Predictions are only as good as the assumptions on which they depend
Global tradeOne of the most important lessons from the 2008 global financial crisis was that financial models don’t always work. The idea that you could throw thousands of variables into an algorithmic black box, shake them up with the millions of positions taken daily by banks, and extrapolate from it all a simple and easy-to-understand take on potential balance sheet losses or gains is now seen as naive.
But these sorts of realisations have not yet trickled down to much of our thinking about global trade. Any questioning of free trade is still considered tantamount to a defence of protectionism. Tariffs are always bad. In such negotiations, multinational businesses have had a huge advantage relative to individual nation states and the workers within them. As the Indian politician Rahul Gandhi put it recently, the west “created” modern China as the factory of the world, since US and European multinationals favoured its “coercive” production model over those of other nations.
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