Is Karl Chuckling?

The new US administration is making its foreign relations preparations to assume power in January under the banner “America is Back.” The phrase contains what some non-Americans might call American Solipsism. This is fed in part by the mistaken notion that the whole world has been moving in an Americentric or more specifically a Trump-centric orbit for the last four years, simply because all US political/media debate thought it to be so. What has been most striking for the outside observer from abroad, one step removed, was the totality of it, ½ + ½ = 1, regardless of which side of the US political divide, which could be parodied as total hate or total love of the 45th president.

“America is Back” implies back to what we knew, without addressing whether we are in the same place or not? Which when it is not the same, makes the idea of being back rather redundant.

The reality is that we are not by any stretch of the imagination in the same place. At the expense of causing deep existential nausea for the US solipsist, by introducing the vague idea that this is not due to Donald Trump (ignoring all the good vs evil moralism). The greatest shift is a subtle one but in as much as it is a nuanced change, it is a monumental one: Capitalism as we have known it in the era since 1989 is losing its mojo.

The pandemic can be looked at from so many perspectives because its effects are so vast. If one tries to restrict to looking at it from an economic perspective, the changes it has wrought would have been unfathomable a few years ago. Capitalism which has had an unbridled run as the driving world force since the fall of the Berlin wall, has been very unceremoniously thrown in the back seat. The wheel has been taken over by a non-economic economic nationalism.

The problem has been that this flow of efficiency has been accruing a debt of social disenfranchisement across the globe.

Globalization was the fruit and perhaps pinnacle of free-market capitalism, as it was by and large able to function by avoiding conflict between the different political shades of its participants, as economic efficiency acted as a lubricant enabling it to flow unhindered. The problem has been that this flow of efficiency has been accruing a debt of social disenfranchisement across the globe. It is worth noting that there has been a profound improvement in baseline poverty across the globe since 1989, which has been significantly aided, one could argue, by globalization. In deep contrast however this has been paralleled by increasing inequality.

Beyond its abject form of baseline subsistence, poverty is a relative concept. Thus, in many ways, social disenfranchisement has been experienced most pointedly in the wealthier nations of the world where a better than subsistence level of existence is guaranteed by the state. Consequently, the experience of comparative poverty is made more intense by loss of the right to complain. This has been accompanied by a growing resentment of globalization experienced by some at the raw level of job exportation to the destination of least cost. Lack of purchasing power, the sense of being left behind has been attributed to much of the political changes in wealthier nations in the last number of years. The French Gilet Jaune protests for example, typifying the genre.

Governments have not had an easy answer to the social discontent, there was an assumption that the ills of globalization were outweighed by its many benefits. This assumption however has collapsed under imbalance of inequality.

Societally one could argue that the world was ripe for a pandemic. Please note this is not intended as a cynical callous remark. It is meant in the sense that the pandemic represents a type of external event which could drive unthinkable economic restructuring without there being a need to take direct responsibility for that restructuring (since it has been perceived as a necessary response to an external imposition beyond anyone’s control). By contrast, for all the talk there has been in recent years, of climate change being an “existential threat” it clearly did not merit a strong enough threat to undertake previously unthinkable wholesale economic change. The pandemic, on the other hand, has provided such a mechanism.

The now common mantra of “life over livelihood” as the explanation of the imposition of restrictions on economic activity, literally usurps capitalism’s modus operandi. The idea that there could be a “good” reason to act in a manner contrary to economic betterment is such a shock to capitalism as we know it, that it would have Karl sit up in his grave in London’s Highgate Cemetery. Add to that the levels of dependence of so many people on state-aid as a substitute for economic activity and it is clear that we are in uncharted territory.

The lessons from creating a PPE bubble where clearly not learned as nations have gone on to hoard vaccine.

Another disturbing development is what could be termed non-economic economic nationalism. This was first seen in the nationalistic rush to acquire PPE in the earlier part of 2020, something that undermined the well-oiled global supply chain and generated a speculators’ paradise normally not seen outside of wartime. This inefficiency resulted in vast amounts of governmental waste and overspending (non-economic) rationalized on the basis that “Our Nation” needs it (economic nationalism). Furthermore, such narrow, contra-global thinking by the nations of the world failed to account for the “Pan” in pandemic (i.e., “All” people). The lessons from creating a PPE bubble where clearly not learned as nations have gone on to hoard vaccine, except that in this case it is not a matter of price, but rather of supply. This cannot be properly described as sensible economic thinking unless of course the nations involved are large enough to self-isolate from the rest world and happily run a reduced but functional national economy, once again the antithesis to a globalized approach.

Perhaps the best current example of non-economic economic nationalism is typified by the symbolic UK-EU impasse on the post Brexit trade deal: the issue of fishing. In the context of the British economy, fishing represents 0.1% of GDP. The UK wishes to prevent fishing in its territorial waters by other EU countries and in response the EU threatened to bar the sale in the EU of UK fish (the EU market currently accounts for 70% of all UK fish sales). Were the UK to achieve its goal, it would acquire all of its fish and be able to sell only 30% of them (until of course other markets were found for its fish). A non-economic pyrrhic victory. However, this issue is considered of more national symbolic worth than its economic consequences. In the broader context of the UK-EU disagreement, this issue (although only one of three key issues) may play a part in there failing to be a comprehensive post Brexit trade deal. That outcome makes no sense economically for either party but could be a likely outcome, even with a just-extended deadline for a resolution.

The world as we approach 2021 is not back where it was in 2016 and it doesn’t look like it will be going back anytime soon. The manner in which the aftermath of the pandemic hiatus to normal economic activity transpires will provide some indicators as to whether we are actually in the first stage of a gradual reduction in the influence of post-1989 capitalism or if it will reinvigorate and restore its mojo.

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