2015 – the post recessionary world
What is on the table
European banks are emerging from the credit crisis bigger than before, posing more risk to their national economies. BNP Paribas, Barclays and Banco Santander are among at least 353 European lenders that have increased in size since the beginning of 2007. Fifteen European banks now have assets larger than their home economies, compared with 10 lenders three years ago. (via European banks growing bigger, sowing seeds for the next crisis).
Concentration of power
What this growth has done is increase the concentration of risk, capital, power, manipulation into the hands of a few people. With Europe, USA and Japan dominating the Fortune 500 listing, with Super-mega corporations, the outlook for dilution of power and risk seems bleak and remote.
The other risk is again the full-employment economic model. Mega corporations, which can be easily controlled at arm’s length by the State, dominate the economic sphere. Power is concentrated in the hands of less than 0.1% of the population. Less than 300,000 people control the US economy of more than 30 crore people (300 million).
Jobs for everyone
So, what happens to the 99.9% people who do not control the economy?
They are given jobs. They become employees, associates, apprentices, trainees, understudies, etc – who will fulfill the purpose of these 300,000 people-in-power – from the media and academia, public and private sector, NGOs and Government, bureaucrats and business managers.
Sleight of hand
And while our attention diverted by war, crisis, threats, the real game is being played somewhere else – out of sight and out of bounds.
Self employment, independence, small business are driven out of business by channeling increasing amounts of debt to organizations controlled by the O.1% of the powerful people.
This growth in banks beyond the size or the home economies signifies greater concentration of wealth – and not less. The world would do well to remember that East India Company was after all a company, a private company!
Public sector economies of Europe
The economies of France, Germany and Italy are practically run by public sector monopolies – or subsidized behemoths, who make survival of competitors difficult by their ability to sustain losses – based on Government largesse.
Spain and Britain have all but collapsed! Which way will the US jump – will it also go the public sector way – go the Spanish way? By the way, the national industry in Spain these days is prostitution!
Which bring me to another question!
The lure of ‘capitalism’ …
Why is the West so keen on calling these publc sector, subsidy driven regimes as Capitalism? Capitalism depended on looted capital and slave labour to prosper – resulting in the famous ‘laissez faire’ quip. Capitalists wanted and got ‘laissez faire’ capitalism – which was a ‘coda’ for unlimited slavery. The restrictions on laissez faire were actually restrictions on slaves.
Now under socialism, they get unlimited protection from ‘destructive’ competition. Which is being papered over by names like crony capitalism, free market capitalism. etc., etc.
Look at Spain and Britain
Spain’s national industry today is prostitution. Britain is floating on the sewage of the Bretton Woods bilge! After the multi-trillion dollar bailout, which has just begun, and with more than US$4 trillion in debt with China, Japan, Russia and India, neither is the outcome certain nor is the outlook bright.
Last but not the least, we must remember the power wielded by the Chartered Companies of Europe – another word for public sector. East India Company was a public sector company!
The Rest of the World needs to be careful of these public sector monsters!
Public sector or oblivion
During the Great Depression, more than 19 auto companies (similar to the number of banks today) were folded into the Big 3. The Big 3 lived to fight for another 70 years. In their death throes, the US Big Auto is likely to go the way European auto sector has gone – public sector or oblivion.
Saddam lives (through his words)
The way it looks, it will mean the Mother Of All Mergers. At which point, there is no team of accountants in the world who can figure out what is where, or what condition what is in? And then the evasions, the lies the obfuscation can continue for some more decades?
Which model will US follow – public sector or closure? Subsidies or welfare?
Real low … real truth (seen an oxymoron like that?)
The real question – who will pay for it?
Not the Americans! No siree. Definitely not.
Neither the American super-rich or the American welfare-poor? Not the American tax payers or the American tax evaders? Not the American Whites or the American Blacks?
It is the Chinese, the Russians, Indians, Brazilians and above all the Africans will pay for this! They have done, what bankers call non-recourse lending! The Chinese, Russians, Indians, Brazilians and the Africans, have no recourse. Who will the Chinese go to, for redeeming their US$2 trillion?
The bankrupt US of A? Welcome to the real world.
Transportation – US auto is down – but not yet out. It will limp along for few more decades.
Boeing will face fresh competition from BRICS – Brazil’s Embraer, Russia’s (Ilyushin) and the Chinese (passenger jet programme). US electronics is stagnant – and fading power.
Computing Equipment – The US is still the prime force in the computing industry – though not on the manufacturing side. Chinese manufacturing is the dominant force in computer manufacturing.
Energy – US oil industry no longer dominates international markets the way they did in mid-20th century. The US Nuclear industry faces increasing competition from a public sector French and Russian industry – and India is planning to add its ‘frugal engineering’ muscle to this segment.
Higher education may save the day – What will sustain the competitiveness of the US industry – with out the dollar hegemony? The US education system is still significantly productive (measured in terms of patents, Nobel prizes, innovation, output, research papers, etc.). The US higher education system is notoriously hobbled by a weak school education system. How long will that advantage last – without an infusion of foreign talent?
The US entertainment industry remains the biggest in the West – and by many measures in the world also. Partially controlled by the Japanese, it however remains significantly competitive and dominating.
Agriculture is more fragile than estimated … The seemingly strong position of the US in agriculture is based on two aspects. Massive direct subsidies – of more than 8 billion dollars. And indirect subsidies of possibly another US$ 8 billion. Most of which goes to the 46000 farmers who account for 50% of the US agricultural production.
Communication technology – The communication sector has again seen the erosion of US competitiveness – with the domination of GSM technology seemingly solid for another 10-15 years. The long term direction for that industry anyways seems like IP-protocol systems. This may well result in commoditization of network equipment and terminal – and the increased importance of content. Low and medium switching technology may see greater commoditization with the eclipse of Cisco by the Chinese switch companies.
Green is still in the red … Environment engineering provides no major advantage to the US. Solar panels, wind energy equipment, hydrogen technology have all seen greater diffusion of leadership and market share. It may not give greater opportunity to the USA.
Finance and banking – The global financial markets were dominated by the US organizations in the past – but with the global financial crisis and the end to dollar dominance may see reduced clout for US firms. Their position will become broadly similar to current position of Swiss banks – mildly competitive, solid history, fading reputation.
Outlook – With such an outlook over the next 10-25 years, what the US leadership may focus on is Arctic oil. Oil will remain a strategic asset only with high prices (slower production increase and faster demand growth) and if no other energy source appears. Oil finds in the Atlantic and Pacific republics may spoil the party – for instance, Cuban oil.
Much like the respite of the North Sea oil to Britain, Arctic oil may provide a temporary halt to the slide in US economic dominance.
If the US can lay its hands on a significant part of it!
France, Germany, Canada, Italy and Australia (not in G7) are tethering on the brink – under the weight of their social security system, and most of their business is in the public sector. A geriatric Japan is dependent almost entirely on exports to these declining seven. Japan’s investment in India and China has been negligible.
The US strategy
Most ‘future-of-China’ debates are incomplete as they miss a very important element – the American template for co-opting client states. Let us call this as US-Client-Acquisition Programme (USCAP). The outcome and China’s economic future is tied to access to US markets, capital, technology, businesses – very closely.
The US has successfully executed US-Client-Acquisition-Programme (USCAP) a most out-sized ‘conquest’ in history. By using these economic levers, it has successfully created client states across Europe, SE Asia, Japan, etc. Some economies have taken the bait, used US incentives and become ‘successful’ client states.
Some prospective clients states have fallen by the wayside. South American failures, the Middle East, Pakistan, post-Gorbachev Russian reluctance have been signal failures of American recruitment.
The 2 trillion trap
Similar to the success of the Europeans, the Japanese, Koreans and the Asian Tigers, China too has embraced the US-client state model. Booming exports to the US, massive FDI by the US in the Chinese economy, has put China in the earlier position of Japan and Korea – prime sub-contractors to the US economy. Where the Chinese economy seems to ‘partially different’ is the military side. On foreign policy and ‘American’ culture, the Chinese have been ’superficially’ resistant and nominally ‘assertive’.
The Chinese miracle, much like the ASEAN, Japanese and European miracles before, is using exports to the USA as a stepping stone. Chinese growth and expansion depends on access to the US markets and a devalued currency. For how long will the US allow the Chinese to do that? Another 5 years – or is it 10 years.
As for India
India is unlikely to drastically change its trajectory.Its economic success will continue evenly, based on its entrepreneurial class. Its public sector engagement will reduce.
It is likely to improve its relation with China, Russia and the US. EU will continue with own perception of self-importance. The crucial factor defining India’s position will be Pakistan. Will India continue whine about Pakistan – or will take some covert /overt action against the twenty off terrorist training camps? Will it take charge of stabilizing Afghanistan?
China’s assertiveness will lessen in the face of resolute Indian actions – and not moral posturing or protests. While the moral under pinning is certainly essential, the Indian position will need reinforcement.
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