Saturday, November 19, 2016

World: May you live in interesting times. Where do we go from here?

One national leader, when asked to comment on Trump's victory replied that it is not time for comments now, it is time for thinking. He is very right.

So what's next? Let's think about it.

There are elections coming up in the next few months in Austria (for president, the last one was annulled), a referendum in Italy on constitutional reforms which could cause PM Renzi to resign, national elections in the Netherlands and Germany in 2017, inter alia.

The key issue is what's going on in the economy and society. That's what drives politics too after all.

I insist in the Clintonian motto "It's the Economy Stupid", in spite of what people may think caused Trump's victory. People want a job, good pay, job security (ie the expectation that they keep their job or find a new one if they lose it), a nice enough life. When they do not have such things, other issues become active. Then the blame game starts and usually scapegoats pay the price.

In other words, the theory I support is that when you have sound economics in your household then you are less likely to be concerned what language your next door neighbour speaks, less likely to be irritated by hearing someone speak in a foreign language in the tube (subway) or the bus. No wonder Britons on benefits and low salaries were key to Brexit. But they were not the only ones. Because in the UK at least  (because of the language inter alia) foreigners do not compete only for low pay jobs but middle and for high end jobs too. So the fact that UK unemployment is just 5% (that is supposed to be a normal rate since people change jobs), this stat alone does not tell you how people feel about their economic and job security.

On top of that, many in America don't appreciate US companies moving production facilities to Asia. Manufacturing jobs were not pretty but they paid relatively well. Plus, consider this. A few weeks ago I was talking to a European IT professional with US citizenship who spent the last three years working in the US. He had to relocate several times to have a job and in the end decided he could not compete with IT work being outsourced to Asia and Asian IT professionals on professional visas in the US hired via middlemen, he claimed. Of course he was now supporting Trump.

Yes, you can now buy a laptop made in Asia for 300 Euros instead of 1000 or so 10 years ago and that is benefit to the Western consumer. But it comes at a cost: Jobs at home. The cost-benefit analysis does not work for everyone.

With Trump president the TTIP (US-EU) deal is probably off and was not progressing well anyway. Will Trump recall existing trade deals of the US? Will he question the WTO Uruguay trade rules as far as the US is concerned? What stance will the GOP led House and Senate have on trade?

The Brexit UK (in trade deficit for years) wants to champion free trade (without free EU movement). Will it push for a new WTO deal? Unlikely it has the muscle or can get a momentum going after the Doha Round of WTO talks failure.

Everyone wants to export and host tourists. All countries/economies do. But as a UKIP fan pointed out in a recent discussion only 6% of UK firms export. That is probably true for most countries. Can things be done to make exporting a game for everyone?

Of course many people have jobs due to inter-national trade. They work for multinationals in country units, provide services to them (eg advertising, PR, tax, IT). They sell in small stores goods made elsewhere. They export. But many don't.

As Angela Merkel pointed out, some people take advantage of free movement to get a job in another EU state, keep it for a few months and then benefit from benefits natives do. Will come back to this issue in a separate post.

Refugees and economic migrants hope for a better life in another country. Let alone their skills
sets, what about language barriers? We are very very far from real globalisation and we are facing the cons of the existing phase. And it looks like they have serious effects, socio-economic thus political too. The Trump election showed that political correctness is not a way to suppress these concerns. Their roots must be addressed. How?

Countries are a system of modern life. They evolved from city states in Ancient Greece, empires (Alexander the Great's, Persian, Roman, Byzantine, British, etc), local kingdoms in Europe (eg Italy and Germany were "united" merely 150 years ago), the US is a result of migration first from Europe and now mostly from other continents, China is now capitalist and a member of the WTO since 2002, Russia is now in the WTO (but has an embargo going on with the EU), some people are concerned about the potential of new world war.

Western economies in recent decades have become Services based ones. The dotcom phenomenon led to a bubble and its bursting. Why did the financial world invest so heavily in subprimes instead of industry? Have derivatives and other financial instruments created too much "fake" money in the world?

Austerity aka budget discipline has become a fashion in recent years, especially in Europe (Germany, NL, UK, etc). Now it seems that Britons want less austerity out of the May government. Obama implemented Obamacare and brought inflation down to 5% but some people cannot afford the Omabacare care fees. Of course they voted for Trump, who also promised lower taxes. Obama skyrocketed the US debt, let's keep that in mind.

It's the Economy Stupid but with 7 billion souls on this planet and some 200 countries ie national economies, large (US, China, India, Russia), medium, small and extra-small, go figure how to make it all stick. They are ways and I will discuss some of them in the near future. But what is a national leader supposed to do? Push exports, help his people move as economic migrants to other economies (eg India), bring in foreign investment, these are the usual main ways. Many are using immigration barriers, the UK now wants to do that too.

Wallonia received angry and dismissive reactions when it temporarily vetoed CETA (the EU-Canada deal). Yet many said "Kudos", especially in social media. Yes, trade is good but does not benefit everyone.

In recent years regional arrangements seemed to provide an outlet. UNASUR, African Union, ASEAN, Trans-Pacific, NAFTA (to some extent) and of course the EU and the European Economic Area, with mixed results. They have to be part of the re-think.

The obvious way is of course to focus on your national economy, try to get everyone jobs and other benefits, use barriers that are not against WTO rules, keep your voters happy or at least as happy as possible. But what will be sum result? Walls. 27 years since the fall of the Berlin Wall. No wonder some people in or from the ex-USSR and ex-Comecon are said to miss the days they "could sleep worry-less at night" (as long of course as they did not oppose the regime). What does that show? That in the modern era people want safety, not just from crime but economic one too and foremost. Ten years ago a BBC survey, global, showed that many in the world are not happy with the current system. They do not want communism, who knows what they want and who can deliver it. But the current system does not please them. Of course compared to 1016 or 1716 everyone in 2016 has a better life, right?

I will end this post by pointing out that maybe over-legislation and bureaucracy are an ill of at least the West. They depress the economy and create many effects. But create many jobs too. Will come back to that. "May you live in interesting times" was a ancient Chinese saying. But it was a curse!

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