The Galaxy, Three Big Ones And The Mother Lanka
Prof Kumar David
That you are reading this is proof that we survived the Winter Solstice two days ago and that those Mayan chaps got their sums a bit wrong; but only a bit as the state of the planet is pretty lousy. It is astonishing how right the Maya’s were about galactic conjugations more than a thousand years into the future, and, coincidentally, I would like to think, put their finger on a troubled period of world history. Had they forecast the end of capitalism as we have known it and not the whole world, they would have been spot on. As befits a piece by a survivor of 11.11am GMT on 21 December 2012 (this year’s solstice) I offer you a potpourri of short accounts of the state of the world in selected quarters, including our troubled Isle, and sign off with a few knickknacks about galactic alignments.
Three big ones
If you count the EU in, the four largest economies in the world are the EU, the US,China and Japan in that order; three of them capitalist,China still an amorphous neither here nor there creature. The economic woes of the EU and Japan deteriorated markedly in 2012 and the signs are 2013 will be worse. The grand old Liberal Democratic Party (LDP) returned with a resounding 300 seats in the 480 member Japanese Diet having lost just as massively to the Democratic Party just three years ago. The caveat is that in a first past this post system the LDP polled only 30% and the polling rate was only 60% – meaning the LDP secured approval from a mere 18% of eligible voters. There is economic, social and political despondency inJapan, and rightly so. There is little Shinzo Abe in his second try as premier, or the LDP, or moribund Japanese capitalism can do to pull the greying country out of the quagmire of systemic decline.
The LDP’s economic programme is weird; as though it were crafted before Weimar induced hyperinflation propelled the Nazis to power. Hard to take seriously is the demented pledge of monetary stimulation to the point of unlimited yen-printing, and negative nominal interest rates (we pay the bank for keeping our money). Desperation Japanese capitalism aims to compel consumers to spend, launch humongous public works, again, (Japanis replete with “bridges to nowhere”) and let state borrowing rise above its current 235% of GDP. It will all end in tears; there is no way out for Japanese capitalism, but an abyss of irreversible decline.
Economic morbidity is steering Abe, LDP, and a many Japanese into right wing nationalism. It is likely that Chinese provocation in the seas near the disputed islands will be resisted and the 1% GDP cap on defence spending lifted. Abe is likely to engineer a turn around on the admission of guilt by the Imperial Army during the war, turn-on jingoism, visit the Yasukuni Shrine, and try to repeal the pacifist articles in the constitution. If China and Japan have a go at each other in their littoral waters, it will muddy the surrounding oceans for all Asia.
What is fascinating about the Eurozone is the unabashed mix of money printing and severe austerity. A cacophony of Keynes and Hayek simultaneously on steroids! The prescriptions forced down the throat of individual countries are agonizing austerity and severe market discipline. But at Eurozone level, supranational state-capitalism prevails on a scale that would have taken Keynes’s breath away. Policies for Greece and nearly all for Spain are made in Brussels by the European Central Bank, EU institutions and German and French leaders; trans-national state-capitalism on a grand scale. Europeis confused, pointing this way and that; year 2013 will be more pain and recession.
Interestingly, the one portion of the greater capitalist world where 2013 may allow a ray of sunlight to flicker in is the USA. I do not take the so-called fiscal-cliff seriously. In a piece after Obama’s victory I exhorted him to drive the nail deep into the Republican coffin and confront them at every opportunity. The Republicans are in disarray and on the run; they can see that suckling the ultra rich, the Bible-belters and the reactionary old white working class in the rust belt, is a dead end. This is why House Speaker John Boeher has caved in on tax increases for the above $1 million income earners. Democrats have been asking for a lower ceiling of $250, 000 and resisting expenditure cuts in entitlement (medical assistance and social security payments) that the Republicans demand as quid pro quo. A last minute deal will be struck; forget the cliff, it won’t bury American capitalism.
The medicine engineering growth (say 2%) and decline in nominal unemployment (say 6.5%), is supra-Keynesianism. Monetary infusion into the economy since the late 2007 collapse is already in excess of $2 trillion. QE3, the next stage, was held in abeyance by Fed Chairman Bernanke earlier this year, but last month the Fed started injecting $40 billion a month into the economy buying mortgage backed securities. This will have an effect next year, and now that the electoral scuffle is over, consumer spending may rise and business confidence may improve. Disengagement in Afghanistan, the awaited overthrow of Syria’s Assad, and relative quietude in banking and financial sectors, may promote respite from the prevailing gloom, albeit temporary.
Temporary because the big questions have not been addressed. US standard of living, the footprint Americans leaves on the globe, has not been brought into alignment with what Americans contribute to the world. In economic speak: Consumption is disproportionately above productivity. America continues to feed off the rest of world and its living standards have to fall till correspondence is achieved – a monumental rise in comparative productivity is impossible. This cannot be resolved short of global restructuring; hence America’s comparative decline, its debt problems and on a shorter timescale, an inflationary spiral spurred by monetary expansion, will all catch up.
