ECONOMY
Why exports have not benefited from demand and weaker currency
In the 1930s, before the era of floating exchange rates, countries would try to gain a competitive advantage for their exports by means of "competitive devaluation". This practice refers to the deliberate devaluation of a fixed exchange rate vis-a-vis those of trading partners, to make exports cheaper in the foreign currency. If the exports were relatively undifferentiated from competitors’, such as agricultural produce, this would lead to increased sales relative to other countries’ produce. But even if they were differentiated, such as Nikon cameras, making them cheaper would lead to more of them being sold. Times were tough in the early 1930s, following the Great Depression, but this practice did not improve a country’s situation for long because it usually led to retaliatory devaluation. The situation is similar to what we now see taking place in the world with US President Donald Trump’s trade war. If country A could devalue its currency, so in turn could country B, and this le...
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