economy will undergo hardware upgrades and attempt a new operating system—this is essentially a complete reboot, one whose scope is unprecedented in nearly a century. The architecture of this "computer" is changing, but how the next version of capitalism will operate largely depends on which "software" we choose to install.

This kind of forced reboot last occurred in the 1930s. In the United States, the huge liquidity crisis triggered by the 1929 Wall Street crash, combined with the Smoot-Hawley Tariff Act of 1930, stifled business activities and triggered the Great Depression. Bank failures quickly evolved into large-scale collapses of businesses and industries; wages dropped sharply, and unemployment rates soared, with as many as 1/4 of the labor force unemployed in some areas. Although Franklin Roosevelt's New Deal involved state intervention, the economic situation did not stabilize and return to sustained growth until the 1940s, because wartime rearmament at that time provided a significant stimulus to industry.

In the summer of 1992, this "computer" began to hum again. The United States entered the period called "the Great Moderation" by Ben Bernanke, who was then a Federal Reserve Board member (and later chairman). Globalization was good, and finance represented the future. Central banks achieved sustainable prosperity, and the investor class saw profit recovery on a transnational level.

However, this system had its flaws. Increased profitability was not only due to improved domestic productivity, but also came at the cost of previously stable industrial areas in the United States—massive outflows of jobs, skills, and capital. At the same time, authorities decided to relax financial market regulations, injecting a large amount of credit into the economy. However, one consequence of this credit was that long-term wage growth stagnation and increasing inequality were masked.

It turned out to be a major "hardware" issue: When another crisis hit in 2008, the neoliberal model of solving economic problems through financialization became a liability—a credit tsunami turned into a debt earthquake. The "hardware upgrade" during this period (independent central banks) saved the system by providing massive assistance to the private sector, while the costs were borne by the public sector—manifested as continuously expanding debt and more stringent fiscal policies. Signs of deep public dissatisfaction in Western countries began to emerge in 2016: first, the Brexit referendum, then the rise of Donald Trump in the United States.

A new economic order is taking shape

Trump has become a catalyst for another reboot. According to the logic of Trumpism, the new economic goal is to benefit domestic workers by restoring high-carbon industry jobs, excluding foreign immigrants from the labor market, and encouraging women to have more children and return to the family. This is less about building a new computer system and more about upgrading multiple old systems—what a critic called a version of "retro-modernization." The economic ideal of "Make America Great Again" (MAGA) is a mixture: a combination of elements from the 1950s (a significant expansion of male manufacturing jobs) and the 1940s (women being pushed out of wartime jobs and returning to the home, with strict limits on foreign immigrants). This boost to domestic labor is tied to the mercantilist "sphere of influence" foreign policy of the 19th century.

This patchwork of various historical elements reveals the unstable nature of "Trump economics." Because the dominant idea remains controversial, the new economic order is still unclear. The nationalist conservative movement is trying to reshape the Republican Party into a party representing the working class, with an economic vision, but other forces are also trying to influence this moment. The "dark enlightenment" faction in the tech industry is also a force. Silicon Valley billionaires have already heavily invested in artificial intelligence and are eager to seize government funding that was previously allocated to elite research universities. Their envisioned economy is not a return to the glory of blue-collar industries, but rather a post-human future dominated by automation and space exploration.

The problem with these plans is that we cannot go back to the past or leap into the future—we can only live in the present. The right-wing populist reset will fail, because tariffs may stimulate some degree of re-industrialization, but the main producers will be robots, not male blue-collar workers on assembly lines. Moreover, there is little indication that most women would be willing to accept the fate of "returning to the family" that has been planned for them. The "software update" of technological futurism benefits the general public very little, and only the tech giants most enthusiastic about achieving it will benefit.

Therefore, we seem to be in a dilemma, which is why the current situation is so confusing. System upgrades are imminent: the right is offering "retro-modernization" as an update plan, while the left has not yet figured out which path to take.

No matter what, we must acknowledge that change is happening. A new economic order is forming—that means it is not yet fixed and can still be shaped. But time is running out. (Translated by Zhu Li)

Original: https://www.toutiao.com/article/7522053861532500520/

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