NZ, being small, isolated, but also a well-developed Western economy, provides a stark example of where this ends up. We produce enough food to feed over 40 million people, but up to 1 in 3 (and growing!) children among our own 5 million population live in households experiencing inhumane hardship and malnutrition. Meanwhile, lobbying over the past decades has left us with the most expensive (and likely least-taxed) per-capita property market in the world, with the wealthy able to turn essential shelter into a dependable investment asset, on the back of low-productivity primary-good exports.
There is one reason why I include China in what I like to call the financial and industrial core, which is a better term than the global north and global south, which I just cringe it over at this point.
Because I think the real solution to the existential crisis being faced by all of humanity can only really be found at the local level; the calamity US plutocracy intends for the United States will simply push forward the changes we actually need to embrace.
Globalization is the biggest bubble ever conceived, localization is the necessary response. Every community has to engage in the significant creative challenge: figuring out how to live as comfortably as possible on the resources available within their own territory. And I do mean this at the local level, because this is where the energy intensity of the modern world is expended. It’s where the global supply chains originate and terminate, after passing through that financial and industrial core.
The carbon capture and the greatest energy efficiency is the stuff we never dig out of the ground, whether that’s fossil fuels or rare earth needed for renewables..
Walkable cities don’t need car infrastructure they don’t need the tarmac, they don’t need the parking space, they don’t need the tires or the gas or the car parts nor the car dealerships. Regional ecological restoration, and a vegetated urban landscape, passive building design, doesn’t need air conditioning or need to worry so much about extreme weather. And small scale multi farms, if managed in specific ways are 6 to 10 times more productive in total food per unit land than the large agricultural concerns of the global food processing sector. Economies of scale do not apply to agricultural productivity. This is because the productivity of the land is directly tied to the diversity of stuff growing in the land. A monoculture is antithetical to this biological reality. That holds true for agricultural productivity as much as it does for economic diversity. The global econony is a mono-culture of sustinance. It's a terrible survival strategy.
Money, THE TOOL for temporal universe ACTION, could accomplish all of the the things you inumerated...if you applied the policies of the new paradigm of Gifting utilizing the TOOL of accounting.
Two comments: 1. Unionization sprees in China are unlikely to happen anytime soon, but they will be crucial to driving up domestic consumption to absorb the would-be trade surplus. Interestingly enough, unionization in the U.S., with its focus on manufacturing and industrial policy (maybe even energy startups!) will play a pivotal role in onshoring, though Trump will try to hamper that.
2. I’m eager to see what’s in the next post, I think the best-case scenario for global inequality when China firehoses its trade surplus elsewhere is that LATAM, Africa, Oceania and peripheral Asia will put up walled gardens of regional trade blocs, combined with neo-Hamiltonian industrial policy (and a dash of William Easterly’s thinking)
"But here’s the thing: the affluent don’t spend all they earn. There are limits to the number of properties, fashion items, yachts and foreign holidays they can buy.
In contrast, the 99% - the workers - spend all their income - on food, housing, healthcare and travel."
Perhaps I'm being picky, but I wish economists, in particular, would get it straight that the affluent have income but they don't "earn" it. Their money makes money for them. In contrast, the 99% spend all they EARN.
+1 for the Machiavelli quote. Although I’m much more a fan of Discourses than The Prince.
he rarely voiced/penned his true sentiments regarding tyrants versus republics and the inclinations of the common man versus nobility, but he did make them, and he was very clear what side he fell on when he did.
Actually Trump isn't offering anything that is genuinely new, just re-packaged present pardigm palliatives...which indeed are destined to fail due to the self destructive inhumane nature of fascism. Here is the applicable corollary to Machiavelli: New paradigm's are the most difficult things to begin as they are always in complete conceptual opposition to present orthodoxy, however, they are inevitable when one actually looks at them and their temporal universe effects.
"in China, where the Communist government has shown itself completely unable to boost domestic demand"??
Michael Pettis has been pushing his myth on the basis that Beijing runs a manufactured goods surplus with the US. But he ignores China’s structural trade deficits: $909B primary goods imports; $241B services (Chinese foreign travel/IP licenses); $386B profits of foreign firms operating in China; $258B factoryless manufacturing.
Says Glenn Luk, “Subtracting these figures gets us back to the official surplus of $211B, or 1.2% of GDP,” in line with exports’ modest (20%) share of GDP.
In real life, urban Chinese consumer spending has 6.0% pa since 2013 while country folks's spending grew 9.3%.
The answer to chronic lack of demand, inflation, export platforming and the hollowing out of economies manufacturing capabilities is a 50% Discount/Rebate policy at retail sale. This policy immediately doubles every individual's purchasing power while transforming chronic erosive inflation into beneficial price and asset deflation and yet every commercial agent gets their full price...simply by the magic of the accounting operation of equal debits and credits that sum to zero, that is a 50% discount/credit to the consumer and a debit/rebate aspect of the policy...back to the merchant. In other words the consumer can now buy $100 worth of groceries for $50 while the grocer gets $100. Likewise they only have to pay $250k for a $500k house. And if you do the same accounting operation at point of loan signing with a credit/gift of interest to the banks/debit/debt jubilee to the consumer the individual gets that $500k house for only $125k.
The present monetary paradigm of Debt Only as the sole/monopolistic form and vehicle for the creation and distribution of new money is at the core of the core economic problem, namely Finance. Integrate/strategically apply the new paradigm of Direct and Reciprocal Monetary Gifting and you'll get the classic signature of historical paradigm changes: resolution of the anomalies of the present paradigm and complete inversion of its problematic temporal universe realities.
I think you are sidestepping the main point here. As the NGFS has just updated; the world is looking at a 30% reduction in GDP at 3°C of warming.
This 3°C is now guaranteed, as IPCC chair Jim Skea has recently admitted: investors and shareholders are still maintaining the upwards emissions trajectory, despite calls from government that fiscal and monetary policy should reflect these losses.
And as Swiss Re explain, 2-2.7°C is expected by 2050; or up to 3.2°C by this time.
It is a sad indictment of shareholder capitalism, and something only China seems to be seriously focused on surmounting - producing most of the solar, wind and other green tech as well as installing more capacity additions than the rest of the world combined.
My writing on medium.com goes into detail with excerpts from my new book
Hi Anne, a few thoughts on your excellent post: If weak demand at the global level is the problem then supply side solutions will largely prove to be in vain. However at the state level where governments are responsive to electorates, surely beggar they neighbour supply side policies make sense? Can we resolve trade imbalances at the global level? Is a version of Keynes' Bancor system achievable, or does the politics make it virtually impossible?
Whilst China would like to rebalance their economy they baulk at the price – having to cede a degree of power. I don't how they can square that circle.
ps. for anyone interested in the workings of cross-boader trade, I find Michael Pettis' excellent twitter feed one of the few streams still worth following.
Jim…Thanks for this comment…And as to Keynes’s Bancor system of international clearing, yes, I do think it is possible…with a start at regional level. Pretty much as the European Payments Union of 1950 - 1958 operated, and helped EU countries recover over that period. (Amato and Fantacci are the expeerts on the EPA) In fact I am in the process of writing for the Carnegie Endowment Fund on a proposal for an African Payments Union….something so. necessary to tackle Africa’s huge youth unemployment problem and its need for funds to finance the transition away from fossil fuels...
Thank you for taking the time to reply Ann. As US, China, Germany, Japanese economies game the current unbalanced system, starting with a regional (African) system which could later be rolled at the global level does sound sensible. Fingers crossed your proposal is adopted and proves a success!
The Chinese consumer prefers to save than consume. What is wrong with that? The bottom line is that living standards in China has been rising, per capita income is rising and China ended absolute poverty.
I personally aim to save as much of my income as possible and leave my savings to charity when I pass on. That’s my modest contribution to making the world a better place. I don’t want to rely on social security.
There is a lot of need for infrastructure development in the Global South. Just have to figure out how to allocate savings to where they are needed!
Also, so much of “consumption” in the Western economies are so wasteful. Lots of uneaten food, expenditure on “status goods”, expensive health care, arms industry and war ….
Personally, I feel a lot of consumption in the West is addictive, ends up trapping consumers in a debt burden. Far better to keep consumption below income with a savings buffer. And send the savings to help fund investments where they are needed. Even if the rate of return is low.
The issue I am raising here may be the same one as the issue of taking action to mitigate climate change. The Stern Review has been criticised by many respectable economists for “stacking the deck” in favour of climate mitigation, arguing that the social discount rate should reflect the cost of capital in financial markets. (I may be oversimplifying the critique.) Whereas Stern saw this (reasonably in my view) as a moral question, so we value future generations the same way as we value our own?
There is nothing wrong with China getting very low rates of return on investments/savings. That’s collective action at work to help make the world a better place. If the Chinese people have high savings rate, why not take advantage of that to channel their savings to finance investments in the Global South.
Don’t take the high savings rate for granted. One day the Chinese people will no longer have high savings rate. I suspect the tendency to save will wear out eventually as future generations forget the hardships of past generations.
And so he examined with suspicion any intimations of wanting to unburden himself of this weight, this anticipation of failure, to walk in any particular and arbitrary direction away from his fault, or have himself absolved, or exorcized, or cured, or excised, or turn away from the direction of his studies, or open himself to magnified inspection and critical comment (an activity at which he himself was supremely gifted especially when he was acting like a pompous ass), or simply change his life or his path or his mind, because he feared- or perhaps knew better than me- that he would fall apart. The fault was structural he knew too well, the heavy and solid having been mixed irretrievably within himself, the solid and the fluid, and could no longer be further localized, so that it could not even be located, so that it could be separated, no more so than some hobgoblin in some room in a castle, without imploding completely and washing his construction of an identity down the vortex of his imagined deep internal fault or cliff to oblivion forever.
Over time and recurrence his fault strengthened, encysting his isolation wherever it was mixed fluid into his being, was nourished by professional employment, and grew into a hardened identity displayed to others as composed of actual suffering skin and bone.
NZ, being small, isolated, but also a well-developed Western economy, provides a stark example of where this ends up. We produce enough food to feed over 40 million people, but up to 1 in 3 (and growing!) children among our own 5 million population live in households experiencing inhumane hardship and malnutrition. Meanwhile, lobbying over the past decades has left us with the most expensive (and likely least-taxed) per-capita property market in the world, with the wealthy able to turn essential shelter into a dependable investment asset, on the back of low-productivity primary-good exports.
There is one reason why I include China in what I like to call the financial and industrial core, which is a better term than the global north and global south, which I just cringe it over at this point.
Because I think the real solution to the existential crisis being faced by all of humanity can only really be found at the local level; the calamity US plutocracy intends for the United States will simply push forward the changes we actually need to embrace.
Globalization is the biggest bubble ever conceived, localization is the necessary response. Every community has to engage in the significant creative challenge: figuring out how to live as comfortably as possible on the resources available within their own territory. And I do mean this at the local level, because this is where the energy intensity of the modern world is expended. It’s where the global supply chains originate and terminate, after passing through that financial and industrial core.
The carbon capture and the greatest energy efficiency is the stuff we never dig out of the ground, whether that’s fossil fuels or rare earth needed for renewables..
Walkable cities don’t need car infrastructure they don’t need the tarmac, they don’t need the parking space, they don’t need the tires or the gas or the car parts nor the car dealerships. Regional ecological restoration, and a vegetated urban landscape, passive building design, doesn’t need air conditioning or need to worry so much about extreme weather. And small scale multi farms, if managed in specific ways are 6 to 10 times more productive in total food per unit land than the large agricultural concerns of the global food processing sector. Economies of scale do not apply to agricultural productivity. This is because the productivity of the land is directly tied to the diversity of stuff growing in the land. A monoculture is antithetical to this biological reality. That holds true for agricultural productivity as much as it does for economic diversity. The global econony is a mono-culture of sustinance. It's a terrible survival strategy.
Money, THE TOOL for temporal universe ACTION, could accomplish all of the the things you inumerated...if you applied the policies of the new paradigm of Gifting utilizing the TOOL of accounting.
Two comments: 1. Unionization sprees in China are unlikely to happen anytime soon, but they will be crucial to driving up domestic consumption to absorb the would-be trade surplus. Interestingly enough, unionization in the U.S., with its focus on manufacturing and industrial policy (maybe even energy startups!) will play a pivotal role in onshoring, though Trump will try to hamper that.
2. I’m eager to see what’s in the next post, I think the best-case scenario for global inequality when China firehoses its trade surplus elsewhere is that LATAM, Africa, Oceania and peripheral Asia will put up walled gardens of regional trade blocs, combined with neo-Hamiltonian industrial policy (and a dash of William Easterly’s thinking)
China is 72% unionized, which is why 58% of GDP is always allocated to wages (vs. 42% for Americans).
Urban Chinese median net worth is 400% greater than Americans', largely for this reason.
"But here’s the thing: the affluent don’t spend all they earn. There are limits to the number of properties, fashion items, yachts and foreign holidays they can buy.
In contrast, the 99% - the workers - spend all their income - on food, housing, healthcare and travel."
Perhaps I'm being picky, but I wish economists, in particular, would get it straight that the affluent have income but they don't "earn" it. Their money makes money for them. In contrast, the 99% spend all they EARN.
While we're quoting philosophers here's Gramsci on what we need from modern intellectuals: "pessimism of the intellect, optimism of the will.”
Here's my quote for intellectuals: Cynicism is the modern intellectual disease of the erudite.
+1 for the Machiavelli quote. Although I’m much more a fan of Discourses than The Prince.
he rarely voiced/penned his true sentiments regarding tyrants versus republics and the inclinations of the common man versus nobility, but he did make them, and he was very clear what side he fell on when he did.
I agree…read his biography over the summer, and learned much more about the real Machiavelli...
Actually Trump isn't offering anything that is genuinely new, just re-packaged present pardigm palliatives...which indeed are destined to fail due to the self destructive inhumane nature of fascism. Here is the applicable corollary to Machiavelli: New paradigm's are the most difficult things to begin as they are always in complete conceptual opposition to present orthodoxy, however, they are inevitable when one actually looks at them and their temporal universe effects.
"in China, where the Communist government has shown itself completely unable to boost domestic demand"??
Michael Pettis has been pushing his myth on the basis that Beijing runs a manufactured goods surplus with the US. But he ignores China’s structural trade deficits: $909B primary goods imports; $241B services (Chinese foreign travel/IP licenses); $386B profits of foreign firms operating in China; $258B factoryless manufacturing.
Says Glenn Luk, “Subtracting these figures gets us back to the official surplus of $211B, or 1.2% of GDP,” in line with exports’ modest (20%) share of GDP.
In real life, urban Chinese consumer spending has 6.0% pa since 2013 while country folks's spending grew 9.3%.
Surely its the relationship with the US that is the point…?
The answer to chronic lack of demand, inflation, export platforming and the hollowing out of economies manufacturing capabilities is a 50% Discount/Rebate policy at retail sale. This policy immediately doubles every individual's purchasing power while transforming chronic erosive inflation into beneficial price and asset deflation and yet every commercial agent gets their full price...simply by the magic of the accounting operation of equal debits and credits that sum to zero, that is a 50% discount/credit to the consumer and a debit/rebate aspect of the policy...back to the merchant. In other words the consumer can now buy $100 worth of groceries for $50 while the grocer gets $100. Likewise they only have to pay $250k for a $500k house. And if you do the same accounting operation at point of loan signing with a credit/gift of interest to the banks/debit/debt jubilee to the consumer the individual gets that $500k house for only $125k.
The present monetary paradigm of Debt Only as the sole/monopolistic form and vehicle for the creation and distribution of new money is at the core of the core economic problem, namely Finance. Integrate/strategically apply the new paradigm of Direct and Reciprocal Monetary Gifting and you'll get the classic signature of historical paradigm changes: resolution of the anomalies of the present paradigm and complete inversion of its problematic temporal universe realities.
I think you are sidestepping the main point here. As the NGFS has just updated; the world is looking at a 30% reduction in GDP at 3°C of warming.
This 3°C is now guaranteed, as IPCC chair Jim Skea has recently admitted: investors and shareholders are still maintaining the upwards emissions trajectory, despite calls from government that fiscal and monetary policy should reflect these losses.
And as Swiss Re explain, 2-2.7°C is expected by 2050; or up to 3.2°C by this time.
It is a sad indictment of shareholder capitalism, and something only China seems to be seriously focused on surmounting - producing most of the solar, wind and other green tech as well as installing more capacity additions than the rest of the world combined.
My writing on medium.com goes into detail with excerpts from my new book
https://danielrwilliams.medium.com/financing-the-collapse-51cb6754a365
Hi Anne, a few thoughts on your excellent post: If weak demand at the global level is the problem then supply side solutions will largely prove to be in vain. However at the state level where governments are responsive to electorates, surely beggar they neighbour supply side policies make sense? Can we resolve trade imbalances at the global level? Is a version of Keynes' Bancor system achievable, or does the politics make it virtually impossible?
Whilst China would like to rebalance their economy they baulk at the price – having to cede a degree of power. I don't how they can square that circle.
ps. for anyone interested in the workings of cross-boader trade, I find Michael Pettis' excellent twitter feed one of the few streams still worth following.
Jim…Thanks for this comment…And as to Keynes’s Bancor system of international clearing, yes, I do think it is possible…with a start at regional level. Pretty much as the European Payments Union of 1950 - 1958 operated, and helped EU countries recover over that period. (Amato and Fantacci are the expeerts on the EPA) In fact I am in the process of writing for the Carnegie Endowment Fund on a proposal for an African Payments Union….something so. necessary to tackle Africa’s huge youth unemployment problem and its need for funds to finance the transition away from fossil fuels...
Thank you for taking the time to reply Ann. As US, China, Germany, Japanese economies game the current unbalanced system, starting with a regional (African) system which could later be rolled at the global level does sound sensible. Fingers crossed your proposal is adopted and proves a success!
The Chinese consumer prefers to save than consume. What is wrong with that? The bottom line is that living standards in China has been rising, per capita income is rising and China ended absolute poverty.
I personally aim to save as much of my income as possible and leave my savings to charity when I pass on. That’s my modest contribution to making the world a better place. I don’t want to rely on social security.
There is nothing wrong with that, except the consequence: over-production, gluts and surpluses….
There is a lot of need for infrastructure development in the Global South. Just have to figure out how to allocate savings to where they are needed!
Also, so much of “consumption” in the Western economies are so wasteful. Lots of uneaten food, expenditure on “status goods”, expensive health care, arms industry and war ….
Personally, I feel a lot of consumption in the West is addictive, ends up trapping consumers in a debt burden. Far better to keep consumption below income with a savings buffer. And send the savings to help fund investments where they are needed. Even if the rate of return is low.
The issue I am raising here may be the same one as the issue of taking action to mitigate climate change. The Stern Review has been criticised by many respectable economists for “stacking the deck” in favour of climate mitigation, arguing that the social discount rate should reflect the cost of capital in financial markets. (I may be oversimplifying the critique.) Whereas Stern saw this (reasonably in my view) as a moral question, so we value future generations the same way as we value our own?
There is nothing wrong with China getting very low rates of return on investments/savings. That’s collective action at work to help make the world a better place. If the Chinese people have high savings rate, why not take advantage of that to channel their savings to finance investments in the Global South.
Don’t take the high savings rate for granted. One day the Chinese people will no longer have high savings rate. I suspect the tendency to save will wear out eventually as future generations forget the hardships of past generations.
From Eve's Mark( Book 1, Purgatorio)
-----
And so he examined with suspicion any intimations of wanting to unburden himself of this weight, this anticipation of failure, to walk in any particular and arbitrary direction away from his fault, or have himself absolved, or exorcized, or cured, or excised, or turn away from the direction of his studies, or open himself to magnified inspection and critical comment (an activity at which he himself was supremely gifted especially when he was acting like a pompous ass), or simply change his life or his path or his mind, because he feared- or perhaps knew better than me- that he would fall apart. The fault was structural he knew too well, the heavy and solid having been mixed irretrievably within himself, the solid and the fluid, and could no longer be further localized, so that it could not even be located, so that it could be separated, no more so than some hobgoblin in some room in a castle, without imploding completely and washing his construction of an identity down the vortex of his imagined deep internal fault or cliff to oblivion forever.
Over time and recurrence his fault strengthened, encysting his isolation wherever it was mixed fluid into his being, was nourished by professional employment, and grew into a hardened identity displayed to others as composed of actual suffering skin and bone.
-----
-----
Wonderful..thank you for sharing.