Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Trade Page 7 of 13

Offshoring Critical Industries Is So Harmful It Should Be Treason (Covid Edition)

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On March 25, 2021

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I was impressed how fast the UK and the US were vaccinating their population. How were they doing it, after they had been so incompetent during the rest of the pandemic?

Simple enough. Restrictions on vaccine exports.

Meanwhile:

India delays big exports of AstraZeneca shot, including to COVAX, as infections surge

And then there’s this:

(Spare me the self-serving arguments that breaking the patents wouldn’t have helped because it takes too much time to ramp up production. However long it takes, the sooner  your open up the IP, the faster it happens.)

And we could make it happen faster:

But the global capacity for producing vaccines is about a third of what is needed, says Ellen t’Hoen, an expert in medicines policy and intellectual property law.

….

To make a vaccine you not only need to have the right to produce the actual substance they are composed of (which is protected by patents), you also need to have the knowledge about how to make them because the technology can be complex.

The WHO does not have the authority to sidestep patents – but it is trying to bring countries together to find a way to bolster vaccine supplies.

The discussions include using provisions in international law to get around patents and helping countries to have the technical ability to make them.

Rich countries use IP law to keep poor countries poor, and to kill and impoverish their citizens to make even larger profits.

And, of course, if you’re stupid enough to believe neoliberal bullshit about how your countries will be OK and don’t take steps even though you have manufacturing capacity, (Europe), well, your citizens die. The EU is now restricting imports to the UK. I wonder how many Europeans will die because of not having those 10 million doses?

“I mention specifically the U.K.,” said EU Commission Vice-President Valdis Dombrovskis. Since the end of January, “some 10 million doses have been exported from the EU to the U.K. and zero doses have been exported from U.K. to the EU.”

OK. I have said this for years and years but I’m going to say it again now that it is being illustrated brutally: if you can’t make it yourself, you can’t be sure you’ll have it when you need it, since countries that can make it will tend to prioritize themselves.

You must make and grow everything essential to your country domestically if you can. Any international laws that forbid you from doing so are illegitimate. They may exist; they are not Just. This doesn’t mean completely breaking patent law (though it needs to be much less draconian and a lot less long), it does mean, at the least, writing in mandatory licensing provisions at reasonable prices.

A lot of people are going to die who didn’t need to because neoliberal “free trade” orthodoxy said you didn’t need to be able to both design and make vaccines in your own country: the “market” would supply you.

Eventually.

This isn’t just about behaviour now. It is about behaviour that has been encoded into law and trade practice over decades.

Don’t offshore anything that matters. If your citizens have to pay 5% or 10% more, slap on tariffs.

To not do so, if you think the welfare of your citizens is your duty, is treason.

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You Can’t Buy Anything That Matters When It Matters (Covid Vaccine Edition)

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On December 12, 2020

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… unless you have control over the production facilities.


I think this map is a little inaccurate, but it makes the point. Money matters, yes, but having control over vaccine manufacturers and R&D matters more.

This is true of everything. Oil is not a global market if there are ever shortages decision makers care about. FOOD is not a global market if there’s ever a worldwide shortage, and countries which net import will find that out. (The Irish famine, where Ireland, then an imperial colony, continued to export food even as its people starved, underlines the word control.)

Global markets are OK for things that don’t matter. For anything that does matter you want manufacture, R&D and supply lines concentrated in your own country or that of true close allies. In those cases, you want mutual vulnerability. If country A has it all and is a close ally, that won’t work when they’re desperate, you have to have part of the dependencies.

Even this doesn’t work completely. It was very popular before WWI to state that a big European war couldn’t happen because of how interdependent the economies were.

Yeah.

 

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Industrial policy means that if you can, you make it at home, and if it costs a little extra, too bad, slap on a tariff. If you control natural resources, you NEVER sell them raw if you have any choice. The history of England’s economic development leading to the Industrial revolution starts with a ban on selling English wool to mainland Europe, allowing them to build their own textiles industry. Of course, those textiles were worse than what Flemish weavers would have made, and less efficient to start, with higher prices. The English, correctly, did not care. They had the wool, and there wasn’t a huge surplus of wool. Buy the clothes from us or no one.

Food, water and essential goods: if it is at all possible you want to be self sufficient in all three. In sensible countries a great deal of geopolitics is driven by this when a country can’t do it all internally. China knows, for example, that the US can shut down the Strait of Malacca any time it wants, crushing their oil supply and that is a major reason why they are creating a huge land route all the way across the Asian continent, and getting snuggly with the Russians (who can supply oil by land.)

Chinese economic policy, letting Westerners get super rich by producing goods in China, was also driven by this. The Americans aren’t wrong, the Chinese were super-aggressive about technology transfer. The deal was often that in order to get access, you had to give them the tech. If you wouldn’t, they would try and steal it (Americans stole a ton of British IP back in the day, don’t get all pious, everyone does it.) There was also technology-arm breaking creep. Sure, you gave us a tech a few years ago, but what have you given us recently, and why should we allow you to stay in our market today?

Foolish nations, like Canada and the US, let key industries go overseas, or sell raw materials without processing. Wise countries don’t, unless they’re getting something very worth it in return. Getting a bunch of new rich people who made their money by selling your country out isn’t “worth it” to anyone but the rich people and the politicians they bribed.

Money doesn’t cut it. Per capita Canada bought more Covid vaccines than anyone else, but notice that Canadians won’t be in the first wave to get mass vaccination. This is a “white, 1st world” country, and it can’t buy its way in. (The case is a bit more complicated than that, because the government are incompetent, but we’ll leave it there for now.)

If it isn’t on your territory, where your people with guns and your bureaucrats have power, you don’t control it and when it matters, you can’t buy it.

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Cold War 2.0 Incoming

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On August 11, 2020

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Right, with the ban on Huawei using chips made with American manufacturing equipment (one of the US’s last few places of absolute advantage), the bans on TikTok, Tencent, and WeChat, the attempt to convince other countries to not use Huawei 5G, and the arrest of the Huawei founder’s daughter for doing business with Iran, along with the US seizing a freighter full of medical supplies for Iran, I think we can state that the world is moving towards a second cold war.

The US pivoted to China containment under Obama, not Trump — though Trump has been far more aggressive. The Trans-Pacific Partnership (TPP) was created as a way of marshaling Asia-Pacific countries into an anti-Chinese trade area. While Trump didn’t go ahead with it, he’s pushed hard against China in other ways.

When the US asked Canada to seize the daughter of Huawei’s founder, for example, it destroyed Canada-China relations: Canada was forced to take sides, and the Chinese were furious. The USMC (the NAFTA replacement) included a clause that says signees cannot make new trade deals with non-free states if the others object: This was aimed squarely at China.

Britain had originally intended to use Huawei 5G, but after leaving the EU, reversed course.

It’s important to understand that the anti-China pivot is bipartisan, as are the sanctions against Huawei and others.

The United States has a number of advantages and it’s using all of them aggressively. First, the fact that it is the center of the financial universe, to the point that movement of funds often goes through the US even when the transaction doesn’t involve them, is a major one. The US has made its financial laws extra-territorial, in effect. If a transaction goes through the US at all, even if no one involved in the transaction is American-related, the US claims jurisdiction. (Famously, this was used by the US to launch an investigation in the World Cup, in which the US is a trivial player, because a bribe went through the US on its way somewhere else.)

This often happens unintentionally, and firms that do business with the US at all are thus often unwilling to do business with anyone whom the US has sanctioned.

US naval power and military presence is also important, with their ability to interdict the Strait of Malacca. China imports about 70 percent of their oil, and 80 percent goes thru the Malacca strait and the US can shut it down any time they want. This is true of much else that China imports or exports.

The Belt and Road Initiative is, in part, meant to cut out the US ability to use its navy to hurt China; it creates alternate land routes, including one right across the continent to Europe, and it includes pipelines. The alliance with Russia, fraught as it is, is also about reducing dependence on Malacca.

Indeed, even the ability to protect and control trade to nearby neighbours is in doubt, which is why China built artificial islands in the South China Sea.

Fundamentally, the post-WWII trade, financial, and military order is an American creation, with a European assist.

When the US let China into the WTO, they let the power most likely to overtake them inside, as it were, the house. They did so for the simplest of all reasons: greed. Oh, sure, there was talk of capitalism meaning democracy and all that, but basically, offshoring and outsourcing to China made a lot of money for a lot of corporations and rich people, and that’s why they allowed China in.

The US deliberately sped up the transfer of industry to China as a way of making more money and undercutting wages at home. China knew the deal it was offering; they understood Americans, and they were patient.

So now, China is a larger manufacturing country than the US and, by some measures, has a larger economy.

China is a threat.

China is seen as a threat and this perception is, again, bipartisan.

There is no reason to expect this to change. China is not going to buckle under to the US, like some third-world nation or a vassal like Canada. They now have a de-facto alliance with Russia. China has nuclear weapons, and Russia is not going to allow China to be taken out with a nuclear first strike (without China, they’d have to give the US anything it wants, and they know it.)

The US will keep using its financial and technological power to weaken and isolate China.

So what will happen is an acceleration of the creation of a banking system that routes entirely around the United States and which does not use the US dollar, but instead the Yuan. Countries will be folded into this, as part of the Belt and Road Initiative. Even core US allies may have little choice: South Korea does twice as much business with China as with the US, for example, and Australia is extremely dependent on China.

For many countries, China clearly offers the better deal: they provide far more cheap loans than the US, they provide development, and their goods and services are suitable for both developed and developing nations. Nor do they natter on about “human rights” while they bomb Yemen.

For others, China will be unacceptable.

This leads to a world with two trade areas, not a free trade world. It leads to an end of the dollar as the world reserve currency. It leads to a continued arms race. It may well lead to a breaking of world IP into two sets: one American lead, one China lead. (There’s no particular reason for China to respect US IP if the US refuses to let them use it.)

This is a recipe for Cold War 2.0.

This time, however, understand that the US is facing an “enemy” with more population and more industry than it, not a nation devastated by World War with less population. Likewise, China and Russia combined have more land and more resources, while Europe is not a sure American ally, though Britain, absent EU support, will fall completely into US vassal status.

This is especially true as the US is experiencing late-imperial rot. It is nearly completely unable to handle its internal affairs, and its social cohesion is breaking down to the point where it may soon become a failed state.

Many American supporters of Cold War 2.0 are trying to use China as the external enemy to rally Americans around and, by closing China off from the US, to drive manufacturing back to the US, or at least to its firm allies (like Taiwan).

Bringing manufacturing back is smart, it should never have been sent overseas, but American elites are confused: Their primary enemy isn’t China, their primary enemy is themselves. They are responsible for the US decline and China could not have risen so fast if they were not so corrupt, greedy, and short-sighted.

It’s a very stupid world we’re moving into, but some of what is going to happen has to happen. It’s not good that the US has the ability to sanction anyone it wants to. Those medical supplies seized off that freighter? Covid-19 medicines.

Power which is routinely abused, as the US has abused its financial and military power, is eventually removed. The US is accelerating this progress as fast as it can.

The ban on Huawei using chips manufactured with US tech will hurt, for example. But it’s time limited: China isn’t some backwards third-world country. They will advance their own chip manufacturing and erase the deficit.

By fighting the dragon, the US is making a rival an enemy.

Cold War 2.0 is coming and essentially inevitable, because it is something the leadership of both countries either wants or is willing to accept. The only monkey wrench in this are the effects of climate change and ecological collapse. More on them later.

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On the Causes and Consequences of the Oil Price Crash

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On April 23, 2020

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Image by Yuan2003

So, we had a crash of oil prices, where some futures contracts were actually negative, which means that sellers had to pay people to take oil off their hands.

Obviously, oil use has dropped during the Covid-19 crisis, and before that, prices had already decreased in an attempt by non-US producers to reduce prices low enough to crush US shale production.

Oil is a real thing: It takes up storage. Storage space is running out, and it’s not clear when demand will recover, so oil that is to be delivered now-ish is an expense–you have to pay to store it. Thus, the negative prices.

There was a bounce Wednesday, ostensibly due to Trump saying he had ordered the US Navy to blow up Iranian boats if they continued to hassle other ships. (If they do this in the Gulf, and it goes to shooting, Iran will win the initial confrontation. They have a lot of missiles.)

One could equally say this is a dead-dog bounce.

At any rate, even double digit prices are below most people’s production costs for oil, and they are above the price every major government that relies on oil needs to balance their books. This means Saudi Arabia, the four gulf oil states, Iraq, Iran, Russia, and so on. Ironically, Iran, having been under sanctions already, will be in better shape than most of the others.

It is also, obviously, low enough to make US (and Canadian) shale oil production completely uneconomical: generally that needs at least $60/barrel, and much of it needs more.

So we have countries and companies with bleeding treasuries. The US has the ability to print money, presumably it will do so to keep Shale oil around in Zombie form. Countries which cannot print money and have other countries accept it could be in trouble. This depends mostly on how long this goes on. A couple months, even three or four, uncomfortable, but no big deal.

If this crisis bubbles on for a year and a half of shutdowns, partial relaxations, then more shutdowns, we’re into some very dangerous territory. I’m not sure the House of Saud, for example, can survive that scenario (it couldn’t happen to a nicer country, etc.).

The world has been in a very long economic relationship, in which the most important commodity has been oil, and the producers sold it in dollars, so the US and the swing producers all benefited. Obama and Trump more or less broke the deal with the promotion of shale oil, and China has increasingly been insisting on buying oil in Yuan, but the relationship had stumbled on, even though it meant enabling countries that the US has been treating as enemies, like Russia.

Trump wanted to force Europeans to buy more American oil and less Russian oil: This was a major part of his economic plan, such as it was. Trump likes to find a place where he’s more powerful, and push that as hard as possible, and things like sanctions against Russia, Iran, and Venezuela were–and still are–situations in which he has unilateral power that no one else has been entirely able to get around (though China has somewhat). The EU has proven unwilling to stand up to the US in the case of sanctions.

Right now, there’s no particular reason to think this can’t continue. The US can still print infinite dollars, because foreigners will still accept them–even though the US is no longer the most important manufacturing state. So the US can bail out shale oil. Oil producers, who do not have hegemonic currencies, do not have infinite rope.

This changes only the major producers of things the US needs cease to be willing to trade in US dollars. China and the EU could (but I very much doubt will) cut the US’s throat if they ever chose to act together. Perhaps China could even do it alone. The problem, of course, is that there would be a lot of collateral damage to them. US oil is expensive, but the US can produce it. China and the EU need to import it. If they want to make such a change, they have to secure strong supply guarantee from other nations.

This is theoretically possible, but the problem is simple: Any nation that did this would then fall under (even more) US military threat. Bombs are very good at ending oil exports, and neither the US nor China is willing to go to war over this. Perhaps China could move troops and nukes into vulnerable countries, but that would trigger a new cold war, and the Chinese don’t want that–at least not yet. China is working on their own trade area, to compete with the US-led trade area (which the US is abandoning anyway, as it shits on the WTO it created), but it is not ready yet (the Belt and Road Initiative is China’s name for this trade restructuring).

The current collapse of oil prices is unexpected; while a pandemic has always been possible, knowing when it would happen was not. The pandemic has simply revealed the current production’s costs and dynamics. Saudi Arabia has been moving towards vast danger for ages because of its over-reliance on oil; this simply means the consequences may hit sooner. Oi-consuming nations have been maneuvering to reduce their dependence on imported oil in general, and unreliable oil in particular, but they were not yet ready to make any big moves. Almost everyone has been chafing under the petrodollar and under the current world payment system, which the US has abused with its constant sanctions. Despite this, no one has created a viable alternative and been willing to take the hits necessary to move off the dollar and the US/eu payment system (“EU” is in lower case deliberately).

Most oil producing nations, including the US and Canada, are generally bad actors on the international stage: with crimes ranging from moderately bad to invading oil producing nations regularly and sanctioning other ones constantly, or to being the world’s premier supporters of fundamentalist religion and terrorists.

So don’t cry too much for oil producing nations, nor even for their customers, who have enabled them greatly. But beware that the game is changing: Covid-19 has highlighted existing issues and if it continues long enough it could precipitate changes which have been desired by many, but remained unimplemented because people have been unwilling to bear the costs and risks.

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Should NATO Exist? Will It?

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On September 20, 2019

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One of Trump’s constant cries is that American allies aren’t spending enough on their militaries and that the US is, thus, carrying them.

While there is a temptation to scorn this argument because it was made by Trump, it has a fair bit of truth to it, as Matt Stoller suggested today:

The American military umbrella is a bad deal for America and a good deal for our “allies.” Japan gets protected channels to Middle Eastern oil, for free. Germany gets protection from Russia, for free. They all export to us at terms unfavorable to our own industries/middle class.

The problem with this is that it is, well, true.

And that Europe “needs” America for defense against Russia is absurd:

Let us be clear, the EU’s population is 508 million. When the UK leaves, it will be 447 million.

Russia’s population is 143 million.

The EU minus Britain has a GDP of 18.1 trillion (purchasing power parity), Russia has an economy of 3.5 trillion (ppp). Germany alone has a GDP (ppp) of four trillion.

If Europe “needs” the US, it’s because it can’t be bothered to raise a proper army. That’s all. It is genuinely free-riding.

Chinese and American flags flying together

But then NATO is a large part of why Russia is a “threat”. The expansion of NATO, which Bush Sr. promised Gorbachev would not happen, is a large part of why Russia has armed up.

It’s not clear that NATO should even exist. Its purpose was to resist the Warsaw Pact and the USSR, neither of which exist. Russia has a lot of nukes, and is relatively strong militarily, but it is no USSR and has no grand alliance facing NATO. It is not a threat unless terribly mismanaged. (Which, I suppose, it has been.)

Disband NATO. Let the Europeans take care of their own defense, or lay prostate before the Russians as they choose.

Japan is a trickier proposition. What American military presence there does is simple enough: It prevents Japan from needing its own nuclear weapons. The same is true of American bases in South Korea. Leave and those two countries have to nuclearize or become Chinese satrapies (and Japan will need a much larger navy).

It’s also worth noting that the US didn’t start protecting “Japan’s oil.” The US needed foreign oil too; it is only recently, under Obama, that the US has again reached petrocarbon self-sufficiency and is able to say, “We’re protecting other people’s oil.”

WWII was won by the powers who had access to more oil. Generals and admirals at the time understood the war was, to a large extent, about oil.

America may not need foreign oil now, but it did for decades and that is why it protected maritime oil trade.

In general, however, a US withdrawal from its forward bases will be a good thing. A rebalancing of trade will also be a good thing, though it will hurt as it happens (Trump is not doing it well). Deliberately offshoring and outsourcing the US (and Britain’s) industrial base led, more or less directly, to Trump and other social ills. It created a group of people who have lost for 40 to 50 years. Their parents had better lives. They had better lives. They know it. You cannot lie to them with BS statistics and pretend otherwise.

So they are willing to vote for and support anyone who seems like they will wreck a system which doesn’t serve them. Maybe what happens will be worse, but what’s happening right now is shit.

This is not contradicted by Trump’s support from red-state elites. They are also scared, because they also know their situation is precarious and that power and wealth has flowed away from them. And they rule over Hell. It isn’t always better to reign in Hell.

So the world is changing. It was changing before Trump: The Trans-Pacific Partnership was intended to be a trade bloc AGAINST China.

Note carefully Stoller’s hostility to China. It is constant. The American elite is finally reorienting. They don’t see Russia as a primary threat. They’re moving away from caring about the Middle East as they now have enough oil of their own and see a post-oil future coming. They know the rising great/super power is China.

They want to reorient their alliances against China. The price of keeping NATO will be keeping China OUT. When Germany said they wanted to do more business with China, Stoller was angry and said it was an argument against NATO. No Huawei, no China.

The world is very likely to divide into trade blocs–probably two, maybe three.

China rises. The US moves to protect its position.

Great power politics continue, as they ever have.

There is no end to history, save an end to humans. Only fools ever thought so.

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A Few Words About Argentina

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On August 13, 2019

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Okay, so Argentina elected a neoliberal president. He went to deep austerity, removed capital controls, and sought an IMF bailout.

Now it looks like a socialist may win and markets are freaking out, because he may default on some of the debt and re-institute capital controls.

Argentina’s problems have a long history, but it’s worth remembering this: Before WWII, it was a first world country, with a standard of living about equal to Canada’s.

Argentina partially defaulted in 2001. We should remember that that default was caused by following the conservative policy of pegging the Peso to the dollar, which any moron should have known would eventually backfire.

It is also worth remembering that, when Argentina defaulted in 2001, it wasn’t actually allowed to. American courts wouldn’t let Argentina pay the creditors who allowed their debt to be reduced unless they also paid those debtors who didn’t take the deal.

We live in a stupid, perverse world where people don’t understand that there has to be a balance between debtors and creditors. Creditors are making a bet, and if they lend to the wrong entity, and that entity eventually can’t pay back the debt, they should have to eat their losses. Don’t lend to people who can’t pay you back. Everyone knew that Argentina was going to have debt problems, every time, but they took the chance because they wanted high returns.

But the central financial system, the NY and London courts, and the IMF act as debt collectors for people who want the upside of high payments from distressed borrowers without the downside of possibly losing the money.

Worse, they act as enforcers for bad actors, who won’t cut deals, and expect to litigate.

Debtors may lose some money, but leg-breaking countries for rich debtors kills and impoverishes poor people.

Now, none of this is to say Argentina hasn’t made mistakes. Flipping back and forth between neoliberals and socialists is stupid. Pick one, and suck it up. Electing Macri was stupid, but then being outraged when he does what a neoliberal technocrat would do (i.e., austerity and sucking up to the IMF) is equally stupid.

Pick a governing philosophy and elect governments that adhere to that philosophy until the leading parties all follow it (like when Labour became neoliberal under Blair, cementing Thatcher’s victory).

Right now, Argentina is getting the worst of both worlds.

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Why Would Iran Attack Tankers?

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On June 19, 2019

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Well, if it did.

Let me tell a story, possibly apocryphal. Back in the 1970s, the Russian (USSR) ambassador supposedly had a talk with the Pakistani leader of the day. This is what he is reputed to have said.

” I do not know who will be in charge in Moscow in ten, twenty, or even 50 years. But what I do know is that whoever is there will want the same things then, that we do today. You can trust us, not because we pretend we are your friends, but because we are consistent.

Anyway, remember, that we’ll come back to it.

In the meantime, on June 13th there were reports that two tankers had been sunk in the Gulf. Claims were made they were sunk by Iran.

I shrugged. Important people want war between Iran and the United States, and in such a situation it’s hard to know what’s true and what’s not. I moved on with my day.

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But yesterday I discovered an interesting fact. Before the two tankers were sunk, something else happened:

On June 5, 2019, a huge fire consumed a storage facility for oil products at the Shahid Rajaee port in the southern Hormozgan Province. Located west of Bandar Abbas, the Shahid Rajaee port is Iran’s largest container shipping port. Reportedly, a vehicle used for transporting shipping containers exploded and caught fire. Since there were oil products near the site of the explosion, the blaze spread quickly to several tanks and storage sites and caused heavy damage to the port. The spreading fire set off huge explosions which shot fireballs and heavy smoke high into the air.

On June 7, 2019, six Iranian merchant ships were set ablaze almost simultaneously in two Persian Gulf ports.

First, five ships “caught fire” in the port of Nakhl Taghi in the Asaluyeh region of the Bushehr Province. Three of these ships were completely burned and the two others suffered major damage. Several port workers and sailors were injured. As well, at least one cargo ship burst into flames and burned completely at the port of Bualhir, near Delvar. The fire was attributed to “incendiary devices” of “unknown origin.” The local authorities in the Bushehr Province called the fires a “suspicious event” and went no further.

Oh hey.

So, assuming the Iranians did attack the ships, they were retaliating.

Iran has long said that if they can’t get their oil to customers, no one will get oil to customers through the Gulf.

Yeah.

But this has bigger consequences. The real problem is simpler: The US made a deal with the Iranians, under Obama, then repudiated it when the President changed.

The US has arrogated to itself the right to impose sanctions on anyone it wants, for any reason, with no recourse by the victim. It is using this “right” in an attempt to remove Iran’s government.

The US cannot be trusted. Every few years, it changes. You can’t make a deal and be sure it will be honored for any length of time, let alone 10, 20, or 50 years.

Americans who squeal about Trump being an aberration both miss the point (your system allowed him) and are wrong: Bush attacked Iraq based on lies, and everyone knows it. Hilary Clinton promised the Russians that Qaddafi would not be removed, then removed him and gloated about him being killed after being raped by a knife.

The US can’t be trusted.

So the larger consequence is that a coalition of countries, including multiple oil producers, China and Russia are moving to sell and buy oil in a bundle of currencies which does not include the US dollar, and where no payments go through the payment system which the US can control (systems like SWIFT, to slightly oversimplify).

Dollar hegemony is one of the main supports of American hegemony. Misuse of dollar hegemony to attack other countries has brought us to this point.

I’ve been a bit of a broken record on this issue, but that’s because it’s been the obvious consequence of the US Treasury’s misuse of its powers.

Other great powers and their allies can put up with a cruel, even an evil, hegemon. What they will not put up with is a capricious one whom they cannot predict.

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Why the Economy Is Bad for Most People and How to Make It Better

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On June 10, 2019

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This is the second collation of articles on why our world is what it is, and how we can change it. Some of these articles are old, as I don’t write as much as I used to about economics, mostly because the decision points for avoiding a completely lousy economy are now in the past. The last decision points were passed by when Barack Obama announced his economics team and refused to try and get rid of, or bypass, Bernanke to enforce decent policy on the Federal Reserve.

However, this economy was decades in the making, and if we do not understand how it happened we will only wind up in a good economy through accident, and, having obtained a good economy, will not be able to keep it. These articles aren’t exhaustive; a better list would include almost five centuries of economic history, at least in summary, and certainly deal with the 19th century and early 20th centuries.

I was heartened that hundreds of people read the articles linked in my compendium on ideology and character so I dare hope that you will, again, read these pieces. If you do, you will walk away vastly better informed than almost anyone you know, including most formal economists, about why the economy is as it is.

The Decline and Fall of Post-war Liberalism

Pundits today natter on and on about income inequality, but the fundamental cause of income inequality is almost always determined by how society distributes power. As power goes, so goes income–and wealth. The last period of broad-based equality was the “Liberal Period,” which started with the Great Depression. You can locate the end of that era at various points from 1968 to 1980, but 1980 was the point at which turning back became vastly difficult. This was the moment when a new political order was born; an order conceived to crush those who were willing and able to fight effectively for their share of income and money.

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Why Elites Have Pushed “Free Trade”

Those who are middle-aged or beyond remember the relentless march of free trade agreements, the creation of the WTO, and the endless drumbeat of propaganda about how FREE trade was wonderful, inevitable, and going to make us all rich. It didn’t, and it was never intended to. Fully understanding why “free trade” has only enriched a few requires understanding the circumstances required for free trade to work, the incentives for free trade, and the power dynamics which make free trade perfect for elites who want to become rich (often by destroying the prosperity of their own countries). Free trade is about power, and power is about who gets how much.

The Isolation of Elites and the Madness of the Crowd

All societies change and face new challenges. What matters is how they deal with new circumstances. The US, in specific, and most of the developed world, in general, is in decline because of simple broken feedback loops. Put simply, ordinary people live in a world of propaganda and lies, while the rich and the powerful live in a bubble, isolated from the consequences their decisions have on the majority of the population, or on the future.

The Bailouts Caused the Lousy “Recovery”

This may be the hardest thing to explain to anyone with a connection to power or money: The bailouts are WHY the world has a lousy economy, not why it isn’t even worse. If people cannot understand why this is so, if they cannot understand that other options were, and are, available, other than making the people who destroyed the world economy even richer and more powerful, we will never see a good economy, ever again.

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The Rapid Destruction of Countries

You may have noticed, you probably have noticed, that most countries are becoming basketcases faster and faster. Some are destroyed by war and revolution, others by forced austerity. However it happens, the end of anything resembling a good economy through austerity in places like Greece, the Ukraine, Italy, or Ireland, or through war, in places like Lybia and Syria, is sure. Understand this: What is done to those countries, is being done to yours if you live in the developed world, just at a slower pace–and one day, you, too, will be more valuable dead than alive.

Why Countries Can’t Resist Austerity

Many of you will realize that much of the answer to this is related to the article on free trade. Weakness, national weakness, is built into the world economic system, and done so deliberately. The austerity of the past six years is simply the deliberate impoverishment of ordinary people, for the profit of elites, on steroids. But it is worth examining, in detail, why countries can’t or won’t stop it, and what is required for a country to be able to do so.

Why Public Opinion Doesn’t Matter

We live in the remnants of a mass society, but we aren’t in one any more (though we think we are). In a mass-mobilization society with relatively evenly distributed wealth and income, and something approaching competitive markets, public opinion mattered. If it was not a King, well, it was at least a Duke. Today it matters only at the margins, on decisions where the elites do not have consensus. Understand this, and understand why, or all your efforts to resist will be for nothing.

The Golden Rule

Money, my friends, is Permission, as Stirling Newberry once explained to me. It is how we determine who gets to do what. He who can create money, rules. This is more subtle than it seems, so read and weep.

It’s Not How Much Money, It’s Who We Give It to and Why

We have almost no significant problems in the world today which we could either not have fixed had we acted soon enough, or that we could not fix or mitigate today, were we to act. We don’t act because we misallocate, on a scale which would put Pyramid-building Pharoahs to shame, our social efforts.

Higher Profits Produce a Worse Society

No one ever told you that, I’m sure. Read and learn.

The Fall of the USSR

The USSR fell in large part because of constant and radical misallocation of resources. This misallocation occurred because those running the economy did not receive accurate feedback. Despite the triumphal cries of the West and the managerial class who pretend to be capitalists, a version of this exact problem is at the root of our current decline, and it would serve us well to understand how and why the USSR fell.

What Privatization Does

Of all the ideological bugaboos of our current age, one of the strongest is the idea that private enterprise is always more efficient and better. It’s not, but that belief is a very profitable to our elites, and understanding how the engine of privatization works is essential to understanding both our current economic collapse and how the fakely-bright economies of the neoliberal era–especially the early neoliberal period of Thatcher and Reagan–were generated.

What Prosperity Is and Isn’t

It is, perhaps, odd to put this article so far down the list, but it’s wonky and important and not very dramatic. Simply enough, what we define as prosperity is not prosperity, which is why we are sick, fat, and unhappy with rates of depression and mental illness and chronic disease which dwarf those of our forbears despite having so much more stuff. Fix everything else, but if we insist on continuing to produce that which makes us sick and unhappy, what we have will not be what we need or want, nor will it be, truly, prosperity worth having.

The Four Principles of Prosperity

Prosperity, at its heart, is an ethical phenomenon, as much as it is anything else. Without the right ethics, the right spirit, it will not last, nor be widespread. If we want a lasting prosperity, which is actually good for us, we will start by reforming our public ethics.

How to Create a Good Internet Economy

The internet is wonderful, but despite all the cries of “Progress, progress!” it has mostly made a few people rich, created a prosperous class of software engineers who often lose their jobs in their 50s, and has simultaneously overseen the decline of the prosperity for most people in the developed world. It has not produced the prosperity we hoped it would. Here’s why and how to fix it.

Concluding Remarks

The above is so far from comprehensive as to make me cry, but it’s a start. I do hope that you will read it and come away with a far better idea of why the economy sucks for most people, and a clearer understanding of the fact that it is intended to suck, why it is intended to suck, and how the old, better economy was lost.

(Author’s Note: This was originally published October 6, 2014. I’m putting it back up top, as I have gained many new readers since then.)

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