CORONAVIRUS | WHERE’S THIS HEADING (PART 3)?


A Long Read

This post is the final one in a series of what’s turned out to be four parts (1, 2A, 2B and 3) contemplating the economic, political and social implications of the Covid-19 pandemic. The perspective I’m sharing here is held by people whom I refer to as ‘alt-economists’; I suppose I’m one of them. They’re not necessarily formally trained in economics, but they have other qualifications relevant to ‘humanity’s struggle to achieve happiness in a world full of constraints’ (one definition of classical economics). My defensive-pessimist nature makes me think that economists and politicians between them could be misjudging the transformational nature of what we’re experiencing now. We’re in the mother-of-all worlds of unforeseen consequences; a world in which some of us contend that economists are no better placed than others to predict what happens next. So, this post sets out the alt-economists’ explanation of where the Covid-19 global health crisis could be heading.

Of course, nobody can predict the future. However, by reading this post you’ll have an alternative perspective to that purveyed by orthodox economists (often through the mainstream media), many of whom are already saying that economic growth will once again save the day. Therein lies the problem. I shall argue here that we can kiss goodbye to Industrial Age rates of economic growth and, therefore, goodbye to globalisation. We must say hello to localisation, the decentralisation of politics and a rise in the sanctity of the sovereign nation state.

The world post-Covid-19 will be like nothing anybody alive has experienced.

Economic Impact

One of the typically riveting books I’ve read recently is David Graeber’s, ‘Debt – The First 5,000 Years’. Debt is topical because governments around the world are racking it up like there’s no tomorrow (you’d suspect there wasn’t, but I imagine there will be). The strategy in the UK and in certain other countries is, to all intents and purposes, to make government the employer of last resort. Economists will tell you that, inter alia, the failure of governments to adopt a similar strategy at a time of financial crisis in the early 20th century was a major contributor to The Great Depression, which hit America the hardest. So, without getting into a debate about the merits or otherwise of, say, Keynesian versus Austrian economics theory, we are where we are: governments are riding to the rescue by borrowing and, if necessary in due course, printing money to prevent immediate economic collapse.

As an aside, the European Union (EU) is struggling to cope economically and politically with the coronavirus, primarily because the euro is and always was a fair-weather currency. The euro as is it is today may well not survive the Covid-19 pandemic; therefore, the EU itself could be facing a euro-induced existential threat. The EU’s institutions will duck and dive and fight for their political lives, detached as they are from the peoples of Europe; some euro nation states, particularly Portugal, Italy, Greece and Spain (aka the PIGS), will be crucified – it’s happening already; the process will take time, but’s it’s unfolding now. Like the USSR, if the EU’s days were numbered before Covid-19, they could soon be numbered, metaphorically, on the fingers of one hand after Covid-19. The peoples of the EU won’t tolerate the imminent catastrophic socio-economic consequences of Covid-19; those consequences now being amplified, ironically, by the EU itself.

Nobody can be certain of the precise economic impact of lockdown. Obviously, the longer lockdown continues, the more damage is being done to the country economically and socially. You can take your pick from economists, think-tanks and financial institutions trying to shed light on the numbers. Here are a few examples:

The Telegraph reports the UK’s Office for Budget Responsibility (OBR) as calculating that, ‘Britain faces the biggest economic shock in 300 years’.

In the same newspaper, Assistant Editor Jeremy Warner observed, ‘across great swathes of the economy there is already utter carnage’.

Torsten Bell, Chief Executive of the Resolution Foundation, said: “The current crisis is unprecedented in both its scale and rapidity, with low earners and the young worst affected so far. We are already on course for a deeper recession than the [Global Financial Crisis of 2007/08]’. An understatement there from Mr Bell.

The OBR says the UK public sector budget deficit ‘could surge to £273 billion this year, representing some 14% of GDP’. The budget deficit is the amount by which government spending exceeds its tax income in any given period. That deficit will be added to the UK national debt which currently stands at about 80% of Gross Domestic Product (GDP being the primary measure of the nation’s wealth). The UK national debt – the money owed by the public sector to the private sector – amounts to £1.8 trillion today and will now almost inevitably exceed £2.0 trillion. To put things into perspective, in 1994 the UK national debt was under 15% of GDP and stood at some £250 billion. On the other hand, in wartime (eg the Napoleonic Wars, the Second World War), national and global debts soared in some cases to three-digit percentages of GDP. At the end of World War II, the UK’s national debt was 250% of GDP. According to a recent report in The Independent newspaper, ‘some economists say that government borrowing could shoot up as high as in wartime’.

Again, as an aside, in the EU, Spain’s national debt is already 98% of GDP; Portugal’s is 146% of GDP; Italy’s is 167% of GDP and Greece’s is 219% of GDP. The last time I looked, none of those countries was in a shooting war. Being in the eurozone, however, those countries’ governments have zero chance of managing their economies organically and, therefore, steering their societies out of the Covid-19 crisis. As ever in the EU, Germany holds all the cards. I’ll wager that tens of millions of EU citizens won’t tolerate what now lies ahead. They’ll realise soon enough, if they haven’t done so already, that their respective governments are powerless to manage their own economies in a crisis, thereby potentially ripping apart the fabric of their societies. Incidentally, one can’t help but wonder where are all the British EU cheerleaders these days?

Kate Andrews, The Spectator’s Economics Correspondent said that, ‘all economic indicators suggest that we’re now experiencing the sharpest economic contraction in historyattempts to forecast are relevant for hours, maybe days, before a new infection outbreak or multi-billion-pound stimulus package turns the most up-to-date calculations on their head. The new reality has destroyed our already limited ability to make economic forecasts. Now, we’re all flying blind’.

Economic Growth, Debts and Energy

Fast-forward to a time when the primary focus of governments shifts to economic recovery. Now assume the perceived threat of damage to society from the looming economic catastrophe is considered by governments to exceed the threat to society perceived to arise from Covid-19. Exactly when and how this occurs doesn’t much matter for the purpose of this post. What matters is how governments approach the need to create and sustain economic renewal. One hopes there’ll be people in government looking at this right now.

My guess is that economists and politicians will assume that by pouring in the right ingredients, pulling the right levers and flicking the correct switches, economic growth can and will be restored; the aim will almost certainly be to return the economy to industrialised rates of wealth creation as soon as possible. Bizarrely, stock markets are signalling in this direction. Ambrose Evans-Pritchard observed just this week that ‘delusional markets are still betting on a V-shaped recovery that cannot possibly happen’. Mr Evans-Pritchard is right because there are a couple of serious problems here: one relating to the debt situation mentioned earlier, and the other relating to energy.

Economic Growth and Debt

Let’s look first at the relationship between economic growth and debt. According to research and analysis carried out by Dr Tim Morgan ‘interpreting the post-growth economy’, Dr Morgan explains that in the period 2001 – 2016, global GDP, ieglobal wealth’ expanded by $49.6 trillion. However, over the same period, global debt increased by $141 trillion. So, each $1 of ‘growth’ was accompanied by $2.84 of net new borrowing. You can see the problem here. In the simplest terms, for a couple of decades (at least), we’ve been deceiving ourselves that we’ve been getting wealthier when in fact what we’ve been doing is getting more heavily into debt (government, corporate and household). Furthermore, at the time of the Global Financial Crisis (2008) authorities slashed interest rates to avoid mass debt defaults. Consequently, returns on capital invested since then have plummeted meaning that, inter alia, global pension provision is deficient to the tune of about $124 trillion. So, in the period 2008 – 2016, global GDP expanded by $24 trillion (you could be forgiven for thinking that we were all getting richer); however, debt increased by $84 trillion and the pension deficit (a contingent liability) worsened by $91 trillion. Again, you can perhaps see where this is heading. For every $1 of GDP ‘growth’ from 2008 – 2016, the combined effect of increased global debt ($3.51) and pension impairment ($3.82) was to dwarf that $1 of ‘growth’ by $7.33 of downside. Put simply, the global economy is a mirage of wealth creation. We’re living beyond our means but, worryingly, the debt and contingent liabilities’ trends have been worsening. Now throw in the extraordinary and unprecedented impact of Covid-19 and you can see why some of us are uneasy about what lies ahead. Orthodox economists on the other hand will be saying, ‘move along, nothing to see here, economic growth will save the day’, economic growth being the economists’ mantra.

However, as Chris Martenson at ‘Peak Prosperity’ informs us, governments and debt markets are making an enormous collective bet that the future global economy will be exponentially larger than the present. Read that sentence again, if you would please, in the context of the previous paragraph. It’s a dangerous wager and one which, if it doesn’t pan out, places the collective wealth of entire nations at risk. We could spend an entire book just on the subject of debt (I mentioned earlier David Graeber’s book, ‘Debt – The First 5,000 Years’), but the point to note is this. When debt markets have been disappointed in the past, standards of living have suffered, governments have fallen, currencies have been destroyed and/or nations themselves have collapsed. So, economists and politicians, through the mechanisms of their governments, will now be desperate to achieve economic growth post-Covid-19, or at least the appearance of economic growth through spin and propaganda (says the cynic in me) – rather like has been the case for at least the past couple of decades; some would say since the end of the Second World War. Only now the stakes could be higher than in all history.

Back to Dr Tim Morgan again. He said in March 2018 that, ‘worldwide we’re subsidising an illusory present by cannibalising an already-uncertain future. We’re doing this (a) by creating debt that we can’t repay and (b) by making ourselves pension promises that we can’t honour. So acute is this problem that the chances of us getting to 2030 without a financial crash are vanishingly small’. Covid-19 has just made the situation almost immeasurably worse. But that’s not all, as I’ll explain in the next section.

Economic Growth and Energy

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design’ | Friedrich von Hayek

Economics is not science; physics is science. Unlike economics, physics has immutable laws, not least as far as energy is concerned. The sustainability of globalisation as we know, experience and benefit from it today (well some of us do, anyway) depends crucially on one dominating input: cheap fossil fuel energy. It’s critical that you grasp this fact because many economists just don’t get it; you can check out why at Gail Tverberg’s ‘Our Finite World’ blog: see the section, The Fundamental Problem is a Physics Problem. In my previous post I quoted the physicist Dr Michio Kaku who informed us that, ‘energy is vital to civilisation. In fact, all of human history can be viewed through the lens of energy’.

I’ll paraphrase Dr Tim Morgan who argues that money per se has no intrinsic worth; money commands value only as a claim on the output of a real economy driven by energy. In physics, energy is defined as the ability to do work. Without energy, there is no work, there is no economy. The global economy is an energy system (as Dr Kaku implied above), not a financial one; money plays a proxy role as a claim on output. So, there are limits to how long we can delude ourselves that prosperity is increasing in the face of growing evidence that, in fact, it’s not (see the growth/global debt analysis above). The most probable catalyst for recognition that the global economy is an energy system was always going to be a financial crisis, itself caused by escalating debt, dwindling provision for the future (pensions especially) and a puncturing of bubbles in asset prices. Covid-19 is now the God-given crucible for a headlong rush into a financial crisis.

You see, the cost of providing cheap energy to our global civilisation has been rising inexorably since around the 1950s; look at the Energy Cost of Energy (ECoE) parabola at Page 13 of this report. Put another way, the extraordinary benefits of cheap-energy-fuelled globalisation brought to mankind since about 1760 (the advent of the Industrial Revolution) started going pear-shaped shortly after the end of World War II. Since then the global ECoE has been rising steadily and will continue to do so (according to the Second Law of Thermodynamics). Consequently, post-War economic growth has not been all that it seemed; it has in fact involved an explosion in government, corporate and household debt that’s made us feel like we’re getting richer but has in fact been sowing the seeds of the destruction of globalisation. To use another analogy, Covid-19 represents the globalisation chickens coming home to roost.

Finally on the topic of energy, for those of you who assert that mankind will continue much as it has done for the past 200 years for the next 200 years without fossil fuels and without oil in particular, please take time to read this Manhattan Institute paper, ‘The “New Energy Economy”: An Exercise in Magical Thinking’.

Globalisation

Whether economists, politicians, you or me like it or not, globalisation as we know it today is finished. Even if economists and politicians wanted to proceed with the economic equivalent of pushing blancmange uphill with a fork, their mission is doomed from the outset. Notwithstanding, even today for example, OBR economists (there they are again) predict a strong economic bounce back in the short-term following the unprecedented self-induced coma into which governments around the world have, in synchrony, placed the entire global economy. Economists have never been terribly good at predicting the future; these days, some of them seem positively delusional.

Covid-19 has been the catalyst for bringing into sharp relief the fact that the laws of nature – biology, chemistry and physics – trump any and all economic theories within ‘the dismal science’. The demise of globalisation has been in the offing for some time; the obsolescence of globalisation isn’t a novel idea; it just hasn’t made the headlines – until now. After you’ve read this post you might want to spend half-an-hour with a glass of your preferred poison listening to this podcast of an article in The Guardian newspaper (July 2017), ‘Globalisation – the rise and fall of an idea that swept the world’. You may also wish to read Richard Heinberg’s prescient book, ‘The Party’s Over’ (2003) in which Heinberg predicted ‘we shall soon be entering a new era as different from the industrial one as the latter was from medieval times’. Heinberg was on the money, methinks.

Of course, you could reject the proposition that globalisation is obsolete. You could say that the laws of physics have no bearing on economic matters; that oil depletion is not significant vis-à-vis future economic growth; you could say that the relationships between the post-War illusion of economic growth, ballooning global debt (government, corporate and household), and pensions impairment are neither cause-and-effect, nor an existential threat to the global economy in the medium- to long-term. Finally, you could say that the socio-economic impact of Covid-19 will not be as substantial as predicted and that, therefore, economic recovery on the back of human endeavour and concomitant economic growth will, as has been the case for the past 200 years, ensure that everything will be alright on the night. All the best to you in substantiating that Panglossian thesis.

To round off this section on globalisation, here’s Adrian Wooldridge, The Economist’s Bagehot columnist explaining where in his opinion globalisation went wrong:

Localisation, Democracy and Nationhood

For the past ten years or more one of my pastimes has been to research and understand how and why civilisations come and go. This partly explains why I maintain this blog and have written this series of posts. At the risk of putting too fine point on it, our globalised civilisation is now at risk. Mankind has never in its history been so inter-connected, so inter-dependent, so complex and so fragile as it is today. Civilisations up until the 19th century had always been localised relative to how we live today. Of course, the Roman Empire springs to mind in this context; however, even that civilisation didn’t embrace every continent on Earth and, notwithstanding, it too in the end collapsed. The British Empire was unwound relatively peacefully over decades, but no longer exists today. Now we live in a hyper-connected World Civilisation where we’re staring transformational change in the face. In the final sub-sections of this post, I’m going to summarise how I see things panning out over the coming years and into my children’s generation.

Nationhood

Covid-19 has shown us the extent to which when there’s trouble afoot, people turn to their families, their communities and their own governments for succour. By contrast, supra-national organisations (the European Union, the United Nations and the World Health Organisation spring immediately to mind) rapidly start to look extraneous or even inimical to national survival. Covid-19 has triggered what has all the makings of an outright rejection of globalisation, including a rejection of China’s virtual monopoly as manufacturing supplier to the world (but China’s another’s story for another post).

In his book, ‘The Road to Somewhere’ (2017), David Goodhart’s central thesis is that the liberal ideas that led to and reinforced globalisation and more recently hyper-globalisation were the preserve of a powerful minority of people (about 25% of the population) whom he refers to as the ‘Anywheres’. Goodhart’s research showed that Anywheres are educationally and professionally successful and they value social and geographical mobility. Anywheres are well-suited to globalisation and have largely benefited from cultural and economic openness in the West. A lot of my personal friends are Anywheres, but I choose not to be one of them in this regard.

Somewheres’ on the other hand are in the majority (about 50% of the population); they’re characterised by identities rooted in place. Somewheres value family, authority and nationality. In terms of globalisation, the Somewheres have been left behind, not only economically, but also in terms of the things they hold dear. The remaining 25% of the population are the ‘Inbetweeners’ and can be persuaded either way.

Goodhart argues that for a long time the Anywheres have looked down on the Somewheres which has provoked a backlash manifested in the rise of so-called ‘populism’ and, for example, the election of President Donald Trump in the USA, the decision by the British electorate to have the UK leave the EU and the unfolding Italian political landscape. Incidentally, we’re not talking about nationalism here. We’re talking about the English novelist and poet Richard Adlington’s take on nationhood in the form of patriotism. In 1931 Adlington said, ‘patriotism is a lively sense of collective responsibility. Nationalism is a silly cockerel crowing on its own dunghill’.

One could write at length about the many and varied reasons for a resurgence in nationhood in the way that I mean it in this post, and in the sense described in 1860 by the Italian politician Giuseppe Mazzini who said, ‘a country is not a mere territory; the particular territory is only its foundation. The country is the idea which rises upon that foundation; it is the sentiment of love, the sense of fellowship which binds together all the sons of that territory’.

This isn’t the case of a wish of mine being father to the thought. Post-Covid-19 I think we can expect to see the binding together of peoples in their respective communities and countries having faced down a global pandemic (or learned to live with it, more like) and then striving to cope with the dire economic consequences in the years ahead. In a later post I intend to pick up on this more philosophical component of the impact of the Covid-19 pandemic.

Democracy

The EU provides a perfect example of what happens when nation states cede sovereignty to a foreign power (namely to the European Commission which is the EU’s unelected, executive body) and in so doing deny their citizens clean democratic choices about national economic, political and social policies. Member nations of the European Union, especially members of the eurozone, lack full and proper control over their destinies. In benign conditions, EU citizens aren’t really aware of the power of the European Commission and the six other supranational institutions which, ultimately, determine their respective national ways of life. That is until the proverbial shit hits the fan. Those of us who are Somewheres could always see this coming in some shape or form and so voted in the EU Referendum (2016) for the UK to leave the EU.

Earlier in this post I explained how the euro currency could well be a millstone around the EU’s neck. Eurozone nations now find themselves powerless to deploy simultaneous fiscal and monetary measures to mitigate the economic impact of the Covid-19 pandemic as it affects their individual countries. The EU is not a democracy; at best it’s a sham democracy. Consequently, EU citizens were never asked if they wanted their countries’ currencies outsourced to a foreign power. Now, some of those countries at least will pay the price: Portugal, Italy, Greece and Spain, for example, are being hung out to dry.

Covid-19 will make people realise just how precious is sovereignty, freedom and democracy. Sure, international cooperation, international relations and, indeed, international trade (which is not globalisation) are all very important. However, when all’s said and done, what really matters when a crisis on the scale of Covid-19 hits a country is that the citizens of that country want to know that their elected representatives have complete control over the armoury – and, moreover, that those citizens can dismiss their elected representatives (vote them out of office) if they fail in their democratic duties to their electorates. None of this is possible in the European Union quasi-superstate, and it’s why I believe the EU’s days are numbered.

The EU’s response to Covid-19 has been shambolic. In fact, the situation in Europe is every-man-for-himself as member nations adopt their own strategies for tackling the virus. Open borders quickly became closed borders. The EU failed initially to provide an effective mechanism for distributing badly needed medical supplies to affected countries. The EU then compounded its abject performance through its inability to provide economic support for coronavirus-stricken economies. The EU remains in pretty much a paralysed state being more of a hindrance than a help to its member nations. The EU’s government, the European Commission, is both impotent and pointless (albeit its 32,000 employees are extremely well insulated from the crisis, thank-you; for the time being anyway). The Telegraph’s Con Coughlin summed up the matter in a recent article, ‘The EU’s lamentable response to Covid-19 has exposed fatal flaws in the project’. In a situation like this, when strong and effective governance becomes a life or death matter, one wonders just what is the point of the European Union? I said it earlier and I’ll say it again: where are the British EU cheerleaders these days who not so long ago were screaming and shouting and telling us that the UK could not possibly survive without our country being governed by the unelected ‘President’ Ursula van der Leyen and her 32,000 cronies in Brussels? Democracy wins the day here.

Localisation

For all its advantages, some of us conclude that globalisation’s disadvantages outweigh the advantages. You’re free to take the contrary view, of course. Most pros and cons analyses that I’ve researched offer a consensus on the principle disadvantages of globalisation; these include the following:

Inequality. Globalisation has an inherent tendency to increase inequality. The world’s 26 richest men now own as much as the world’s 3.8 billion poorest people. Globalisation is wonderful for senior corporate people, business owners, investors and the professional middle-class; it’s pretty rubbish not only for the poorest in the world, but also for millions of blue-collar workers in developed economies.

Job Losses. In developed nations, jobs have been lost and continue to be lost to emerging-market nations which have lower cost economies. China in particular – a relatively low-cost economy – has hoovered up jobs from developed economies around the world. For example, since 2001 America alone has lost 3.7 million jobs to China.

Environment. Globalisation has hammered the Earth’s environment. The world’s resources and natural systems upon which we depend are exhibiting clear signs that we’re approaching their limits in terms of sustaining our globalised existence. We’re having to exploit the poorest-quality mineral ores; peaks in critical resources are being noted at a faster and faster pace; and we’re scouring the globe for the last few concentrated sources of primary wealth. We’re depleting water in fossil aquifers at unsustainable rates, farmers are mining soils of essential nutrients and our oceans’ rich ecosystems are suffering.

So, if not globalisation, then what? Well, the answer is localisation. As with the subject of debt, one could write a book on localisation and why and how we now need to build a world of localised, interconnected economies.  In fact, we don’t have a choice in this matter: since globalisation is unsustainable, localisation is our only survival strategy.

The International Institute for Environment and Development (iied) describes localisation as a process which reverses the trend of globalisation by discriminating in favour of the local (no surprise there, then). Depending on the context, ‘local’ is predominantly defined as part of the nation state, although it could be the nation state itself or even occasionally a regional grouping of nation states. The policies that bring about localisation are ones that increase control of the economy by communities and nation states.

The objectives of localisation are to increase community cohesion; reduce poverty and inequality; improve livelihoods, social infrastructure and environmental protection, and to increase people’s all-important sense of security.

Localisation is not about restricting the flow of information, technology, investment and trade, management, and legal structures which, in fact, further localisation; indeed, these would be encouraged by a new localist emphasis in global aid and trade rules. Such transfers would play a crucial role in the transition from globalisation to localisation. Furthermore, localisation is not about a return to overpowering state control; it’s about governments’ pursuit of an economic framework which allows people, community groups and businesses to reshape their own local economies.

Earlier in this series of posts I quoted University College London’s Peter Antonioni who told us that, ‘economics is all about humanity’s struggle to achieve happiness in a world full of constraints’. The word ‘happiness’ stands out, doesn’t it? Well, Helena Norberg-Hodge is the founder and director of ‘Local Futures’ whose strapline is ‘Economics of Happiness’. Here, Ms Norberg-Hodge’s institution neatly explains localisation in under three minutes, better than I ever could:

If you want to round off your understanding of localisation, you may wish to download and read the iied’s Colin Hines’ paper, ‘A Global Look to the Local’ which he subtitles ‘replacing economic globalisation with democratic localisation’.

Summary

Thanks for hanging in this far; it was a long read and I’m grateful you’ve taken the time to try to understand a somewhat unorthodox view of life after lockdown. I was tempted to write life after Covid-19; however, Covid-19 will be with us forever now; the objective will be to learn how to live with it. An orthodox economist probably wouldn’t accept the central thrust of this post, namely that Covid-19 will be a socio-economic game changer. In fact, Covid-19 is merely the catalyst for something that was on the cards anyway: the end of globalisation and a transition for mankind back to pre-industrial rates of economic growth and the profound socio-economic implications of that change.

Quite what transition will look like in practice and how long it will take would have to be the subject of another post. Jon Michael Greer predicts what he calls the long descent. For fifteen years Rob Hopkins has led the ‘Transition Network’ which, as the organisation’s name suggests, exists to facilitate, through practical advice and networking, the transition of communities and nations towards localisation. Localisation and transition are subjects in their own right and won’t cut the mustard with classical economists nor most politicians. There are no votes in talking to electorates about ‘de-growth’.

Notwithstanding, one of the first things I shall do on publishing this post is to invite my elected politicians in local government, the Scottish government and the UK Parliament kindly to read my thoughts. Perhaps you would consider doing the same?

In a nutshell, this four-part series of posts has posited the following:

Global Pandemic. The Covid-19 pandemic represents a global health crisis, its impact dramatically amplified and exacerbated by globalisation.

Global Lockdown. The response of governments around the world has been, by and large, to put into effect a synchronised closing down of the global economy.

Globalisation. Globalisation/hyper-globalisation is unsustainable economically, environmentally and socially. Above all else, globalisation relies on an uninterrupted supply of cheap energy, ie energy available everywhere and always at a price consistent with consumer-led economic growth ad infinitum. Such energy can only be delivered by fossil fuels and especially by crude oil. If you don’t believe me, sit down one day and read from cover-to-cover the physicist Professor David MacKay’s book, ‘Sustainable Energy – Without the Hot Air

Energy. Mankind faces a global energy crisis best coined as oil depletion, but in fact embracing the end of sufficiently affordable fossil fuels to power world civilisation in the way we’ve come to expect for the past 200 years.

Energy Economy. The global economy is an energy construct, not a financial one. Economic growth since the 1950s has in fact been little more than a debt-fuelled mirage as the Energy Cost of Energy has climbed inexorably since then.

Debt. Global debt (government, corporate and household) is already a dead-weight on economies around the world; a situation that will be exacerbated by Covid-19 and which could now tip the world into a major financial crisis.

Nationhood, Democracy and Localisation. In the face of all of the above, some of us argue that the future will (should) be about treasuring nationhood above distant, semi-detached supra-national structures; treasuring democracy and freedom and placing these attributes highest on the list of political and social priorities; doing everything possible to plan and manage a transition from globalisation to localisation in order to bake the greatest chance of sustainability into our children’s future.

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See you down the pub … eventually.

17 comments

  1. Sydney Wright · ·

    Does LOCALisation mean trading with geographically closer nations eg Belgium, France, Germany, Ireland rather than trading with geographically distant nations eg Australia, Canada, New Zealand, United States of America which requires far more cost and fuel (and consequent damage to the environment) to transport the goods?

    The traditional trade of English wool was to export it to Vlanderen where weavers turned it into high quality cloths which were then sold on to amongst other Italian traders, some of whom then sold the highly value added goods back to England, with the obvious resulting imbalance of export low cost raw materials versus important expensive manufactured goods.

    Liked by 1 person

    1. moraymint · ·

      Thanks Sydney. Localisation doesn’t and can’t mean no international trading, nor does it mean mercantilism. Localism simply means starting from the assumption that it’s highly desirable to do as much as possible locally and to develop government economic and social policies accordingly. The idea is to make localisation more economically and socially attractive than globalisation.

      Liked by 1 person

  2. flyer · ·

    Just to add to my last post, this from Reuters.

    “Fed opens dollar swap lines for nine additional foreign central banks”

    https://www.reuters.com/article/us-health-coronavirus-fed-swaps-idUSKBN2162AX

    Globalism may be over as we know it but this opens up another can of worms, particularly as the US Fed is printing trillions of dollars. I’ll leave you all to pick the bones out of it.

    Liked by 1 person

  3. flyer · ·

    I was just having a look at the oil futures market, very amusing, speculators are desperate to get out of the market as they won’t be able to take delivery of the oil and squeeze hundreds of thousands of gallons into their bath tubs. Now that’s what I call price discovery!

    Nobody ever talks much about the speculative elements of markets and how this drives prices. We may have an energy problem in the long term but for now, under our current circumstances, the world is awash with oil. This alone should tell you something.

    A great article though, very much in line with my own thoughts and increasingly, I don’t like what I’m seeing. I live in a sparsely populated part of the world, we can cope with localism, we can easily feed ourselves. This decision to move is one I made twenty years ago, back then I could already spot the trends, people at the time thought I was mad to just pack my bags and go, they are envious now.

    I’m not being smug, indeed if there’s one thing I’ve learnt over the last twenty years, it’s that it just isn’t easy to let go of your native land and countrymen, I’ve tried but I just can’t do it, hence my comment here.

    Unfortunately this is a very accurate article, all I can say is that it’s better to go into these things with your eyes open.

    Liked by 1 person

  4. Wolfy · ·

    Thanks. Your intellectual expose of globalisation vs localisation chimes with what my gut has been telling me as we feel our way through the implications of COVID-19 locally.

    I’m looking forward to your blog about China. I sense that we and many other developed nations have become so dependent upon China’s manufacturing capacity (and banks?) that our politicians dare not call out the Chinese government on its stonewalling with respect to the true nature of the COVID-19 pandemic within China. The prime exception appears to be Trump, and you cannot imagine how difficult it is for me to admit that!

    Thanks again.

    Liked by 1 person

    1. moraymint · ·

      Thanks Wolfy. There’ll be huge corporate and, to some extent, consumer pressure to return the world to globalisation once lockdown becomes less oppressive. If that succeeds, then we’ll get all that we deserve socially and environmentally. I’m anxious for my children and theirs more than anything else; it won’t make much difference to our generation. Only if governments shape their own economic, political and social policies to favour and prioritise localisation over globalisation would things change.

      I sent a hard-copy of this post to The Rt Hon Michael Gove MP today, copied to my local MP, to the Prime Minister and to Dominic Cummings. Michael Gove is the Minister for the Cabinet Office and one of his responsibilities is ‘advising the Prime Minister on developing and implementing government policy’. I asked Mr Gove to consider advising the Prime Minister to favour localisation over globalisation as government policy. I figure that it’s all very well me getting things off my chest here on my blog, but then I need to do something a bit more practical to try and influence change more directly. I’m not holding my breath on getting a reply from Mr Gove.

      Like

  5. reallyoldbill · ·

    Another interesting read. I tend to agree that Covid19 could well be the final nail in the coffin of an already very sick patient called the Euro. It has staggered from one illness to another over the past decade and this could finally finish it off. It may not happen this year but cannot now be very far off. Should that collapse occur, as I fully expect, it will be interesting to see how Germany copes with the ending of its huge advantage of an artificially devalued currency. For an export-driven economy as it is that could be catastrophic in the aftermath of this global shut down and it is hard not to feel that the sound of pigeons coming home to roost can be detected in the air.

    As for the whole EU project, the levels of ill will that have been created during this pandemic in countries like Italy and Spain by the attitudes and inaction of the bureaucratic behemoth will not easily or quickly be assuaged. If the Euro, one of its “greatest achievements” according to boastful legend, goes under there is a very real risk that the EU in its entirety will as well. The question then will be how well that break up is managed, but even with goodwill on all sides it will make Brexit seem like a walk in the park. Coming as it will, should it happen, as the world as a whole struggles to minimise the impact on global economies of this unprecedented shut down it may herald a very uncomfortable time for Europe.The demands of people in many countries to protect their own economies at the expense of others will be hard to resist for many politicians and that makes it all the more disappointing that voices in the UK, still unreconciled to the UK having left the EU, are trying to weaponise this pandemic and demand an extension to the transition period due to end with this year. The last thing we need is to be shackled to a disintegrating, protective shambles across the Channel for a moment longer that already agreed. Once this is over the UK needs to be as flexible and nimble as possible and that means cutting the ties that bind us at the earliest possible moment.

    I can’t believe, as some sources seem to suggest, that we can all just pick up where we left off. It is my suspicion that whatever the world looks like when it reopens for business it will not be the same as it was and, properly managed both here and abroad, that might not turn out to be such a bad thing.

    Liked by 1 person

    1. Martyn Edwards · ·

      reallyoldbill,

      I agree with your claim that Germany is an export-driven economy. However, there is scope for ramming your point home more forcefully. The value of its exports is equal to 47% of its GDP. (The equivalent figure for GB is 15%). Until recently, when it was overtaken by China, it was the biggest exporter in the world by value. I concede that, for the sake of directness, sometimes it is better not to saddle an argument with too many ancillary facts. Having that figure at your fingertips may nevertheless be useful to substantiate a point.

      The exploitation of an undervalued currency by Germany is a very sore point with me. I would estimate that it has cost me in the region of £100,000. That is tantamount to theft. Admittedly, the Euro was foisted upon Germany by France as the cost of Reunification. But what efforts has the German government made to rectify a currency imbalance of between 20-25%? None whatsoever.
      It is evident that the German government values commercial expediency above international goodwill.

      Like

  6. I’m sure there will be all sorts of unintended consequences from Covid-19, some caused by the virus. however many caused by the response of most governments. All governments have to put a cost on life e.g. in respect of regulations for car design, or the availability of life saving drugs and health care. Many believe the costs of saving those that will die because of Covid-19 is too high i.e. we’re sacrificing the future prosperity of billions of people to save the lives of a few million (who might have died quite soon anyway). Of course politicians can’t be seen to be making these sorts of calculations even though they have been doing so for decades.

    As for energy I believe we need to take a step back and consider (i) how we can become more energy efficient & (ii) instead of investing billions in ‘Climate Change’ use that money (and more if necessary) to set up a modern day Manhattan Project to deliver fusion energy. Also, we can solve most of the energy problem, and power a global electric car fleet if we stop being so anal about nuclear power and take it to the next level i.e. thorium reactors. Why aren’t we deploying versions of the sorts of nuclear plants that power submarines to deliver clean local/regional energy?

    Liked by 1 person

  7. Martyn Edwards · ·

    Moraymint,

    This review was compelling reading. The omissions inevitable in a tour de force such as this were minor details:

    1. Interest rates. One reason that debts have spiralled to astronomic levels is that they have been allowed/engineered to do so by low interest rates. Historically, base rates have been about 5%. In recent years they have been lower than at any time since the Bank of England was established in 1694. I understand that interest rates are currently lower than any time in the past 600 years. This scenario is repeated throughout the western world. This in itself is a manifestation of the fundamentally unstable condition of our economy.

    2. Population. Population levels both globally and in the UK, are far too high.

    James,

    I very much doubt that you are old enough to remember what life in Britain was like in the 1970s at a time of heightened industrial unrest. Society was effectively held to ransom by trade unions making sizable wage demands on behalf of their members. Britain became known as the sick-man of Europe. Smashing the power of the more militant unions was a matter of national survival, and did not simply serve a narrow sectional interest.

    Your facile premise that the greedy and governments promoted dependency on imported consumer goods is incorrect. In fact, in the 19th century the wealthy landowners in government did their utmost to prevent the importation of cheap corn from the USA with the enactment of the Corn Laws. The Repeal of the Corn Laws was for the benefit of the masses at the expense of the landed gentry. The height of the British Empire was characterised by the import of basic foodstuffs from all over the globe and the export of manufactured goods. This two-way flow of trade benefitted not only the merchants, but the masses too. In the post WWII era, the British government has still tended to adopt a laissez faire attitude towards imports. Just a few years after the end of WWII VW set up an import operation in the UK. It managed to sell all of 2 cars in its first year of trading. It was consumer demand that decided the level of sales, and not government intervention.

    Government policy has been determined since 1975 by the diktats of the EEC.

    Indirectly, however, your vague assumptions are indeed pointing in the right direction insofar as the British government has allowed swathes of industry to offshore production, allowing company shareholders to benefit from lower manufacturing and in particular labour costs, and consequently higher profits and dividends. It is, however, not just the shareholders of such companies who benefit from increased profit margins, as British consumers benefit from lower prices too. Not that I condone such practices, because I don’t.

    Offshoring industry to China facilitates state-sponsored industrial scale IP theft by the Chinese. Self-interest has nothing to do with xenophobia. China should be excluded from the comity of nations.

    Liked by 1 person

  8. Phillip Barnard · ·

    A long read , but interesting 🤔 and lots to think about,
    Thanks barney

    Liked by 1 person

  9. Another tour de force Mr Moraymint….

    Liked by 2 people

  10. James · ·

    Localisation has great public appeal, but the reality is somewhat different. Where would British Steel obtain its iron ore? Where does tea and coffee come from? Global supply lines have been growing for the past 200 years. The British Empire ensured that the UK obtained its needs to become an industrial powerhouse. The end of the empire saw that powerhouse decline.
    Inequality is the product of government decision, not global trading, Dependency on imported consumer goods suited two factions, the greedy, and governments that wanted to reduce the status and power of their labour unions. Post Covid not much will change except for heightened levels of xenophobia and the threat of war increasing. Thos who the virus failed to kill are likely to be the cannon fodder of multi-national government blunders.

    Like

    1. I understand where you are coming from James, but ‘people’ for want of a better word have been trading with other ‘people’ in different localities for millennia – England made much of her wealth by exporting wool while importing other necessary and luxury items from very far afield. That benefitted more people than just ‘the greedy and governments’.

      Liked by 2 people

    2. moraymint · ·

      Thanks James and I anticipated responses similar to yours. It’s important to understand the difference between ‘globalisation’ and nations trading globally; the two are quite different. Obviously, I failed to make the distinction clear in my post. If nations and, most important, their politicians actively choose localisation harmonised with appropriate global trading – but where the emphasis is always on ‘local first’, then there’s no reason why the world should descend into nationalistic chaos. That will always be a risk, of course. However, the fundamental point of my post was to make clear that, whether we like it or not, the laws of nature mean that globalisation is singularly unsustainable.

      Liked by 1 person

  11. Hi Moraymint totally agree with the part about the EU and EURO , with the debt a lot of these countries have, and their GDP and with no currency of there own to work with and again the Germans ,French and a few select others pulling the EURO strings how can they possiblily recover as they cant just keep borrowing , after COVID 19 is over the closed borders may well stay closed and and countries will follow the UK to leave.

    Liked by 2 people

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