Economy: Lever of Power, Source of Conflict

8/13/2019 Economy: Lever of Power, Source of Conflict

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Lever of power, source of

conflict Paul Mason, economics editor, BBC Newsnight

September 2012


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War is not merely a political act, but

also a real political instrument, a

continuation of political commerce, acarrying out of the same by other

meansClausewitz, 1827


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politics is a concentrated

expression of economics

Lenin, 1921


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ECONOMY -> POLITICS ->

WAR

agency


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Economy as structure

Shaped by human actions over long periods

Mutating, structurally, through cycles

Cycles produce power shifts

Policy (politics) adapts to it rather than shapes it

Short-term disruptive action produces effect

not always the one intended


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crisisThe Global Imbalances


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USA: household debt/GDP


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Current account

imbalances


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Share of world saving


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Feldstein-Horioka coefficient(RHS)

Red line indicates ratio of

savings to investment in

15 countries.

Roughly 1:1 for most of

history of capitalism.

Touches 0:1 in 2000s


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The imbalances

Global savings glut

Excess consumption fuelled by credit in West

Sudden disappearance of national pools ofcapital

Capital flows uphill from East to West

Massive expansion of trade, currency trade,derivatives

Financialisation


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Financialisation

Distribution, financialisation and the financial and economic crisis implications for post-crisis economic policies. Eckhard Hein


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Inequality


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disruptionthe disruption is not the crisisthe disruption is what caused the crisis


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crisis

2006: Property bubble bursts

2007: First credit crunch

2008: Commodity bubble disorients central banks

Lehman Bros, AIG, Merrill, RBS, Dexia

2009: Global recession, market crash

Fiscal stimulus: China, US, Japan, E

2010: Recovery: Greek crisis; UK austerity

2011: Euro fiscal crisis: massive austerity

2012: Eurocrisis + Chinese slowdown = double dip


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GDP Growth 2007-11

Source: World Bank

52%


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Growth is slowing


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World trade stopped

growing


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China: Exports slowing

again


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Balance sheet recession?

Governments, businesses, consumers pay down

debt

Demand for credit low

Monetary stimulus does not filter through

Japanese style lost decade

Acute Fiscal stimulus? (Currency war)

Financial repression (wiping out savers)?


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Debt distribution


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USA: Fiscal cliff


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beyondthe crisis


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Long-cycle theory

50 Year Pattern

Technology,

Resources,

Economic model changesExogenous shocks

Upswing / Downswing

Four seasons

Nikolai Kondratieff


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Supercycle theory


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Disrupted wave

Tech revolution is real

New centres of growth/power emerging

ButFiat Money allowed extension of 50 yearcycle beyond limits

Depression sharper/deeperoffset by more Fiat

Money

Crisis of western elite: financialised, immobile,

politically disoriented


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World economy: 2010 -

2030


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BRICs drive growth

politics is

concentrated

economics


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leadershipCharles Kindleberger, The World in Depression,

1973

a country that is prepared, consciously orunconsciously to set standards of conduct for other

countries to take on an undue share of the burdens

of the system to accept its redundant commodities,

maintaining the flow of investment capital, and

discounting its paper


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The chaotic case

China / Russia do not normalise

Savings glut grows with Asian middle class

State capitalism strangles growth

Competitive exit routes:Competitive devaluations (Euro collapse)

Return of national pools of capital

Western model broken

Poor social cohesion

Prolonged fiscal crisis


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Very few of us realize with conviction the

intensely unusual, unstable, complicated,

unreliable, temporary nature of the economicorganization by which Western Europe has

lived for the last half century. We assume

some of the most peculiar and temporary of

our late advantages as natural, permanent,

and to be depended on, and we lay our plans

accordingly. On this sandy and false

foundation we scheme for social improvement

and dress our political platforms.

1919


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Haldane A, The Global Imbalances in retrospect and prospect Bank of

England, 2010

Lyons G, The Supercycle Report Standard Chartered, 2010

Hein E, Distribution, financialisation and the financial and economic

crisisimplications for post-crisis economic policies Berlin School for

Economics and Law 2011

Congressional Budget Office An Update to the Budget and Economic

Outlook: Fiscal Years 2012 to 2022 August 2012

OECD, What is the near term economic outlook September 2012 (ppt)

Reinhart C and Sbranica B, The Liquidation of Government Debt, IMF

2011Kindleberger C, The World In Depression 1929-1939

Harmondsworth,1987

Kondratieff ND, Long Cycles of Economic Conjuncture Moscow 1926

Mason P, Meltdown: The end of the Age of Greed, 2009

Mason P, Why Its Kicking Off Everywhere: The New Global

Revolutions 2012

Economy: Lever of Power, Source of Conflict

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