El gobierno sirio parece haber retomado la iniciativa en su cruenta lucha contra los fanáticos islámicos estacionados en uno de sus últimos reductos: la Gobernación de Idlib, en el norte de ese país. Si logra vencerlos habrá, probablemente, ganado la guerra. La nota que sigue es de Eric Zuesse para el sitio web Strategic Culture Foundation:
Título: How Syria Defeated the 2012-2019 Invasion by US & Al-Qaeda
Texto: On August 31st, the brilliant anonymous German intelligence analyst who blogs as “Moon of Alabama” headlined “Syria – Coordinated Foreign Airstrike Kills Leaders Of Two Al-Qaeda Aligned Groups”, and he reported that,“Some three hours ago an air- or missile strike in Syria’s Idleb governorate hit a meeting of leaders of the al-Qaeda aligned Haras-al-Din and Hay’at Tahrir al-Sham (HTS) aka Jabhat al-Nusra. Both were killed. It is likely that leaders of other Jihadist groups were also present. The hit completely destroyed a Haras al-Din guesthouse or headquarter. The Syrian Observatory says that more than 40 people were killed in the strike. The hit will make it much easier for the Syrian army campaign to liberate Idleb governorate.”
At long last, Syria’s army and Russia’s air force are no longer being threatened with World War III by the US and its allies if they proceed to destroy the tens of thousands of Al-Qaida-led jihadists whom the US had helped to train and arm (and had been protecting in Syria ever since December 2012) in order to overthrow Syria’s non-sectarian Government and replace it by a fundamentalist-Sunni Government which the royal Sauds who own Saudi Arabia would appoint. All throughout that war, those Al-Qaeda-led ‘moderate rebels’ had been organized from the governate or province of Idlib (or Idleb). But now, most (if not all) of their leadership are dead.
Turkey’s leader Tayyip Erdogan had hoped that he would be allowed both by Russia’s Vladimir Putin and by the United States’ Donald Trump to grab for Turkey at least part of Idlib province from Syria. But now, he is instead either participating in, or else allowing, Syria’s army and Russia’s air force, to slaughter Idlib’s jihadists and restore that province to Syria. On 9 September 2018, Russia and Iran had granted Turkey a temporary control over Idlib, and Erdogan then tried to seize it permanently, but finally he has given it up and is allowing Idlib to become restored to Syria. This turn-around signals Syria’s victory against its enemies; it’s the war’s watershed event.
Here is the history of how all that happened and how Syria is finally a huge and crucial step closer to winning its war against the invaders (which had originally been mainly Al Qaeda, US, Turkey, Qatar, and the Sauds,, but more recently has been only Al Qaeda and US):
I reported, back on 10 September 2018, that:
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Right now, the Trump Administration has committed itself to prohibiting Syria (and its allies) from retaking control of Idlib, which is the only province that was more than 90% in favor of Al Qaeda and of ISIS and against the Government, at the start of the ‘civil war’ in Syria. Idlib is even more pro-jihadist now, because almost all of the surviving jihadists in Syria have sought refuge there — and the Government freely has bussed them there, in order to minimize the amount of “human shield” hostage-taking by them in the other provinces. Countless innocent lives were saved this way.
Both Democratic and Republican US federal officials and former officials are overwhelmingly supportive of US President Trump’s newly announced determination to prohibit Syria from retaking control of that heavily jihadist province, and they state such things about Idlib as:
It has become a dumping ground for some of the hardcore jihadists who were not prepared to settle for some of the forced agreements that took place, the forced surrenders that took place elsewhere. … Where do people go when they’ve reached the last place that they can go? What’s the refuge after the last refuge? That’s the tragedy that they face.
That happened to be an Obama Administration official expressing support for the jihadists, and when he was asked by his interviewer “Did the world fail Syria?” he answered “Sure. I mean, there’s no doubt about it. I mean, the first person who failed Syria was President Assad himself.”
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Idlib city, incidentally, had also been the most active in starting Syria’s ‘civil war’, back on 10 March 2012 (that’s a news-report by Qatar, which had actually helped to finance the jihadists, whom it lionized as freedom-fighters, and Qatar had also helped the CIA to establish Al Qaeda in Syria). Idlib city is where the peaceful phase of the “Arab Spring” uprisings transformed (largely through that CIA, Qatari, Saudi, and Turkish, assistance) into an armed rebellion to overthrow the nation’s non-sectarian Government, because that’s where the Syrian branch of Al Qaeda was centered. On 29 July 2012, the New York Times headlined “As Syrian War Drags On, Jihadists Take Bigger Role” and reported that “Idlib Province, the northern Syrian region where resistance fighters control the most territory, is the prime example.” (Note the euphemism there, “resistance fighters,” not “jihadists,” nor “terrorists.” That’s how propaganda is written. But this time, the editors had slipped up, and used the honest “Jihadists” in their headline. However, their news-report said that these were only “homegrown Muslim jihadists,” though thousands of jihadists at that time were actually already streaming into Idlib from around the world. Furthermore, Obama lied and said that the people he was helping (the al-Saud family who own Saudi Arabia, and the al-Thani family who own Qatar) to arm, were not jihadists, and he was never called-out on that very blatant ongoing lie.) But the US-allied, Saud-and-Thani-financed, massive arms-shipments, to the Al-Qaeda-led forces in Syria, didn’t start arriving there until March 2013, around a year after that start. And, then, in April 2013, the EU agreed with the US team to buy all the (of course black-market) oil it could that “the rebels” in Syria’s oil region around Deir Ezzor were stealing from Syria, so as to help “the rebels” to expand their control in Syria and thus to further weaken Syria’s Government. (The “rebels,” in that region of Syria, happened to be ISIS, not Al Qaeda, but the US team’s primary target to help destroy was actually Syria, and never ISIS. In fact, the US didn’t even start bombing ISIS there until after Russia had already started doing that on 30 September 2015.)
A week following my 10 September 2018 news-report, I reported, September 17th, about how Erdogan, Putin, and Iran’s Rouhani, had dealt with the US alliance’s threat of going to war against Russia in Syrian territory if Russia and Syria were to attack the jihadists in Idlib:
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As I recommended in a post on September 10th, Russia’s President Vladimir Putin and Turkey’s President Tayyip Erdogan jointly announced on September 17th, “We’ve agreed to create a demilitarized zone between the government troops and militants before October 15. The zone will be 15-20km wide,” which compares to the Korean DMZ’s 4-km width. I had had in mind the Korean experience, but obviously Putin and Erdogan are much better-informed about the situation than I am, and they have chosen a DMZ that’s four to five times wider. In any case, the consequences of such a decision will be momentous, unless US President Donald Trump is so determined for there to be World War III as to stop at nothing in order to force it to happen no matter what Russia does or doesn’t do.
What the Putin-Erdogan DMZ decision means is that the 50,000 Turkish troops who now are occupying Idlib province of Syria will take control over that land, and will thus have the responsibility over the largest concentration of jihadists anywhere on the planet: Idlib. It contains the surviving Syrian Al Qaeda and ISIS fighters, including all of the ones throughout Syria who surrendered to the Syrian Army rather than be shot dead on the spot by Government forces.
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However, after Erdogan got control over Idlib, he double-crossed Putin and Rouhani, by trying to solidify his control not only over Idlib but over adjoining portions of Syria, I headlined on 14 July 2019 “Turkey Will Get a Chunk of Syria: An Advantage of Being in NATO”, and reported:
Turkey is already starting to build infrastructure even immediately to the north and east of Idlib in order to stake its claim to a yet larger portion of Syria than just Idlib. This might not have been part of the deal that was worked out by Russia’s Putin, Iran’s Rouhani, and Turkey’s Erdogan, in Tehran, on 9 September 2018, which agreement allowed Turkey only to take over — and only on a temporary basis — Idlib province, which is by far the most pro-jihadist (and the most anti-Assad) of Syria’s 14 provinces. Turkey was instead supposed to hold it only temporarily, but the exact terms of the Turkey-Russia-Iran agreement have never been publicly disclosed.
Turkey was building in those adjoining Syrian areas not only facilities from two Turkish universities but also a highway to extend into the large region of Syria to the east that was controlled by Kurdish separatist forces which were under US protection. In July 2019, Erdogan seems to have been hoping that Trump would allow Turkey to attack those Kurdish proxy-forces of the US.
For whatever reason, that outcome, which was hoped for by Erdogan, turned out not to be realized. Perhaps Trump decided that if the separatist Kurds in Syria were going to be allowed to be destroyed, then Assad should be the person who would allow it, not he; and, therefore, if Erdogan would get such a go-ahead, the blame for it would belong to Assad, and not to America’s President.
Given the way Assad has behaved in the past — since he has always sought Syrian unity — the likely outcome, in the Kurdish Syrian areas, will be not a Syrian war against Kurds, but instead some degree of federal autonomy there, so long as that would be acceptable also to Erdogan. If Erdogan decides to prohibit any degree of Kurdish autonomy across the border in Syria as posing a danger to Turkish unity, then Assad will probably try (as much as he otherwise can) to accommodate the Kurds without any such autonomy, just like in the non-Kurdish parts of the unitary nation of Syria. Otherwise, Kurdish separatist sentiment will only continue in Syria, just as it does in Turkey and Iraq. The US has backed Kurdish separatism all along, and might continue that in the future (such as after the November 2020 US Presidential election).
Finally, there seems to be the light of peace at the end of the nightmarish eight-year invasion of Syria by the US and its national (such as Turkey-Jordan-Qatar-Saud-Israel) and proxy (such as jihadist and Kurdish) allies. Matters finally are turning for the better in Syria. The US finally appears to accept it. America’s threat, of starting WW III if Russia and Syria try to destroy the jihadists who have become collected in Syria’s Idlib province, seems no longer to pertain. Maybe this is because Trump wants to be re-elected in 2020. If that’s the reason, then perhaps after November of 2020, the US regime’s war against Syria will resume. This is one reason why every US Presidential candidate ought to be incessantly asked what his/her position is regarding the US regime’s long refrain, “Assad must go”, and regarding continued sanctions against Syria, and regarding restitution to Syria to restore that nation from the US-led war against it. Those questions would reveal whether all of the candidates are really just more of the same actual imperialistic (or “neocon”) policies, or whether, perhaps, one of them is better than that. Putin has made his commitments. What are theirs? Will they accept peace with Russia, and with Iran? If America were a democracy, its public would be informed about such matters — especially before the November 2020 ‘elections’, and not merely after they are already over.
Mientras continúa la notable debacle económica, social, ideológica, cultural, política y geopolítica de Occidente, algunas naciones parecen estar mejor preparadas para lo que se viene. Tal podría ser el caso de la Federación Rusa; a propósito del tema, la nota que sigue fue escrita por Jon Hellevig para el blog The Saker:
Título: New World Order In Meltdown
Texto: Last week was full of portentous events. Only somebody who has not been awake for the last few years will fail to realize how these at first sight unconnected events are part of the same matrix. There was the ever louder talk in mainstream media about an approaching global recession, inverted yield curves and the negative yields, which tell us that the Western financial system is basically in coma and kept alive only by generous IV injections of central bank liquidity. By now it has dawned on people that the central bankers acting as central planners in a command economy and printing money (aka quantitative easing) to fuel asset bubbles are about to wipe off the last vestiges of what used to be a market economy.
Then we saw Trump taking new twitter swipes at China in his on-and-off “great trade deal” and the stock markets moving like a roller coaster in reaction to each new twitter salvo. Also, we had both Trump and Macron sweet talking about getting Russia back and again renaming their club G8. Last Tuesday at a G7 presser in Biarritz, the Rothschild groomed Macron took it one step further opening up about the reasons why they all of a sudden longed for friendship with Russia: “We are living the end of Western hegemony.” In the same series, Britain’s new government under Boris Johnson was telling his colleagues in Biarritz that he is now decisively going for a no-deal Brexit, after which he went back to London and staged a coup d’état by suspending parliament to ensure no elected opposition interfered with it.
Perhaps the weirdest news to crown it all, came from Jackson Hole, Wyoming, where the Western central bankers were holed up for their annual retreat. The president of Bank of England Mark Carney shocked everybody (at least those not present) by announcing that the US dollar was past its best-before and should be replaced with something the central bankers have up their sleeves.
The New World Order is in its death throes
What these events have in common is that they amount to an admission that the globalist New World Order project in its present form is dead, or at least in its death throes. It has bumped its head against an impenetrable Sino-Russian wall of resistance. The heated totalitarian propaganda against Russia since 2001 (when the NWO realized that Putin wasn’t their man); regime change and color revolutions in neighboring countries; attempts at Maidan style coups in Moscow; and finally the sanctions since 2014 were key to the Anglo-Zionist empires strategy. They needed to take over either China or Russia to gain absolute world hegemony. Taking over either one, they would have checkmated the remaining one, and after that the entire world. They rightly deemed Russia as the weaker piece and went all out in that direction. The NWO wanted to take advantage of Russia’s weakness in form of its Western minded comprador class and a shell-shocked liberal intelligentsia (dominating media, culture and business, just like in Hong Kong, BTW), which is constitutional uncapable of thinking with their own brains to liberate themselves from Soviet era stereotypes (“Soviet Union/Russia bad, West good”).
They then figured that economic and cultural sanctions (e.g. Olympic ban) coupled with doubling down on the propaganda would break the country. Luckily, the Russian narod, the common people saw through it all and would not play along with the enemy. At the same time, Russia paraded its resurrected military in Crimea and Syria as well as its formidable new hypersonic doomsday weapons. The military option to take over Russia was not in the cards any longer.
Russian economy from strength to strength
Believing their own propaganda, they had got that totally wrong. Endlessly repeating their own self-serving talking points they must have truly fancied that Russia’s economy amounted to nothing else than export of fossil fuels, that “Russia’s economy is the size of Holland’s,” that “Russia does not produce anything,” and that Russia was “nothing but a gas station with nukes” (somehow managing to ignore the significance of the nukes part). I seriously believe, that the propaganda had become so complete that the Western leaders and the intelligence people actually had come to adapt their own propaganda as the truth. What is for sure, is that all Western media, including what should be the most respected business journals and all those think tanks, had not published one honest appraisal of the Russian economy in 15 years. Every single piece I read over the years had clearly been written with the aim to denigrate Russia’s achievements and economic development. Nowhere to be found were reports on how Putin by 2013 had totally overhauled the economy transforming Russia into the most self-sufficient diversified major country in the world with all the capabilities of the foremost industrial powers. In fact, I tend to think that even the US presidents from Bush to Obama were fed in their intelligence briefings cooked up fake reports about the Russian economy and the whole nation. Actually, I would go one step further. I bet that the CIA itself in the end believed the propaganda it had given birth to. (It has been said that at some point the genuine Russia analysts had all been dismissed or demoted and replaced with a team specializing in anti-Russian propaganda).
But actually all the data was there in plain view. I myself took the trouble to compile a report on the real conditions of Russia’s economy fresh at the onset of the 2014 crisis. In the report, I set out to show that Russia indeed had modernized and diversified its economy; that it had a vibrant manufacturing industry in addition to its energy and minerals sector; and that its budget revenues and economy at large were not at all as dependent on oil and gas as it was claimed. Among other things, we pointed out that Russia’s industrial production had by then grown more than 50% (between 2000 and 2013) while having undergone a total modernization at the same time. In the same period, production of food had surged by 100% and exports had skyrocketed by almost 400%, outdoing all major Western countries. Even the growth of exports of other than oil and gas products had been 250%.
The gist of the study may be summarized with this quote from it:
“The crisis-torn economy battered by years of robber capitalism and anarchy of the 1990’s, which Putin inherited in 2000, has now reached sufficient maturity to justify a belief that Russia can make the industrial breakthrough that the President has announced.”
Events have borne out this insight. And it is therefore that Russia won the sanctions battle.
The report represented an appeal to the Western leaders to give up on their vain hope of destroying Russia through their sanctions and risking nuclear war at it. Russia was invincible even in this respect. For that purpose I expressly added this missive in the introduction to the report:
“We strongly believe that everyone benefits from knowing the true state of Russia’s economy, its real track record over the past decade, and its true potential. Having knowledge of the actual state of affairs is equally useful for the friends and foes of Russia, for investors, for the Russian population – and indeed for its government, which has not been very vocal in telling about the real progress. I think there is a great need for accurate data on Russia, especially among the leaders of its geopolitical foes. Correct data will help investors to make a profit. And correct data will help political leaders to maintain peace. Knowing that Russia is not the economic basket case that it is portrayed to be would help to stave off the foes from the collision course with Russia they have embarked on.”
A follow-up report of June 2017 covering the sanctions years 2014 – 2016, showed how Russia went from strength to strength never mind the Western attempts at isolation. This report stressed that Russia’s economy had now become the most diversified in the world making Russia the most self-sufficient country on this earth.
In this report we exposed the single biggest error of the propaganda driven Russia analysis. This was the ridiculous belief that Russia supposedly was totally dependent on oil and gas just because those commodities made up the bulk of the country’s exports. Confusing exports with the total economy, they had foolishly confused the share of oil and gas in total exports – which was and remains at the level of 60% – with the share of these commodities of the total economy. In 2013 the share of oil and gas of Russia’s GDP was 12% (today 10%). Had the “experts” cared to take a closer look they would have realized that on the other side of the equation Russia’s imports were by far the lowest (as a share of GDP) of all major countries. The difference here is that while Russia does not export a great deal of manufactured goods, it produces by far a bigger share of those for the domestic market than any other country in the whole world. Taking the 60% of exports to stand for the whole economy was how the “Russia produces nothing” meme was created.
Finally in a November 2018 report, I could declare that Russia had won hands down the sanctions war having emerged from it as a quadruple superpower: industrial superpower, agricultural superpower, military superpower and geopolitical superpower.
Macron et co. realizes that Russia actually is a superpower
These facts have now finally dawned on certain key stakeholders of the globalist regime can be discerned from the fact that they have tasked their handpicked puppet president Macron to make up with Russia. Trump has got the same assignment, which is evident from the siren calls of the two leaders in Putin’s address. Both want to invite Putin to their future G7-8 get-togethers.
As it was said, Macron went as far as unilaterally capitulating and declaring the decline of the West. He went on to spell out that the reason for this spectacular geopolitical about-face was the rise of the Beijing – Moscow (de facto) alliance that has caused a terminal shift on the world scene. Curiously, he also openly blamed the errors of the United States for the dire state of affairs pointing out that “not just the current administration” were to be blamed. No doubt, the foremost of these errors, Macron had in mind, was the alienation of Russia and pushing the country into the warm embrace of China. It is quite clear, that this is what they want to remedy, snatch the bear back from the dragon. Fortunately, that won’t happen. Good if there will be rapprochement and good if the West will try, but after all what Russia has learnt by now it will not sell out on China under any circumstances. I think Putin and the Russian powers that be have clearly opted for a multipolar world order. That is definitely not what Macron’s and Trump’s employers have in mind but let them try.
Until Trump took office, the strategy of the US regime had been to pursue only Russia in its geopolitical ambitions, but by then it had dawned on them that Russia was invincible especially in the de facto alliance with China. In a sign of desperation, the empire then opened big time another front with China. Essentially going from bad to worse.
The world order is being shaken like never before
“The world order is being shaken like never before…”, that’s another quote from Macron. Obviously, it refers to the military and geopolitical strengths of the Sino-Russian alliance, but certainly also to the economic shifts as the West has lost – and will keep losing – its economic domination. This brings us back to Mark Carney of Bank of England and his unprecedented attack on the US dollar arguing that it was time to end its global reserve currency status. As one option Carney brought up that the major Western central banks would instead issue a digital cryptocurrency. That is to say, a NWO currency controlled by the central banks. That would effectively mean the replacement of the Federal Reserve cartel with a cartel of the Western central banks (the Fed obviously being a part of it). That’s yet one step further north from any kind of democratic control and a giant step towards world government.
What could possibly have prompted such a radical US hegemony puncturing idea to be put forward? One reason obviously is that the Western economies really are in that extreme critical condition that more and more analysts caution about. (We shall look at the economic facts further down). There’s a very real possibility that we will be hit by a doomsday recession. What’s sure is that Carney’s bizarre speech could possibly not have occurred in a normal economic environment (any more than Macron’s admission that the Western hegemony is done with). According to Zerohedge, The Financial Times, the party organ of the globalist elite, admitted as much in its report on the Jackson Hole meeting. The central bankers “acknowledged they had reached a turning point in the way they viewed the global system. They cannot rely on the tools they used before the financial crisis to shape the economic environment, and the US can no longer be considered a predictable actor in economic or trade policy — even though there is no imminent replacement for the US dollar in sight.”
There was an effective admission that the central bankers had run out of tricks to pull the economies out of the everything-bubble mess, not to mention the looming doomsday recession. According to FT, Carney went as far as flashing the war card saying: “past instances of very low rates have tended to coincide with high risk events such as wars, financial crises, and breaks in the monetary regime.” On the one hand this can be seen as an admission on how deeply tormented they are about the financial situation and what could happen when it comes crashing down. On the other hand, it can be seen as a sales pitch, “only we can fix it, trust us, give us a carte blanche.” Or more probably, both.
Note from above Carney saying: “the US can no longer be considered a predictable actor in economic or trade policy.” Bank of England President here directly attacking President Trump.
And just a couple of days later William Dudley an ex-president of New York Federal Reserve Bank (the most influential of the 12 federal reserve banks that comprise the Federal Reserve System) followed up on a direct attack on Trump. But as they say about spies, there are no ex-spies, and I would think the same applies for the global financial elite. And yes indeed, Dudley is a card carrying member of the Council of Foreign Relations. Dudley had penned an op-ed for Bloomberg titled “The Fed Shouldn’t Enable Donald Trump," where he openly lobbies for the Fed to deliberately damage the economy in order to neutralize the policies (namely trade wars) of the sitting president and prevent his reelection chances by willfully ruining the economy.
One thing is for sure, the elite is desperate and in serious disarray. Very probable that the elite is split, too. It seems as if there were two globalist factions competing with each other and wanting to follow vastly different strategies. One faction supports Trump and the other is against him. Possibly, one that wants to do things with force and another that wants to gain by stealth. That could be Pentagon and the military-industrial complex vs. the financial elite, who also owns the media. My argument does not hinge on the veracity of those division lines, but that some rupture exists among the elites must be taken for granted, otherwise Trump would have been ousted by now with all that pressure on him.
To summarize this introduction. The Western world is in turmoil: the previous overwhelming geopolitical domination is gone and over with; military solutions against the main adversaries – China and Russia – are off the books; hybrid wars against them have failed; China and Russia are economically stronger than ever, too strong for the adversary; and to boot the domestic Western economies are in extraordinary bad shape, risking a depression of epic proportions.
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Further down in this report, I will look at the one aspect of the question I am best equipped to handle, namely the economy. I will outline just in how bad shape the Western debt-fueled casino economies are. Having that as the background, I will then show how surprisingly strong the Russian economy is, at least in comparison with the Western gambling nations. Most importantly, Russia is virtually debtless, and that’s really the clue to survival in this extraordinary economic environment. In addition to the solid finances, Russia has other things going for it, too, as we will see below. I will not provide comparative data on China. One reason for that is, that China is not an economic risk. China does not have the debt problem that it is frequently touted in Western press to have. China, as the world’s number one export country, would of course take a hit in a serious global crisis, but that would not kill the economy. Although, China is the biggest exporter, there has been a shift from export-led growth towards domestic investment and consumption. The share of exports of goods and services in the country’s GDP was by 2018 down to 19.5%, half of the 2006 peak of 36%. On the contrary, the Chinese economy would stay vivid and therefore also help to sustain Russia’s exports.
I may add as one more piece of background, that it is my firm belief that the approaching economic disaster has long been evident to the central bankers and the globalist elite decision makers. Most likely the game plan was to establish the absolute world hegemony – which they not long ago thought was within early reach – and then after that deal with the debts as they saw fit as democratic dissent would not matter a bit anymore by then. That’s why they felt confident in building up the asset bubbles to carry them over to the final solution. Reminds me about a story told about Moscow’s so-called Khrushchyovka tenement buildings. These are low-cost three- to five-storied houses built quickly and cheap during the Khrushchev era to address the dire housing shortages of the 1960s. According to the story, the planners knew they would serve only for a few decades, but that would not matter all that much because by that time there would be Communism and everything would be perfect anyway. No Communism materialized, but presently the Moscow government under Mayor Sobyanin has initiated a program to tear them all down and erect new buildings where flats with title will be given for free to house the 1.5 million present residents of those buildings slated for replacement. – Well, that’s sort of Communism, isn’t it? – This kind of wishful thinking must have kept the globalist elite going, too. Unfortunately for the dreamers, though, their plans hit a snag in form of Russia and China.
Central bank fueled asset bubbles
Russia is low in debt, but you can’t say the same about the US and other Western nations. And that debt really is what got the world in the present mess and brought it teetering on the brink of financial collapse. Since the late 80s, the US central bank, the Federal Reserve under Alan Greenspan developed an addiction to cure any downward tick on Wall Street with easy credit, eventually requiring after every downturn ever bigger central bank liquidity injections to keep the stock indices on a growth curve. Greenspan was experimenting with a policy aimed at creating a “wealth effect” aka “trickle-down.” The idea being that Wall Street bankers and big corporations be stuffed with all the free money they can swallow for the purpose of keeping stock and bond prices high. The theoretical frame told that doing so something would eventually trickle down to the real economy, and everybody would live happily ever after. After stocks and bonds, Greenspan’s wealth effect policy was addressed to inflate home prices and all real estate with that. That was the road that eventually led to the 2008 subprime loan crisis, which took down Lehman Brothers and then all of Wall Street and the whole global economy.
But Wall Street recovered soon, because Greenspan’s successor Ben Bernanke had set forth to blow up an even bigger asset bubble. And the Europeans followed suit. The Fed fueled the market frenzy with creating money out of thin air (aka quantitative easing) in favor of governments, banks and corporations to the tune of $3.5 trillion in the decade following the 2008 collapse.
The European Central Bank has done the same for Europe in volumes more than 2.5 trillion euro to date. All the other Western central banks joined the gambling by flooding the markets with fiat money at same levels relatively speaking.
But anyway this astronomic leverage and the humongous budget deficits of the Western countries didn’t get the real economy anywhere. They have blown up asset bubbles of phantasmagorical proportions with preciously little trickle-down. Since the pre-crash peak in October 2007, the broadest US stock index (Wilshire 5000) has gained 95% (on top of covering the nearly 60% crash from in between). In the same 12-year period industrial production (manufacturing, mining, energy, utilities) has grown only 5% combined over all those years. Deduct – the in itself lossmaking – shale oil and gas and there is barely no growth left in the 12 years. In fact, the US manufacturing sector was in June still 1.6% below the pre-crisis peak in December 2007. So we have a 5% gain in the most important part of the real economy vs. 95% in stock market gambling. The absurdity of the stock market growth is further evidenced by the gap between growth of real final sales and stock valuations since 2007 peak. Since then, the former has grown on an average 1.6% per year, while the stock market has delivered annualized growth at levels of 15%. Total industrial production share of the GDP in the US has sunk to 18%. (For comparison, the figure for Russia was 32% and growing.)
Trickle-down, anyone?
It would be false to claim there has not been any trickle-down at all. Millions of people have kept their jobs because of it. But at the same time they have had their real wages squeezed and the overwhelming majority have seen their standards of living drop. Only massive loads of consumer credits and ultra-cheap mortgages have kept up an illusion of superficial prosperity among the middle classes. This debt-fueled prosperity and it’s cursory result, the artificial real estate asset bubble will prove a wolf in sheep’s clothing when the everything-bubble bursts.
There’s been another form of trickle-down, too, a much more real and actually beneficial one. By creating the debt-fueled illusion of prosperity, the Western central banks have actually subsidized China, Russia and all of the emerging world as they have flushed their export goods on the global markets where the Western nations have picked it all up on borrowed money. Thanks for that, though. At the same time, that has driven production costs up in the West with the consequence that their own industries have been priced out.
The humongous borrowings fail to produce GDP growth
Every year since the last bout of the crisis in 2008, growth of debt in the national economies of each Western country has far exceeded the growth of economic output measured as GDP. Below chart shows just how bad it has been in the US.
The debt and GDP growth curves started to diverge in the late 70s, but from 2000 debt has spiraled out of control delivering preciously little incremental GDP. Deduct the wasteful debt and wasteful spending and there would be no growth whatsoever.
Not only has there been no real GDP growth but even the nominal growth has to a crucial extent been provided for by means of the enormous government borrowings. We see from below table that that in each year from 2008 to 2017 even the nominal GDP growth has been less than the growth of government debt, with 2015 and 2015 as the only exceptions when they were on par.
In the peak crisis years 2008 and 2009, debt growth was a staggering 5.7 and 6.3 times that of GDP growth.
The debt game has been equally miserable all over the West, perhaps with the only exception of Germany, who has wisely refrained from participating, even when egged on by liberal economists calling Germany’s more prudent policy unfair to the gambling nations. Below chart shows how much more the Western governments have borrowed than produced economic growth. The chart covers years 2004 to 2013, but the trend has been the same ever since. GDP growth has been vastly less than the growth of the colossal debtberg.
Note Russia there as the shining exception.
Below chart ranks countries according to their debt burden relative to GDP. And again you see how debtless Russia is compared with the squandering nations.
These charts concerned only government debt, when we add private debt to it, the picture is doubly worse. From the point of view of a national economy it really doesn’t matter in which form the excess debt expands, public or private. In fact, on an average in the West the situation with household debt is equally dire. Below chart tells you just how bad. And again note Russia as the one shining exception.
And it’s no better with corporations, which have throughout the last decade been enjoying mindboggling levels of central bank largesse in form of virtually unlimited interest-free financing. For example, compared to earnings, US bond issuers are about 50% more leveraged now than in 2007.
Finally, there is the black hole containing trillions and trillions of bankers derivative risks. Deutsche Bank – which was recently placed in emergency care – alone is said to have 49 trillion dollars in exposure to derivatives. These risks alone could take down the whole global financial system.
First no real interest, then on to negative yields
One of the many deadly side effects of the central bankers’ practice on gambling with the national economies is that they first eliminated real interest rates (pushed rates below inflation) and then doubled down on the destruction of sound economic principles by cooking up a system with negative yielding bonds (bonds which yield below zero). By now $30 trillion of the $60 trillion US bond market yield below inflation (no real interest) and nearly $17 trillion worth of bonds are in negative yield territory. That’s mostly made up by sovereign debt of Japan and European governments (12 at the moment) but recently the mass of negative yielding corporate bonds has also doubled to $1.2 trillion. Half of the $5 trillion worth of European government bonds sport a negative yield as well as 20% of European investment grade corporate bonds.
Inflation risk
Normally, this kind of excess liquidity artificially put on the market (aka money printing) would have led to high inflation if not hyperinflation. Several factors have helped to keep prices in check. First, it needs to be pointed out, though, that inflation is actually a lot higher than what the government reports. This has been pretty convincingly proven in the case of the United States. Official statistics may not see it, but people sure feel it.
Secondly, the asset price bubbles in real estate and financial markets in fact represent inflation, it’s just not officially recorded as such. As it is only the 10% (and increasingly, the 1%) who get the money, they spend it on the stuff that counts for them, stocks and real estate. Keeping their loot offshore also helps to dampen inflation at home. The squeeze on the middle classes and stagnating wages, is sadly an important factor in keeping inflation down. Ordinary people just can’t afford to buy.
One should also note, that resulting from the illusionary debt-fueled prosperity and its effect on keeping the local Western currencies artificially high, there has actually been an inflation in wages and production costs, but only in relative terms in comparison with the emerging world. This in turn has led to further offshoring of manufacturing jobs.
A crucial factor, which in the crazy money printing environment has kept consumer goods from hyperinflating has been imports from the emerging Asia and especially China. Huge growth of the Chinese manufacturing industry coupled with massive influx of cheap labor from the rural countryside into the cities enabled China for a couple of decades to constantly increase its exports to the US and Europe and these countries to keep prices down. (Including by domestic industries having to lower prices in competition). With the Trump trade wars and dramatically increasing protectionism, this will change. And it could get very ugly.
Finally, there is an important consideration that few if anyone seem to understand. That is the fact that the US and other Western countries have been able to print the stupendous amounts of money while keeping rates down and without the currency values crashing only because they enjoy local currency monopolies in their respective territories. The USD has of course been enjoying a global monopoly, but that is fast fading. All the other factors mentioned above (and several other ones), have enabled to prop up and prolong these currency monopolies, but there is a limit to everything. In the coming recession, I would expect some of the lesser currencies to lose their monopoly trust and that would shatter the position of the bigger currencies USD and Euro and force them to raise interest rates. I have earlier written more in detail about this in a report titled How the Dollar and Euro Monopolies Destroyed the Real Market Economy. https://www.awaragroup.com/blog/dollar-euro-monopolies-destroyed-market-economy/
The below chart suggests that the Western countries are already on the way to lose their respective currency monopolies. The BRICS countries (Brazil, Russia, India, China, South Africa) now have a combined GDP (measured in PPP, which is the only correct way to measure the relative size of national economies) larger than not only the G7 countries, but the US and Eurozone economies combined.
At its foundation in 1973, the G7 countries had a combined GDP PPP of 50% of the world economy, by today it is down to 30%. In the same time the nominal GDP share of world economy has crashed from 80% to 40%. The currency monopolies came with the economic superiority, it is therefore only natural that with the economic domination goes the currency domination, too. If we haven’t reached the tipping point yet, then that will happen within 5 to 10 years.
In summary, everything else unchanged, the risk of inflation picking up with just a few percentage points could have the entire Western financial systems coming crashing down due to the pressure on interest rates growing. The Fed and the ECB are continuously speaking about their inflation targets and how they want to pump the markets with more liquidity to raise inflation. There could yet be a big surprise in store for them. Interest rates as such could also be the primary trigger (even without inflation first rising), as nations would have to protect their currencies and attract financing for their colossal debtbergs.
Must add as a P.S. that the incipient flight to gold might well be one of the trigger events for those currencies to lose their monopolies. (Gold price is up 20% since May).
Deleveraging will come
These massive borrowings have delivered nothing of tangible value. Now, when the party is nearly over all there is left are the debt bubbles that have hit the roof. The real values of all the assets below bear no relation to the money that went into inflating the balloons. What’s left is economic hardship for 80% of the people, a crumbling infrastructure and simmering social tensions.
The debt saturation point has been reached, therefore this time it will be different, the central bankers have lost their magic wand and won’t be able to renew the debt binge and extend it with one more decade. Instead, there will be a day of reckoning. Governments and corporations will have to put their act together and let the market weed out the failed entities. Those who cannot carry the debt, will have to shed it. There will be bloodbath with defaults, bankruptcies and massive unemployment. – Perhaps a revolution here and there. – There will be no choice, deleveraging must happen.
Now, whether this system will come crashing down or just slowly die as it trundles downhill will not matter all that much. It will eventually die either way. Most people would prefer the slow motion option, but only with the crash would a cure come. Whatever, it has become increasingly difficult to stave off the crash and this time around, the financial markets would take the real economy down with them big time.
The impressive figures on Russia
The question then is, who would be left standing? Naturally, those who are less leveraged. Now, scroll back to have a new look at the above charts on government and household debt. Find the position of Russia there? That’s right. Russia is the country with – by far – the least debt, both public and private. Having after 2014 following sanctions been cut off from the Western debt orgy, even Russian corporations are shielded against a possible Western debt apocalypse.
In a global recession, no country is safe, but Russia looks to have quite a lot going for it in terms of economic advantages. Russia’s national balance sheet is next to none with by far the lowest debt of all major countries. All economic actors, the government, corporations and households are economically solid and minimally leveraged. Not only is the government virtually debtless, but it has again replenished its spectacular forex and sovereign wealth fund reserves. On top of that comes a hefty budget surplus. – Yes, you heard that right, surplus. In a time when all Western countries are in a chronic fight against deficits, you rarely even hear the term budget surplus. And more, Russia runs the world’s third biggest trade surplus. Add to that the current account surplus, and there’s the hat trick in form of your classic triple surpluses. Russia has a lot more going for it, too, as we will see.
Let’s look at Russia’s present financial health report.
Thanks to import substitution (domestic production instead of imports to neutralize sanctions) Russia’s industrial production rose 2.6% year-on-year in June. (USA +1.1%, UK +0.8%, Japan -2.4%, Germany -5.9%). Above, we mentioned that US industrial production was up with as little as a cumulative 5% since 2008 to date. In the same period Russia’s industry grew 18% notwithstanding the hardships of sanctions and sharp drop in oil price. In fact, since 2014 when the sanctions were first imposed, Russia’s industry has grown 12%.
Russia’s merchandise trade surplus for the first half of 2019 was $93 billion, ranking third in the world after China and Germany and before South Korea. Imports were down by 3%, the other side of the coin of growing domestic manufacturing. Even when exports also were slightly down, lower imports will keep the surplus on track to reach levels near $200 billion for the full year, just under last year’s record $212 billion.
Q1 current account surplus clocked in at $33 billion, up 10% over the year.
In this connection, it might be helpful to remind that Russia’s economy is nowhere near as dependent on fossil fuel extraction as it is habitually believed in the West. In fact, oil and gas only account for 10% of Russia’s GDP according to World Bank statistics. (In 2017, total natural resources share of GDP was 10.7%, but that includes minerals and forest, too).
We also need to point out that Russia has an enormous strength by way of being the world’s most self-sufficient major country. Russia has the by far lowest level of imports relative to GDP of all countries, as evidenced by below table. It shows that Russia’s imports as a share of GDP was as low as 7.2%, while the corresponding level for Western European countries was between 30 to 40%. The extraordinary low levels of imports in a global comparison obviously signifies that Russia produces domestically a much higher share of all that it consumes (and invests), this in turn means that the economy is superbly diversified contrary to the claims of most so-called Russia experts.
Despite initial scares, inflation has remained low even when the VAT rate was from the new year raised from 18% to 20%. The rolling 12-month inflation runs at 4.6% but with the declining trend the full year inflation is expected to hit the central bank’s target 4%.
The job market continues strong with record low unemployment levels, while the job participation rate has not deteriorated (so no tricks here). The July reading of 4.6% translates to 3.4 million unemployed, which is low for a country with a population of 146 million. The strength of the labor market was underscored by an increase of real salaries by 3.5% by July. This while disposable income otherwise has remained subdued.
Whereas the US is combating persistent budget deficits (latest reading, a deficit of 4.5% of GDP) – likewise the EU countries – Russia mustered a huge budget surplus equal to 3.4% of the GDP by July this year.
Russia’s foreign exchange and gold reserves have also done a spectacular comeback reaching $520 billion.
The Russia sovereign wealth fund surged in July to reach a value equal to 7.2% of GDP.
Despite the wholesome macroeconomic environment and impressive figures, Russia’s GDP growth has been less than 1% so far this year (year-on-year 0.6% in Q1 and 0.9% in Q2). However, by the looks of it the fundamental economy seems to be growing and modernizing, while the drag on the growth comes from depressed household consumption. What’s more important, though, is that while Russia’s growth is hovering around the 1%, so is that of all of the Western world. (Accuse me of whataboutism if you will, but these things need to be put in perspective). Q2 growth in the Eurozone was 1.1%, with Germany even about to slide into recession. UK clocked in at 1.2% and Japan at 0.4%. (All figures, year-on-year). The US showed only 2% (revised down 28 August) even when fueled by a mountainous budget deficit set to reach $1 trillion for the fiscal year and despite all that easy money the Fed keeps pumping out. Only China remained firmly in growth territory with 6.2%.
But, the real conundrum is, how can Russia produce the same GDP as all the Western countries with their seemingly limitless injections of give-away money? How is it possible that all those trillions and trillions that the Western central bankers have thrown on the economy do not produce any real incremental economic output?
The big disadvantage Russia has compared with the Western countries is the exorbitant real interest rate that the central bank maintains. The steering rate is presently 7.25%, with inflation predicted to be 4%, that translates into a primary real interest of 3.25%. Compare that with the negative real interest – and even negative yields – of competitor countries. As, the Russian central bank has failed to create a real banking sector which would lend according to international standards to the country’s businesses, the ones that are lucky to get a loan at all would look to pay interest at the level of 15% of more (save the largest corporations). The Governor of the Russian Central Bank Elvira Nabiullina does not see this as a problem, though. She has said that instead she would pin her hopes on improving the countries investment climate (sic!). (She calls for improvement of corporate governance, development of human capital, and all kinds of nice things. That would sure do it.)
Just this week, Putin called a high profile meeting with Nabiullina, the minister for economic development Maxim Oreshkin, and the finance minister Anton Sulanov, to express his deep concern with the sluggish GDP growth and stagnating income. No doubt, that the depressed income is not only a drag on the economy but on the president’s popularity. There is only one quick fix for it. The government and the CBR must ditch their overzealous austerity programs. It’s good that Russia is not over leveraged with debt, but certainly some debt would be in order to finance the infrastructure and other national strategic development programs instead of ripping it off people’s backs. Free the funds for raising pensions and public service salaries instead. And most importantly, Nabiullina must lower the rates and not run real interests in excess of 3% when the rest of the developed world is in negative territory. There is no other quick remedy for raising people’s income. That’s Putin’s choice. Hope somebody tells that to him.
In conclusion, we are not saying that Russia would not be hurt by the coming recession, we merely express our confidence that Russia is among the world’s countries best placed to cope with it.
"The center does not hold", el centro no se sostiene. La sensación está en el aire, se respira, se percibe en cada uno de los acontecimientos de estos últimos meses. Al respecto, es instructiva la siguiente nota de Alastair Crooke para el sitio web Strategic Culture Foundation:
Título: The Great Switch: Old Ways Fade and are Irrecoverable
Texto: Conflict is popping up everywhere: A major portion of the Turkish army stands ready to invade parts of Syria (though invasion may have been averted for now); PM Modi may just have ignited the next round of Kashmir wars with Pakistan with his Hindu ‘nationalist’ putsch to annex Muslim majority Jammu-Kashmir; Japan has started a mini trade war with South Korea; Turkey is bracing for a face-off with Greece and Cyprus over energy exploration in the East Mediterranean; the Yemen war is heating up with the war increasingly being fought inside southern Saudi Arabia; the US-Iran and the Syria conflicts simmer, and Hong Kong has boiled-over into violence.
What is going on? Is there some unifying thread connecting this sudden outbreak of widespread global tension? Of course all these conflicts have their separate background contexts. But why so many at the same time? Well, in a word, it’s all about change — about the recognition that we are at the cusp of major changes. The world is beginning to pre-position.
Take, for example, the about-turn by the UAE (heretofore, a major agitator for an Iran confrontation) reaching out to Iran. Much of this Gulf State fervour for confrontation with Iran arose on the rebound from the Obama move to normalise with Iran (through the JCPOA). The Gulf States feared losing the umbrella of the US protection which, it was believed, inoculated these monarchies as much from repression of their internal reformists, as from Iran. Then, with the arrival of President Trump, the opportunity seemed to present itself again to lock-in that US ‘guarantee’ by inciting the new President, already obsessed with his notion of Iranian ‘malignity’ into action.
But suddenly, the Gulf chimaera of Trump retarding a resurgent Iran through inflicting a couple of generations worth of missile damage on its infrastructure faded under the desert heat. When Iran took the initiative with its counter-pressures, the US finally did not react, either to Hormuz, or to the loss of its high-spec drone.
It’s not over yet: Iran remains a grave flash-point, but in the region it is understood that the US neither has the political will, nor the capacity, for protracted military action (as opposed to a quick ‘one and done’, to which Iran has promised substantial retaliation). This sense of a ‘shift’ has been reinforced by Trump’s repeat last month of his call for withdrawal from Syria, and by his almost indecent haste in trying to exit Afghanistan. The omens are plain: America is on its way out from the Middle East.
Gulf States need to re-position – and they are. They are repositioning into the security architecture being led by China and Russia. Ten days ago, via a document officially approved by the United Nations, the Russian Foreign Ministry advanced a new concept of collective security for the Persian Gulf. The Russian initiative should be interpreted as a sort of counterpart of, and mostly a complement to, the Shanghai Cooperation Organization, writes Pepe Escobar.
Add to this that China is toying with giving Chinese naval protection to its own vessels in the Gulf (from US or UK-style tanker hijacking); and that Russia and Iran have agreed to mount joint naval exercises in Hormuz (which will give Russia access to the Bandar-e-Bushehr and Chabahar naval facilities), to understand that the notion of a Russo-Chinese security architecture is assuming substance. It makes sense for Gulf States to seek out a new protector. And they are.
So, how does this link to these other effusions of conflict? One aspect concerns the evolution of Trump’s ‘maximum pressure’ thesis: Its lack of any major success to date has already been widely remarked. But the telling factor is that this ‘Art of the Deal’ approach lacks any means to metamorphose this US maximum ‘pressure’ into any meaningful political or strategic diplomatic path. It has attenuated down to ‘capitulate’, or we can make the pain worse. It is in short, the further radicalisation of US exceptionalism. John Bolton formulated it thus: “The greatest hope for freedom for mankind in history is the United States, and therefore protecting American national interest is the single best strategy for the world.” Or, in other words, your interests are irrelevant to me.
What may have initiated as an Art of the Deal strategy has evolved over time from ‘great-power rivalry’, into unabashed new ‘Cold War’. The consequence of this ‘to the devil with yourinterests’ approach, is that most likely now, neither China, nor Iran, nor Turkey actively want a ‘deal’ with US.
This has been particularly relevant in the case of Turkey. As a key NATO member, Turkey largely has been taken for granted in terms of the US pursuit of its own interests, but reciprocity has not recently been on offer: Turkey was simply assumed to have no interests that NATO or the United States felt duty bound to respect. NATO membership was in itself, accolade enough. And, with Turkey’s anger at the 2016 coup attempt, and with its dismay at Centcom’spursuit of its Kurdish autonomy project, NATO simply shifted to raising the NATO-positioning of (an all too willing) Greece – Turkey’s ancient nemesis. Thus, the single-minded pursuit of US interests (in Syria) has resulted in the setting-up of a new struggle between Turkey and Greece in the East Mediterranean, threatening too, to unstitch the precarious status of Greek-dominated Nicosia. Not surprisingly, Turkey is re-discovering its old role as a Eurasian power, with China and Russia according Turkey appropriate esteem. Like others, it seems to be embracing the Chinese-Russian architecture.
This is not to imply that America’s beggar-my-neighbour trade and geo-political approach, nor its shying from wars, can alone account for the present crop of troubles. The radical leverage of US interests to the point of zero-tolerance of others’ interests however does raise the question: why is there no ‘plan B’ if China, Iran, Russia and North Korea refuse to capitulate?
Is it then, that a pathway to a ‘deal’ was never what some in Washington wanted? Is it that the objective from the outset was to use tariffs to break Asian supply lines – and to force them, via tariffs, to be reconstructed in the US. Is it that a new ‘nuclear deal’ with Iran was never actively sought by certain DC constituencies: that it was always about regime change?
The other, wider factor, accounting for this sense of a world in metamorphose precisely is the western cultural implosion, or ‘Great Switch’ (as the founder of the Rousseau Institute terms it). So little time ago, the western liberal, cultural and economic vision was at its apogee. It seemed inevitable. It seemed irrefutable. It stood as the western centre of gravity. But as President Putin recently observed, (so few years later), liberalism and the European so-called Enlightenment is viewed as ‘obsolete’ by much of the world. This quite sudden Great Shift has left the Liberal camp – that was partying ‘on top of the World’ – distraught, angry and apprehensive. In the polarised US and the UK, the antagonisms are causing people to eat each other alive.
The ‘civil war’ within the western paradigm allows other (non-western) states new space to find their own path. Sometimes this path can be potentially destructive — as in Modi’s Hindu-nationalist annexation of Jammu-Kashmir (during the Bush Administration Modi was denied a visa on grounds that he supported Hindu extremism during anti-Muslim riots in 2002). But the reality is that there is no longer any need to pay obeisance to the western moralising Shibboleths, when they are being violently challenged within the liberal citadels themselves. In short, if the West is fighting over its values, what price these values as the basis for the western-led Global Order?
We are indeed at a point of inflection. Some westerners may muse that the status quo ante is somehow recoverable (if only Trump is gone, and the ‘populists’ contained). That is delusional. The external world is transforming. China, Russia and Asia will replace US hegemony – not with another hegemony – but with a loose coalition of states espousing a different values and civilizational model. And with their values differing from the Protestant paradigm of the John Locke, John Hume and Adam Smith, they will arrive at other economic perspectives.
And the status quo ante will not be available even domestically in the West. For, the western party political system itself is in irreversible transformation, too. Western politicians of all spectra are trying to adjust to a public life in which the old world is still around, whilst the new one is only emerging.
The post-war party political system of family and community ties to either Centre-Left and Centre Right (with not a great difference between the two) is dying in western democracies.The Centre-Left is expiring because its original mission is no longer relevant to a large enough proportion of the electorate. What is the point of parties that existed to represent the interests of trade unions and the industrial proletariat when mass employment in heavy industry has come to an end? Post-industrial economies are a global phenomenon.
“The popular conscience today is not exercised by the plight of great numbers of workers being exploited by factory owners. It is more concerned, if anything, by the prospect of factory closures. The old Left-wing battles over working conditions and pay are largely over. The new problem is much more subtle, and less amenable to socialist solutions: how to maintain an industrial sector which offers large-scale employment particularly to those with low (or no) skills. Globalisation has a great deal to do with this, but the decline of the factory-based economy is at the very heart of it” (as in Trump’s appeal to the ‘deplorables’ from a stance on the Nationalist-Right, rather than the Left, strongly suggests), writes Janet Daley.
So here we are at the western dilemma: The moderate forces of Centre-Left and Centre Right are still hoping to represent the people they always have: middle class voters who want to display their decency by voting for a party that espouses some notion of ‘social concern’. But, as the preoccupations of the élite, metropolitan consciousness have turned to more specific ‘disadvantaged’ groups – ethnic minorities, women, and gender non-conformists – the less likely it is that they will give any regard or understanding to the everyday impact of failed mass immigration and multiculturism on the majority (the ‘Sixty-Percent’). And so the polarisation grows, with each group retreating into its enclave. And the Centre Parties wane, in line with a shrinking, economically-struggling Middle Class.
Three major political forces are gathering strength in this political environment where global warming (for the former Centrists), and immigration (for the sixty per centers) are the new defining issues. Nationalist right-wing parties, once marginal, are now a structural element of Europe’s political landscapes. The Centre is struggling everywhere, and the third force is becoming the Green movement. Its spectacular rise – as voters reject the traditional parties and press their leaders on the urgency to act against climate change – is mostly attributable to a mobilisation of the young.
It is this cloistered élite ‘blind spot’ of discounting the adverse effects of globalisation on the ‘Sixty-Percenters’, in favour of pursuing their ephemeral identity preoccupations, that has become toxic for what remains of the old working class. Daley suggests this blind spot “probably cost Hillary Clinton the presidency: women in the depressed rust belt states were not worried about “glass ceilings”, they were worried about putting food on the table and whether their men would ever work again. What happened next? They voted, as the angry and disenfranchised are inclined to do, for a demagogue who did not regard them with contempt, and who gave voice to their frustration”.
The status quo ante is no longer available – even domestically – in the West, let alone externally. The Great Switch is underway. Society has lost its cultural centre of gravity. The old way of life is fading, and is close to extinction.
Quién lo diría: algunos chicos comienzan a mostrar ciertas dudas sobre los beneficios de la globalización a rajatabla. Esta vez es nada menos que Larry Elliott, editor económico del (alguna vez progresista) diario inglés The Guardian. Acá va:
Título: Globalisation as we know it will not survive Trump. And that’s a good thing
Epígrafe: The markets are spooked, but we need a new world order which makes room for local solutions and the nation state
Texto: The significance of the trade war between China and the US goes well beyond the impact of tit-for-tat tariffs, or which of two self-styled strongmen wins the bragging rights. As was the case in the 1930s, the seemingly inexorable drift towards protectionism is part of a deeper crisis of the international status quo. When Beijing this week accused the US of “deliberately destroying the international order”, it was really saying that US hegemony will no longer go unchallenged. Globalisation as we have known it is coming to an end and that’s by no means unwelcome.
Hailed as the ultimate in human progress, a model based on loosening the controls on capital and the construction of global supply chains has spawned recurrent financial crises, fostered corrosive inequality and worsened the climate emergency. True, millions of people have been lifted out of poverty in the past 25 years, but most of them live in a country – China – that has kept the market at arm’s-length.
The world’s stock markets see things differently. They tremble every time Donald Trump tweets a paean to protectionism. Likewise, multinational corporations fret about the possible damage that trade barriers might cause to global supply chains. It is clear that those who have done best out of globalisation tend to be the rich and powerful, and they are not going to give up their privileges without a fight. Nothing in this is new.
Throughout history there have been successive waves of globalisation followed by a backlash when the model over-reached itself. This is one of those occasions and all the ingredients are in place for a struggle between the defenders of the status quo and those who say that recent trends in politics, technology and the climate point to the need for a new world order focused more on local solutions, stronger nation states and a reformed international system. It’s quite a stretch to imagine that Trump has this in mind when he is bashing China, but the economic crisis of the 1930s – of which protectionism was one part – led eventually, albeit after the war, to reforms that made the world a sounder and safer place.
The challenge is to make sure crisis again leads to change, and that process starts with an honest appraisal of the mess we are in. For more than a decade, ever since the financial crash of 2008, there has been a frantic attempt to put globalisation back on its feet and return to the status quo ante. Trump is proof that those attempts have ended in failure.
In retrospect, the early 1990s marked globalisation’s high point. The Soviet Union had collapsed, former communist countries were becoming market economies, independent central banks were all the rage and a multilateral trade deal was concluded after more than seven years of negotiations. Europe’s integrationist project was in full swing, with preparations under way for a single currency. Politics during the 1990s was dominated by parties of the centre right and centre left, pursuing broadly similar economic policies: budgetary discipline, liberalising capital flows, encouraging the incursion of the market into sectors hitherto off limits. Whether in the developed countries of Europe or the emerging markets of Latin America, orthodoxy reined supreme. Sure, it was accepted that there were teething problems with the new world order, but the cold war was over and Russia no longer a threat. America would use its unchallenged military might to police the world and keep factories booming internationally through its willingness to act as the consumer of last resort.
Little of this utopian vision has survived. There has not been a completed set of multilateral trade talks since the Uruguay round was wrapped up in late 1993, in large part because this was the last time the US and the EU were able to carve out a deal to their mutual interest and then impose it on the rest of the world.
The G7 – the US, Canada, Japan and the four biggest economies of Europe – no longer call all the shots at international summits. The independence of central banks is threatened. The US is unwilling to soak up all the world’s excess production and instead demands that countries such as Germany run down their trade surpluses. Europe’s drive for integration has stalled. Parties of the centre have been hollowed out, either because they failed to spot the weaknesses inherent in globalisation or were too timid to act if they did. The Washington consensus – that there was a one-size-fits-all solution to the problems of developing countries that involved privatisation, abandoning capital controls and budgetary rectitude – has fallen into disrepute. And Russia is not the busted flush it was supposed to be. The risk that the current iteration of globalisation could end in military conflict is much higher than generally acknowledged.
To prevent such an outcome, there needs to be change at all levels, starting with the local one. Even during its heyday, large chunks of economic activity remained untouched by globalisation and that segment is likely to grow as economies become more service-sector dominated. In addition, countries such as the US are already bringing production back within its borders – in part because of the high cost of transporting goods around the world, and in part because technological change – greater use of robots and artificial intelligence – has reduced the financial incentive to offshore.
There is also going to be an enhanced role for the nation state, the death of which has been exaggerated. It will no longer be good enough for politicians to fob off voters with the idea that globalisation is an unstoppable force of nature against which they are powerless. Telling the public that inequality, industrial decay and stagnant living standards are something they have to suck up is asking for big populist trouble.
China’s Belt and Road initiative is an example of how countries are starting to operate at a sub-global level. Beijing’s network of infrastructure projects across Asia and Europe has a dual purpose: to provide a market for Chinese goods and to extend Beijing’s reach in parts of the world where America’s hard and soft power is weak. Similarly, trade deals are likely to be negotiated bilaterally or among coalitions of the willing.
Finally, there’s a need for reform at a global level: to mobilise effective climate-change action, to meet the United Nations’ sustainable development goals, to rein in the power of global finance through curbs on capital flows, and to piece together a system of rules-based, but managed, trade.
None of this will be easy – in fact, it will be hellishly difficult. But three developments provide cause for optimism. The first is that the failings of the current system have become too big to ignore. The second is that failure has, as ever, led to new thinking. The third is that the new ideas are starting to influence policy.
