It seems that president Trump is better than the experts from Washington in recognizing America’s place in today’s world. For him, the US is no longer the center of the global system taking responsibility for the planetary order, but just one of its components.
It is in the nature of economic forecasts that they are usually excellent in predicting the weather for yesterday. But perhaps, ironically, their importance grows in a time when the world we have known for over two decades is crumbling. The number of possible scenarios—economic, geopolitical, social—has increased so much that pointing at one of them as the most likely one seems to be largely unfounded. In such circumstances, producing visions about the future is an altogether different undertaking, becoming an appeal meant to spur us to action—according to the formula that if we do nothing then one of the possible disastrous scenarios may really come to pass. And such a look into the future of the global economy seems very sensible today.
Crisis without End
In the past two years the general sentiment across the world has worsened. The EU crisis, Brexit, Kaczyński, Trump, the Islamic State, constitutional coups in Brazil and Argentine, or the “refugee crisis” do not give grounds for optimism. It should be noted, however, that these events are not the cause, but a symptom of widespread unease. The key to understanding the processes shaping the global economy in the coming years is the failure of Western political and economic elites in the face of a deepening structural crisis of global capitalism and the accompanying climate change.
The IMF forecasts for 2017 confirm that the crisis is in full swing. Since 2008, on both sides of the Atlantic we are continually haunted by low growth, sluggish investments, aversion to credit and risk on the financial markets. The financial markets keep going only due to continual injections of public money. Stagnation drags on with all its negative social and political consequences. In 2015, Brussels and Berlin rejected an alternative (proposed by the Greek Syriza) to ineffective austerity measures. In this way, they opened the door for the extreme right, which cleverly feeds on the anger caused by the cuts, transforming it into hostility towards refugees. The hallmark of 2017 and perhaps also 2018 in Europe will be the march of the extreme right to power.
There is no reason whatsoever for the EU austerity recipe to increase its effectiveness. Also the quantitative easing policy, used by the EBC against its most sacred principles, will not produce major changes. First, it is very belated, and second, economic problems in Europe are not limited to monetary issues, so this is not the area where we should look for solutions. “Too late and too little” also summarizes the Juncker plan (€315 billion until 2018), focused on infrastructural investments in a time when investments in society are most needed.
The situation will not be ameliorated by such ersatz measures as the two free trade the projects (TTIP, CETA). One of the reasons European public opinion is opposed to them is that they will not result in GDP growth, but above all in strengthening the position of large corporations at the expense of democratic states. Historically, ever more unequal distribution of wealth has never brought permanent economic growth. Neither will it do so this time.
Europe is only a piece of the global puzzle. Looking at the economy, we have to abandon the Euro- and America-centrism. From 2008 to 2015, when the so-called global crisis ruined the lives of tens of millions of people in Europe and the States, dozens of millions of others came out of poverty in Brazil, Ecuador, or China. This process is equally important for the future of global economy as the breakdown of Euro-Atlantic neoliberalism. The dynamics of the countries of the South is responsible for the fact that the global GDP growth is today around 2.5% rather than 1.7% as it was in the 1980s and 1990s. In the last eight years, both Europe and the US have been the drag in this process.
Now the results of the depression in the North Atlantic basin are reaching the global South. The demand for the products of Chinese and Indonesian assembly plants is falling. This also means reduced demand for raw materials and their decreasing prices. The situation of the countries of Latin America, Africa, or Russia worsens, which means that a truly global crisis is perhaps still to come. Its negative effects would be exacerbated by climate changes and the new wave of armed conflicts. Global warming and natural disasters produced by it have already evicted dozens of millions of people from their homes and in the coming decades another 200 million others may join them. Owing to these processes, the political destabilization of large areas of the Middle East and sub-Saharan Africa will be felt sooner. To the six million refugees from Syria and more than one million from Yemen we must already add 15 million people fleeing from war zones in Africa, and this number may grow significantly in the coming years. The remilitarization of the international order launched by Bush Jr. fifteen years ago has been producing new wars (with the “unlimited war on terror” in the lead) and further growth of the refugee number (from 40 million in 2006 to 70 million today).
The Specters of Multipolarity
Contrary to appearances, the existence of a global policeman does not make the world a better and safer place. The EU would look different today if Washington did not divide it during the dispute around the war in Iraq.
The fear of the US withdrawing to their backyard is irrational also in the light of the experiences of Latin America, which in the first twelve years of the 21st century benefited a lot from the loosening of the imperial muscle. Preoccupied with the wars it was losing in the Middle East and Central Asia, Washington left its traditional hinterland at the mercy of its inhabitants, which produced a historically unprecedented emancipation of the countries of the region in the sphere of international relations, but also in social and economic policies. The weakening of the empire, which for two decades held Latin America in a neoliberal stranglehold, brought such countries as Brazil, Argentine, Uruguay, or Bolivia to a historic development leap. The economy, quality of life, and democratic standards have never fared so well here. The huge reduction of poverty, virtual elimination of undernourishment, and the growth of social transfers were accompanied by a significant increase of GDP dynamics and a reduction of debt.
On the other hand, we see how counterrevolutions and wars crushed the wave of democratic changes in the Middle East. The disastrous evolution from the hope brought about by the Arab Spring to the nihilism of the Islamic State was not prevented by the major military, political, and economic presence of the superpowers in the region. There is plenty evidence to defend the claim that it was the other way round. Today the possibility of democratization and economic reconstruction is overshadowed by the smoke hovering above Aleppo, Mosul, and Sana, by the terror of Marshal Sisi’s regime in Egypt and President Erdogan in Turkey. But we must remember that in 2003 there were few indications that the Iraq invasion would spell the end of American supremacy in the Middle East.
The growth of Chinese power remains a key phenomenon on the global arena. China is already the second largest economy in the world (in terms of the GDP). Moreover, China has taken the lead in purchasing power parity. The declining growth in this country has been caused by the stagnation in the West, but most of all by the huge economic transformation. Its aim is to build the internal market and demand. Hence we will observe a continued shrinking of the share of industry in Chinese economy and a growth of the services sector, already generating more than 50% of Chinese GDP. Capital and direct investments will also grow. From 2008 to 2015 have Chinese direct investments increased from $10.3 billion to $118 billion.
What is good for China means a growing trouble for other economies of the South dependent on commodity prices. Latin America has been experiencing problems since 2012 and the return to power of neoliberal oligarchies in Argentine and Brazil does not bode well for the local economies. Sustained fall in oil prices, due in part to the Chinese slowdown and the US shale boom, hits at the OPEC countries, pushing the richest of them towards diversification of their economies through such measures as seeking new investment areas and purchasing farmland abroad.
One of their objects of desire is Africa. The role of this continent has been growing for some dozen years and this trend is likely to continue. Since the beginning of the century six sub-Saharan countries are among the ten fastest- growing economies in the world. In 2010-2015 these were Zambia, Ghana, the Democratic Republic of Congo (DRC), Nigeria, Ethiopia, and Mozambique. What attracts multinational companies and foreign powers to Africa are no longer only commodities and land, but also investment programs. In 2015, 300 large infrastructural projects worth $375 billion were implemented.
Therefore, Africa seems a likely stage for the most important battle in the Sino-American rivalry. If we add to that the strong presence of Arab and European (mostly French) interests, both in the form of investments and the military, in the current situation of Africa we may perceive some similarities to the 1880s. In that decade Africa also became the battleground for the great game of competing colonial powers. Today’s neo-colonialism seriously threatens the economic development of the continent, which in the last decade fascinated many observers.
Trump, or the Same Thing All over Again
It seems that president Trump is better than the experts from Washington in recognizing America’s place in today’s world. For him the US is no longer the center of the global system taking responsibility for the planetary order, but just one of its components.
Trump’s economic program, or, to be more precise, his collection of one-liners on the economy, excellently reflects the crisis of the American hegemony. A mix of economic nationalism, archaic ultra-liberalism, and protectionism not so much produces a coherent vision but gives an insight into the high-strung sentiments of the new administration. Even if these ideas did not contradict each other, we would have to remember that wishful thinking does not change reality, for reality abhors the vacuum, and places where America reigned just forty years ago have been long taken by others.
The most likely scenario is that part of the more and more impoverished American people will have to settle for the fact that another part will be even worse off. This will be achieved by dismantling Obamacare and again depriving 15 million people of the right to health insurance. Patriotic pride will perhaps be fed by spectacular roundups of illegal immigrants, building a wall along the Mexican border, and an economic war against China. Meanwhile, true benefits will flow to the friends of the new president: corporate and business elites will be happy to collect big lumps of money going their way thanks to revoking the Dodd-Frank act, new tax cuts, and generous public subsidies for extraction of raw materials. Even the implementation of reasonable ideas such as abandoning the ITTI or pumping $1 trillion in the economy will not necessarily bring positive results. First, protectionism by itself is not likely to revive the US economy. Protecting domestic business may worsen the position of employees. Second, printing dollars while at the same time deregulating the financial sector will channel public money towards speculative markets and produce new bubbles.
The same solutions will lead to monopolization of global capitalism. Even today, 30% of production, 70% of exchange, and 80% of investment is controlled by just 500 largest corporations. Their share in the global GDP has doubled since the 1970s (from 20% to 40%) and there is no indication that this trend will be reversed. Instead of growth of innovation and development we may expect an intensified struggle for the division of the global pie. And therefore it is “monopoly” and practices characteristic of it rather than “market” that will be the keyword opening the sesame of correct economic analysis in the future. The world undoubtedly stands at the threshold of great changes. It is impossible to predict the direction of the evolution, although good recipes have been on the table for years. For, paradoxically, there are not purely economic solutions to the greatest economic challenges. The key factor here is the distribution of social forces, as that creates the framework for economic activity. It depends on the dynamics of these forces whether we are headed towards an even greater collapse and chaos, or towards a more just and rational world. In the States and in Europe, as much as in Brazil or China, the problem lies not in the choice of the right economic policy, but in the political and social transformation creating the conditions for a more or less democratic management of the economy.
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