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Michael Pettis Profile picture
@michaelxpettis
Aug 19, 2019 • 6 tweets • 2 min read • Read on X
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Yes, agrees. Ironically democracy seems historically to be “in crisis” precisely when it is most proving its superiority to other systems, i.e. when it is managing us through a difficult, messy adjustment. The books cited here seem to worry that democracy is in trouble because...
...the electorate isn’t just, disinterested and well-informed, but I think this would only be a problem if the purpose of a political system were to express deep political truths. In fact I’d argue that nothing is more dangerous than such a political system: what we need is...
...one that allows our institutions to adjust, however clumsily, as conditions change, and unfortunately because there are times, like today, when change is extremely messy, chaotic and hard to predict, the best we can hope for is to adjust in a messy, chaotic and...
...unpredictable way. Like in the 1930s and the 1970s, I think the populism and “crisis of democracy” that we are experiencing today is just democracy doing what it is supposed to do. It is the non-democracies that are not adjusting, and while this may look like purpose and...
...stability, in fact I think it just reflects institutional rigidity. Jefferson is supposed to have wanted a bloody revolution every fifty years to drive institutional change, but while that may be more aesthetically pleasing, perhaps our way is better.
tabletmag.com/jewish-news-an…
I meant to paste this:
monticello.org/site/research-…

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More from @michaelxpettis

Michael Pettis Profile picture
Feb 13
1/5
 The New York Fed finds that "U.S. firms and consumers continue to bear the bulk of the economic burden of the high tariffs imposed in 2025."
libertystreeteconomics.newyorkfed.org/2026/02/who-is…
2/5
 That is exactly how it should be. Tariffs are effectively a tax on consumption and a subsidy to production (of tariffed goods). They work by transferring income from households (net importers) to producers of tradable goods.
3/5
 The idea that Trump's tariffs would be paid for by foreigners was always nonsense. If they were, as I have often pointed out, they would have little to no impact on trade flows or on American deindustrialization.
Read 5 tweets
Michael Pettis Profile picture
Feb 13
1/7
 My latest piece was written for friends who are EU policymakers or advisors. In it I argue that there is a difference between an inefficient manufacturing sector and a globally uncompetitive manufacturing sector. We shouldn't conflate the two.
engelsbergideas.com/notebook/europ…
2/7
 A country's manufacturing sector is not globally uncompetitive because it is inefficient, but rather because its wages are higher relative to productivity than those of its trade partners.

Efficiency is about how effectively an economy uses resources to create value.
3/7
 Global competitiveness, by contrast, depends largely on how income is distributed within an economy.

This leaves the EU with two options if it wants to prevent domestic deindustrialization.
Read 7 tweets
Michael Pettis Profile picture
Feb 11
1/4
 Very interesting and timely paper. The authors find that "industrial policies lead to trade surpluses if the government pursues an unbalanced policy mix, such that domestic demand does not rise as much as supply. These surpluses are absorbed by the rest of the world, which...
2/4
 in response runs trade deficits. Absent policy interventions, trade deficits reduce the competitiveness of the domestic tradable sector, stifling innovation and productivity growth. Innovation policies can help the rest of the world to mitigate these negative spillovers."
3/4
 In other words countries whose trade surpluses are caused by manufacturing subsidies (paid for by households) force their trade partners to absorb negative spillovers in the form of trade deficits that undermine their manufacturing competitiveness.
bw.bse.eu/wp-content/upl…
Read 4 tweets
Michael Pettis Profile picture
Feb 11
1/6
 According to Greg Ip, in the US economy today, "rewards are going disproportionately toward capital instead of labor. Profits have soared since the pandemic. The result: Capital is triumphant, while the average worker ekes out marginal gains."
wsj.com/economy/jobs/c…
2/6
 And as Marriner Eccles, FDR's Fed chairman, explained in the 1930s, this creates a dangerous illusion. The extent of business profits depends almost wholly on the purchasing power of ordinary people, which in turn depends on wages.
3/6
 In a rapidly-growing developing economy, with huge unmet investment needs, it may be possible (even necessary) for profits to rise faster than wages because the resulting rise in saving can be deployed to productive investment.
Read 6 tweets
Michael Pettis Profile picture
Feb 10
1/5
 Reuters: "The EU should consider either an unprecedented 30% across-the-board tariff on Chinese goods or a 30% depreciation of the euro against the renminbi to counter a flood of cheap imports, a French government strategy report said on Monday."
reuters.com/world/china/fr…
2/5
 I think it's only a question of time before the EU will intervene in its external account to protect its manufacturing sector, just as China has done for decades and the US is increasingly trying to do. It can implement all the reforms that have been proposed to improve...
3/5
 the efficiency of its manufacturing, but while these reforms may indeed do just that, they won't improve Europe's competitive position.

This may sound counterintuitive at first, but I have a piece coming out soon in Engelsberg Ideas explaining why.
Read 5 tweets
Michael Pettis Profile picture
Feb 10
1/11
SCMP: "China’s potential growth rate could fall to about 2.5 per cent in the coming years unless action is taken, prominent Chinese economist Zhou Tianyong has warned."
sc.mp/itwrt?utm_sour…
2/11
“Without a strong turnaround in total factor productivity and a meaningful expansion in household consumption, it will be difficult for China’s economic growth to reach 4 per cent or higher,” he added.
3/11
A 2-3% growth rate is becoming an increasingly popular reference growth rate for Chinese analysts. I'd argue that over the past several years, 2-3% has actually been the upper limit of growth once we strip out the "positive" impact of not recognizing bad investment.
Read 11 tweets

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