Trade Wars and Inequality: Trade Wars Are Class Wars: A Book Review
- Mahendra Rathod
- May 29
- 7 min read
Updated: May 30
Trade Wars and Inequality
Trade wars are stealing the spotlight again, with recent talks involving U.S. leaders and global partners stirring up chatter about tariffs and supply chains. If you’re puzzled about why these economic battles keep flaring up, Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace by Matthew C. Klein and Michael Pettis offers a brilliant perspective.
Published in 2020, this book argues that trade wars and inequality are two sides of the same coin, driven by class struggles within nations rather than just international rivalries. It’s a bold take, backed by data and history, and I’m here to break it down for you in a fun, digestible way. Ready to unpack the key messages, the authors’ style, and whether this book’s for you? Let’s go!
Let’s break down the main ideas of Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace by Matthew C. Klein and Michael Pettis in super simple language, with examples to make it clear.
What’s the Book About?
At its heart, Trade Wars Are Class Wars says that trade wars and inequality are connected. Trade wars—like when countries slap tariffs on each other’s goods—aren’t just about nations fighting. They’re caused by unequal wealth inside countries, where the rich have too much money and the average person has too little. This imbalance messes up how countries buy and sell stuff globally, leading to economic drama and even risks to peace.
Imagine a big family dinner where some cousins hoard all the biryani, leaving others with just rice. The table gets tense, right? That’s what’s happening in economies, and it sparks trade fights.
The Big Ideas, Explained Simply
1. Inequality Causes Trade Imbalances
When a few people in a country get super rich, they save a lot of money instead of spending it. Meanwhile, regular folks don’t earn enough to buy much. This creates a weird situation where some countries make too many goods (because the rich save, not spend) and others buy too much (because they borrow to keep up).
Example: In China, workers earn low wages, so they can’t buy fancy gadgets. The rich and companies save tons of cash, and China makes more stuff (like phones) than it uses. This creates a “trade surplus” because China sells more to the world than it buys. On the flip side, in the U.S., people borrow money (think credit cards) to buy things like Chinese phones, creating a “trade deficit” because they buy more than they sell.
Why It Matters: These imbalances lead to trade wars and inequality. The U.S. gets mad at China’s surplus and puts tariffs on Chinese goods, starting a trade war. But the real problem? The rich in both countries are saving too much, and workers aren’t earning enough.
Fun Analogy: Think of the global economy as a lemonade stand. If one kid (China) makes too much lemonade because nobody at home buys it, they sell it cheap to another kid (U.S.). The U.S. kid borrows money to keep buying, but soon they’re in debt, and both start arguing. The fight isn’t about lemonade—it’s about why one kid’s family doesn’t share the profits fairly!
2. Trade Wars Are Class Wars in Disguise
The book says trade wars look like fights between countries, but they’re really fights between classes inside countries. The wealthy (the “upper class”) benefit from policies that keep wages low or taxes light, while workers (the “working class”) struggle. This class divide creates the surpluses and deficits that spark trade wars.
Example: In Germany, big companies keep wages low to make cars cheaply, which they sell worldwide, creating a trade surplus. The rich get richer, but German workers can’t afford much. Meanwhile, countries like Greece borrow to buy German cars, falling into debt. When Greece can’t pay, Germany blames them, but the real issue is Germany’s rich hoarding wealth, not sharing it with workers.
Why It Matters: Trade wars and inequality feed off each other. Instead of fixing the wealth gap, countries point fingers, slap tariffs, and make things worse.
Fun Analogy: Imagine two neighbours arguing over who’s flooding the street with water. One’s got a leaky rich guy’s pool (surplus), and the other’s got a broke guy’s cracked pipes (deficit). They yell at each other, but the real fix is repairing their own homes’ plumbing—aka, sharing wealth better.
3. History Shows This Isn’t New
The authors point out that trade wars and inequality have caused trouble for centuries. Back in the 1800s, Britain got rich by exploiting colonies, keeping wages low, and selling goods worldwide, much like China today. During the Great Depression (1930s), countries tried to protect their economies with tariffs, but it backfired because inequality crushed demand.
Example: In the 1920s, the U.S. had huge inequality—think millionaires partying while workers scraped by. People couldn’t buy enough, so factories overproduced, and trade collapsed when countries started tariff wars. Sound familiar? Today’s billionaire boom and gig economy echo that era.
Why It Matters: History shows that ignoring inequality leads to economic messes and trade fights, and we’re repeating the same mistakes.
Fun Analogy: It’s like watching a Bollywood rerun where the rich villain keeps winning until the hero (fair policies) saves the day. We’re still waiting for the hero!
4. How to Fix It
Klein and Pettis suggest solutions to stop trade wars and inequality from wrecking the world. They say countries should focus on sharing wealth better, not fighting over trade.
Ideas:
Pay workers more (through unions or higher minimum wages) so they can buy stuff, balancing demand.
Tax the super-rich to fund things like schools or hospitals, spreading money around.
Make trade policies that encourage fair growth, not just piling up exports.
Example: If China paid its workers more, they’d buy more local goods, reducing the trade surplus. If the U.S. taxed billionaires to fund jobs, people wouldn’t need to borrow so much, shrinking the deficit. Both moves would calm trade tensions.
Why It Matters: These fixes could make economies fairer and stop trade wars from escalating into bigger conflicts.
Fun Analogy: It’s like fixing that family dinner. If the biryani-hoarding cousins share, everyone eats well, and the table’s happy. Same with economies—share the wealth, and trade wars chill out.
5. Why It Could Harm Peace
If trade wars and inequality keep growing, they don’t just hurt wallets—they could spark bigger fights. Countries blaming each other for trade problems can lead to mistrust or even conflicts. The authors warn that unbalanced economies make the world less stable.
Example: The U.S.-China trade war (2018-2020) wasn’t just about tariffs—it fueled tensions over tech, security, and influence. If inequality keeps driving trade imbalances, these rivalries could get nastier.
Why It Matters: A world where countries are angry and economies are wobbly is less safe for everyone.
Fun Analogy: It’s like a playground where kids fight over toys because some have too many and others have none. If they don’t share, the bickering could turn into a full-on scrap!
Real-World Connection
The book’s ideas explain why these discussions keep happening. For example, if the U.S. is pushing tariffs to “protect jobs,” the book suggests the real issue might be that American workers don’t earn enough to buy goods, while the rich save too much.
Meanwhile, countries like China face pressure to keep exports high because their own workers can’t afford to buy much. Trade wars and inequality are the hidden drivers, and the book shows why tariffs alone won’t fix things.
Why Should We Care?
This book matters because trade wars and inequality affect our life, whether we’re buying a phone, paying rent, or looking for a job. If inequality keeps growing, prices could rise, jobs could get shakier, and global tensions could make the world feel less safe. Understanding these ideas helps you see why the news is full of trade drama and what we can do about it—like supporting fair wages or better taxes.
Wrapping It Up
In simple terms, Trade Wars Are Class Wars says that trade wars and inequality go hand in hand. When the rich have too much and workers have too little, it creates trade imbalances that lead to tariffs and tensions. Think of China making too many goods because its workers can’t buy them, or the U.S. borrowing to keep shopping. History shows this has happened before, and the fix is sharing wealth better—higher wages, fairer taxes, smarter trade rules. If we don’t, trade wars could make the world a grumpier place.
It’s like a global potluck where everyone needs to bring and share food. If some hog the dishes, we all go hungry. Klein and Pettis show us how to make the potluck fair and fun for everyone!
So, grab a coffee, dive in, and let’s start a conversation about building a balanced future. What do you think—can we tame trade wars by fighting inequality?
Further Reading:
The Great Divergence: China, Europe, and the Making of the Modern World Economy by Kenneth Pomeranz Explores how global trade and inequality shaped the modern world, offering historical context for Klein and Pettis’s arguments.
Capital in the Twenty-First Century by Thomas Piketty A deep dive into wealth inequality, complementing the book’s focus on how elites drive economic imbalances.
Globalization and Its Discontents by Joseph E. Stiglitz Examines the downsides of global trade and offers policy ideas to make it fairer, aligning with the book’s solutions.
The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy by Stephanie Kelton Challenges myths about deficits, offering a fresh lens on trade imbalances and economic policy.
The Shock Doctrine: The Rise of Disaster Capitalism by Naomi Klein Explores how crises fuel inequality, providing a broader view on the class dynamics in Trade Wars Are Class Wars.
The Retreat of Western Liberalism by Edward Luce Connects economic inequality to political instability, echoing the book’s warnings about trade wars and peace.
Happy Reading!
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