"In global economic terms, it’s war, so it’s time for radical measures. Europe should be aware that there is no return to the status quo."
12 Jun, 2018
Trump’s impulsive decisions,
such as his refusal to endorse the G7 declaration agreed upon in Quebec, are
not just expressions of his personal quirks. Instead, they are reactions to the
end of an era in the global economic system, reactions which are sustained by
an incorrect understanding of what is happening. However, Trump’s misguided
vision is nonetheless based on the correct insight that the existing global
system no longer works.
An economic cycle is coming to
an end, a cycle which began in the early 1970s, the time when what Yanis
Varoufakis calls the “Global Minotaur” was born, the monstrous engine
that was running the world economy from the early 1980s to 2008. The late 1960s
and the early 1970s were not just significant for the oil crisis and stagflation;
Nixon’s decision to abandon the gold standard for the US dollar was the sign of
a much more radical shift in the basic functioning of the capitalist system.
Indeed, by the end of the
1960’s, the US economy was no longer able to continue the recycling of its
surpluses to Europe and Asia because its surpluses had mutated into deficits.
As a result, in 1971, the US government responded to this decline with an
audacious strategic move: instead of tackling the nation’s burgeoning deficits,
it decided to do the opposite, to boost deficits.
And who would pay for them?
The rest of the world!
Centre Stage
How? By means of a permanent
transfer of capital that rushed ceaselessly across the two great oceans to
finance America’s deficits. And these deficits thus started to operate “like
a giant vacuum cleaner, absorbing other people’s surplus goods and capital.
While that ‘arrangement’ was
the embodiment of the grossest imbalance imaginable at a planetary scale,
nonetheless, it did give rise to something resembling global balance; an
international system of rapidly accelerating asymmetrical financial and trade
flows capable of providing a semblance of stability and steady growth.
Powered by these deficits, the
world’s leading surplus economies (e.g. Germany, Japan and, later, China) kept
churning out the goods while America absorbed them. Almost 70% of the profits
made globally by these countries were then transferred back to the United
States, in the form of capital flows to Wall Street. And what did Wall Street do
with it? It turned these capital inflows into direct investments, shares, new
financial instruments, new and old forms of loans etc,” as Varoufakis
noted in "Global Minotaur."
This growing negative trade
balance demonstrates that the US is the non-productive predator: in past
decades, it had to suck up a 1 billion dollars daily influx from other nations
to buy for its consumption and is, as such, the universal Keynesian consumer
that keeps the world economy running. (So much for the anti-Keynesian economic
ideology that seems to predominate today!)
This influx, which is
effectively like the tithe paid to Rome in Antiquity (or the gifts sacrificed
to Minotaur by Ancient Greeks), relies on a complex economic mechanism: the US
is "trusted” as the safe and stable center, so that all others,
from the oil producing Arab countries to Western Europe and Japan, and now even
China, invest their surplus profits in the US.
Friendly Division
Since this “trust” is
primarily ideological and military, not economic, the problem for the US is how
to justify its imperial role – and it manages this through a permanent state of
war.
For this reason, it had to
invent the “War on Terror,” offering itself as the universal
protector of all other “normal” (as opposed to “rogue”) states.
Thus the entire globe tends to function as a universal Sparta with its three
classes, now emerging as the First, Second, Third world: (1) the US as the
military-political-ideological power; (2) Europe and parts of Asia and Latin
America as the industrial-manufacturing region (crucial here are Germany and
Japan, long the world's leading exporters, plus, of course, now the rising
China); (3) the undeveloped rest, today's helots, those “left behind.” In
other words, global capitalism brought about a new general trend to oligarchy,
masked as the celebration of the diversity of cultures: equality and
universalism are more and more disappearing as actual political principles.
From 2008 on, this neo-Spartan
world system is breaking down. In Obama years, Ben Bernanke, the Chairman of
the Federal Reserve, gave another breath of life to this system: ruthlessly
exploiting the fact that the US dollar is the global currency, he financed
imports by massively printing money.
However, Trump has decided to
approach the problem in a different way: ignoring the delicate balance of the
global system, he focused on elements which may be presented as “injustice” for
the US: gigantic imports are reducing domestic jobs, etc. But what he decries
as “injustice” is part of a system which profited the US: the
Americans were effectively “robbing” the world by importing stuff and
paying for it by debts and printing money.
Inside Outside
No wonder Trump addresses Kim
Yong-un in far more friendlier terms than his big Western allies: here also,
extremes meet. With the disintegration of the system that dominated world trade
from 1970, the US is increasingly becoming the disruptor of world trade. In
contrast to 1945, the world doesn't need the US, it is the US which needs the
world. Two outcasts are thus meeting in Singapore: the excluded outcast (Kim)
and the outcast in the very fulcrum of the system.
Trump’s goal is to make trade
deals with single partners who can all be blackmailed into submission, so it is
of utmost importance that Europe acts as a unified economic and political
force. Full of dangers as this new situation is, it opens up a unique chance
for Europe: to engage itself in the formation of a new global economic system
that will no longer be dominated by US dollar as the global currency.
In global economic terms, it’s
war, so it’s time for radical measures. Europe should be aware that there is no
return to the status quo.
Instead, a truly new world
order is needed for Trump to get his comeuppance. And it is here that the
response of EU members and Canada is insufficient: instead of advocating a new
vision, they act as an offended party complaining that the US broke the
established rules.
Thus, in the last decade or
so, the EU more and more acts like the PLO ex-leader Yasser Arafat: about whom
it was said that he never missed an opportunity to miss an opportunity.
As the immigrant crisis and
Catalonia, among other events prove, it’s probable that Europe will again miss
the chance.
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