Global economics and the future of the planet
By Sol W. Sanders
You don’t have to be a determinist — believing as orthodox Marxists, all life’s decisions lie in the stomach — to occasionally believe overwhelming national and international economic movements will likely determine the future. But it sometimes helps.
The thought comes after reading an analysis by Swedish Anders Aslund, a knowledgeable Sovietologist who predicted the Soviet crash for economic reasons. He is optimistic — that is, until his last paragraph. President Vladimir Putin is going to put Russia on the road to incremental reform, he says.
Supporters of the far right party of Golden Dawn celebrate the results of the elections outside their headquarters office in Thessaloniki, Greece Sunday, June 17. / Dimitri Messinis / AP
But while he argues the likely approach of an extended period of lower gas and oil prices will force Moscow into long promised reforms, he ignores the corollary: Moscow currently depends almost totally [25 percent of GDP] on gas and oil exports, mostly to the European Community. That’s a hole in his argument you could drive the splendid but now outmoded new Russian T90 tank through.
One reason: falling productivity in gas and oil because Moscow has neglected to reinvest for more than a decade after Putin’s buddies grabbed domestic companies and elbowed foreign investors. So, if for no other social and political reasons, Putin’s reforms, again, ain’t likely to take place.
In fact, energy prices are one of several worldwide economic trends now dictating politics, perhaps for the coming decade:
Energy. Again, always remembering the unpredictability of world petroleum markets, what appears the beginning of a period of declining prices is going to have profound effects everywhere. A combination of factors — not least the worldwide economic slowdown — is curbing prices. The world’s second largest producer after the Russians, the Saudis, in part to replace their Mideast rival Iran’s sanctioned exports, are pumping oil at levels annoying their OPEC partners who want to encourage shortages and higher prices. But the Saudis also need money to spread manna in a society where possible contagion of the Arab Spring makes autocratic rulers nervous. And ageing sheikh leadership, too, has an interest in keeping world oil prices below a level encouraging American exploitation of what now may be the world’s largest reserves given the new but expensive methods shale gas and oil extraction. Elsewhere falling energy prices are going to crimp. For example, along with iron ore exports, high prices for fossil fuels have led to continued Australian prosperity despite a government which believes in such fairy tales as a carbon tax to curb worldwide “greenhouse gases”.
Europe’s currency debacle. Whatever happens in Greece [this weekend as I write], it’s clear a crash of the Euro is coming. Its effects will be worldwide — not least on the U.S. with Europe Washington’s major trading partner [after its North American neighbors]. The Europeans are caught between a rock and a hard place: the need to backtrack on social welfare benefits whose bounties could not be sustained. That would be true probably even with maximum growth in “mature” post-industrial societies with contracting, ageing populations. On the other hand, austerity blocks growth, making it impossible to pay off huge accumulated debt without reducing living standards to the point of social upheaval. German Chancellor Angela Merkel’s “solution”, is a more integrated Europe with central command of economic strategy. But even were it successful, the horse-trading required among 27 European Union members with long differing cultural traditions would require Job. Bureaucrats in Brussels who have taken the integration process to its present inconclusive level and produced the Euro crisis could not handle it. There does not appear to be time for a European Philadelphia-style, secret:”constitutional convention”.
Return to “Beggar your neighbor”. Ironically, the Euro problem has sent capital fleeing into the dollar — as beleaguered as it is. It has facilitated an Obama Administration strategy of huge government deficits and rollicking printing presses with no inflation — so far. As Europe’s crisis deepens there is likely to be more disguised efforts to turn back from the vast advances in global economic integration marking the past three decades. The decline in fortunes of customers in the developed economies has already trimmed export-led growth in China and India. China, and perhaps India, may well not have the political stability to withstand a further slackening of growth with their huge expanding populations.
And so, to paraphrase President Richard Nixon’s remark, amidst his 1971 disastrous economic decisions including wage and price controls, when he came near echoing Milton Friedman’s “we are all Keynesians now”, perhaps we are all economic determinists now.
Sol W. Sanders, (firstname.lastname@example.org), writes the ‘Follow the Money’ column for The Washington Times on the convergence of international politics, business and economics. He is also a contributing editor for WorldTribune.com and East-Asia-Intel.com.