Global Growth and Populism

Return to Geopolitics 2/18/19

1. Post WW 2 Economic Adjustments
2. Neoliberal's Financial Collapse
3. Democracy Caused Popularism
4. Right-Left Populism
5. Populism is a Reset Mechanism
6. A New International Order
7.
21st Century Foreign Policy

Part 1
Post WW 2 Economic Adjustments

Fifty Years of Political Economy

Source: Economist M. Blyth  editor W. Antoniotti
 

Preview

The Why

 
World Wide Great Depression

Made Low Unemployment

"the" Public Policy Goal.

 

 Post WW2 Pent-up Demand

 increased AD, increasing US wages and Profits.


The Resulting High Inflation

pushed interest rates up followed by a 30-year decline.



2. The Result


Profit Margins Stayed High
 as Western business used continuously falling interest rates
 for highly leveraged refinancing causing higher profit.

Western Business Adjusted
 
to a mounting profit squeeze caused by
increased flat world AS.
 "Wages fought profit and
Profit Won."

Only U.S. Increasing Demand was available
 
to soak up global savings surplus
 to negate AS > AD. Will continue?
 

3. The Prediction

Resulting Political Turmoil
 will also continue but its effects
may be less volatile, maybe not.

Fiscal Policy AD Could Increase
 in the form of infrastructure spending
and or helicopter money drops
 like tax reductions.

Government Debt Guarantees
may allow 2% 1950's style real
economic growth.

   Overview

1. The Good

Cold War to 1980
AD > AS

Full Employment Goal =
 Inflation, Debtors Paradise

US Credit Expansion
equates AD with AS.

2. The Bad

Neoliberal Economic Reset 1980-2008
AS > AD

Business Responded to Inflation
Led to Deflation. a Creditors Paradise
 

3. The Ugly

Reactions to Neoliberalism 2008-

Sustained Deflation Created Winners-Losers
Globalization Failed
Pickett's R > G
Back to Equilibrium with Increased Income Inequality
 

 


 

to 1980

Politics

Strong Unions
Restricted, Rigid Labor Markets
Central Government Strong
Central Bank Weak
Finance Weak

Economic Effects
Sustained Inflation
Wages Share All Time High
Corporate Profits All Time Low
Real Value ff Debt Decreases
Inequality Low
 

1980-2008

Politics

Weak Unions
Open Flexible Globalized Labor Markets
Government Less Economic Responsibility
Central Bank More Economic Responsibility
Finance Strong

Economic Effects
Secular Deflation
Wages Share All Time Low
Corporate Profits All Time High
Inequality High
 

 

2008-

Politics
Lack of Bank Regulation

High Leverage

Short-Term Reserves Were in Euros
When Dollar Were Required

Academic Economist Under
Estimated Economic Effects of Financial Market

Economics

Government Helped Top and Bottom
Creating Middle Income Envy
 
 

Winners and Losers

Macro Economics

Winners and Loses 1

Debtors Can't or Won't Pay
Deflation Kills Wage Growth
Real Debt Value Increases

Creditors Lost
Real Value of Debt Up But Some Don't Pay
 
Winners and Loses 2

Return on Capital-R Greater Than Economic Growth Rate-G.

Top 1% received 90% of Income Gains  
Since 2012, most of this (70% of that 90%) went to Top 1/10 of 1%.

 

World's Very Poor Benefited


Middle Income Stagnate
Poor Get Government Help! 

Politics

Winners and Loses 1

Populist Nationalist Parties Won
attracted voters with renationalization
and anti-austerity policies.

Center Left Parties Lost Control
lower wages and cartel politics blamed capitalism and globalism

Center right parties Lost Control
blamed immigrants and globalism

We Will See 2
 

Source

Mark Blyth explains
Competitive Adjustment in European Market Area
Competitive Adjustment Applied to Trumpism starting at 4 min 15 sec mark
Short Term Politics Versus Long-Term Returns 
Video from Prof. Mark Blyth PhD -

See Crashed Video and book-review of Crashed:
 

Part 2
Neoliberal's Caused Financial Collapse

I. Economic Orthodoxies Wrong
A. Finance does affect real economy.

B. Finance system can falter.

C. Markets Need Regulation.

D. Many economist wrong because of
     politics. see Fake News Warning 7

 

II. Real Economy Trade Imbalances
not cause of 2007-08 FINANCIAL CRASH


A. The earlier Dotcom Bubble Crash
did not cause a banking crises because investors took the loss.

B. World trade imbalances,
the Balance of Financial Terror
were not the root cause the crash.

1. U.S. negative trade balance,
as many predicted, did not cause
assets and a dollar crash.

a. As of 6/18 both have appreciated.

b. See The New Financial Geopolitics:
Post-Cold War Geopolitics in a World of ‘Long and Low.’ 96 min
 

2. Loans to Greece from Germany's trade surpluses were not the problem
as France and the Benelux nations controlled the transatlantic dollar flows
needed for international trade and to maintain Exorbitant Dollar Privilege.

a. France runs a small negative trade balance.

b. South Korea currency tanked even
though she had a positive trade balance
and ample dollar reserves.

C. South Korea and the WEST could not
get dollars needed to fund substantial daily
 borrowing needs for international commerce.
 

III. Almost all banks were very highly
leveraged with substantial short term
$ borrowing and Euro collateral
needed for daily operations


A. When Lemans $180 billion
over-nigh
funding needs were not met by the
International Funding Market,
the entire market  crashed.
1. Worldwide credit flows stopped and
ATMs would soon be empty.

2. Bad housing loans were not the problem, rolling over short term
daily funding dollar needs with poor mortgage debt as collateral
immediately would quickly crash the entire financial system.

B. Credit stopped
1. Europe's banks had become the world's hedge fund for world dollar flows.
Loans were highly leveraged borrowed in dollars with Euro denominated collateral.

2. Thatcher deregulation of London's financial system made it the hub of dollar
denominated European bank sponsored debt which flowed into and out of the U.S.

3. The U.S. eventually deregulated
to loosened housing mortgage rules and
help financing of Clinton's expand minority
housing Community Reinvestment Act.

Credit-default swaps
created to safeguard
the resulting low credit rating housing
loans were exempted from regulation by
Gramm-Leach-Bliley Act .
It repealed
banking industry safeguards provided
by the Glass-Steagall Act.

4. Few banks had dollar reserves
to meet the needs of the banking
and corporate world.

5. Walls Street's model of an extremely
leverage wholesale funding model running
out of NY and London would crash.

IV. Is FED Involvement in a Geopolitical World Appropriate?

A. No
as a sovereign debt crisis requires Euro Central Bank was the appropriate agency.
B.
No as Max Plank Institute blames dysfunctional Euro participants.
C. Yes, it was a failure in the Transatlantic Dollar Flows as described by Mark Blyth.
 

V. Stability Needs Dollar Supremacy

A. World trade is stable because the world, through Europe's banks, completes the
circular flow of dollars back to the US by investing in U.S. companies.

B. Dollar investments are dependent on
high Intellectual Propert generated
corporate profits/economic growth.

1. Monopoly power companies:
Apple, Google, Facebook, Pfizer and
Johnson/Johnson are in control.

2. These profits are politically dependent
on intellectual property rights
created by trade treaties.

C. Distribution of these profits
has resulted in more income inequality.


D. Trump's disrupting this process
has many academics apprehensive.

Source

Crashed: How a Decade of Financial Crises Changed the World with Adam Tooze

The New Financial Geopolitics ─ Europe: Helper, Spoiler, Risk Generator?
from
Watson Institute: International/ Public Affairs 86 min

See The Thirteen Commandments of Neoliberalism

Documentary Of The Week: Steve Bannon At Oxford  2 hr video

Return to Political Economy Book Summaries  11/21/18  view horizontally   Please share!

 

Part 3 Democracy Failures Caused Latest Popularism
m

summarized from Francis Fukuyama: Democracy's Failure to Perform

I. Development of Illiberal Democracy
     
A. Causes
          1. Foreign Policy Failures of Developed Democracy
             
enhanced by U.S. foreign policy failures i.e. Middle East  wars
          2. Non-Liberal Democracy success, especially China
          3. Poor Liberal Democracy Performance i.e. economic
              slowness, immigration concerns, wealth accumulation
     B. Definitions, nominal
         1. States: monopoly on the legitimate use of force.
             
from Max Weber States are about Power!        
         2. Rule by Law: sovereignty sets the law i.e. China

         3. Rule of Law: sovereignty responsible to same laws
             as the governed. Laws limit power.

         4. Democratic Accountability requires free political parties
             with guarantee substantive accounting and a governments
             that serves the entire population, not just the rich and the poor.
             Liberals missed this effect of their policies.

 

Everyone Got More, Some Just Got More More Than Others!

 

C. Modern Political System
1. Generate tremendous power limited by the rule of law and is democratically accountable

2. Patrimonialism: rulers own political system, resources , distribute wealth Who You Know

3. Neo-Illiberal States: look democratic, limited representation, leaders follow the money
  

D. U.S. Failures at State Building
1. Focus: Build a Liberal Democracy
2. Required focus: moving from Patrimonial State to Modern Political System

a. Iraq and Afghanistan: got the liberal democracy but did not move from
a patriarchal state. Both states moved to Oligarchy where a few wealthy people
form a  Plutocracy. Neither protect citizens or provide services to a limited population.

 

II. Three Main Forces Are Blowing Up Global Politics

Editor's Thoughts:

1. US Led Global System is Over Thought from Ian Bremmer video
    A. Causes
        1. US Attitudes
        2. Weakness in Europe
        3. Intransigence of Putin's Russia
        4. Chinese Geopolitical Ambitious
        5. Authoritarian States Controlling and Disrupting Enhance by Technology 
   B. Real Problem is ideologically entrenched Western Geopolitical Establishment

2. Is it Possible This is About Self Esteemed?

Would a more Federalist Approach decrease the animosity
created by the movement toward traditional liberalism?
Deciding some issues at the state and local level might help!

 

Return to Political Economy Book Summaries  11/21/18   Please share!

 

Part 4 

Understanding Left-Right Populism
Frem Understanding Right and Left Populism
b
y
Samir Gandesha, Associate Professor
Department of the Humanities and
Director of the Institute for the Humanities
at Simon Fraser University.
 by 

1. Growth of Populism

Right-wing populist parties in Austria, Hungary, and Poland 

Erdogan's Turkey 2003, Modi's India 2014, 
Trump's American 2016,
Batten's U
nited Kingdom 2016.

Left-wing populism

The 2011 Tahrir Square generated Arab Spring was short lived

Zuccotti Park [NYNY] 2011
, was felt five
years later signaled rising support for
Bernie Sanders and Jeremy Corbyn
.

Latin America Bolivarian, Venezuela, Bolivia and Argentina

Focus on two populism helps
understand the difference between
right and left forms of populism in the
context of neoliberal globalization.

Empirical study by Norris and Inglehart (2016) emphasized
1) anti-establishment
2) authoritarian
3) nativism

Theoretical account by Ernesto Laclau (decades) saw an equivalential chain”
of different demands
democratic, horizontal and egalitarian discourse.

2. Populism: Economic Insecurity or Cultural Backlash?

Three distinct elements
1) anti-establishmentism  
vs.
1) representative democracy

2) authoritarianism            vs. 2) liberalism

3) nativism                        vs. 3)osmopolitanism
 

Two distinct axes: economic and cultural
1) evils of state economic management
2) conservative” vs. “progressive” values.

 

Three approaches
1) the rules of the game
2) the “supply-side” party politics
3) the “demand-side” of party politics

Two causes.
1) response to economic insecurity
2)
 backlash by older white males

Norris and Inglehart argue that the latter is the most convincing argument:
“We believe that these are the groups most likely to feel that they have become
strangers from the predominant values in their own country
,
left behind by progressive tides of cultural change which they do not share…
The silent revolution of the 1970s appears to have spawned an angry and
resentful counter-revolutionary backlash today.”

One wonders whether the authors don’t
seriously underestimate the threat right-wing
populism poses to the institutions of liberal-
democracy in the United States
.

A worrying inference that the authors explicitly draw from their
progressivist premises is that populism will eventually die
out.

The study  fails to sufficiently appreciate
the ways in which populist governments
seek to institutionalize their agendas,
thereby changing the rules of the game.
This has become most drastically
evident in the case of
Poland, for example,
in which Andrzej Duda (leader of the right-
populist Law and Justice party) has significantly
limited autonomy of the judicial branch
Other such examples abound.

3. Neoliberal globalization is comprised of four processes:

1) accumulation by dispossession  
2) de-regulation
3) privatization  
4) upward re-distribution of wealth

Together they have increased
economic insecurity
and cultural anxiety
1) the creation of surplus peoples  
2) rising global inequality
3) threats to identity

Anxiety from neoliberal globalization has
ammunition from right and left populists.

Neither Norris and Inglehart nor Laclau adequately account for such insecurity
in their theorization of populism.

“the people” are differentially deployed by right and left and they themselves
must be understood in terms of the respective enemies through which
“the people” is constructed. And this is the decisive dimension of populism.

Right populism defines "the people" as those confronting an external enemy.
1) Islamic terrorism 

2) Refugees
3) European Commission,
4) International Jewish Conspiracy ...

Left populism defines “the people”
as social structures/institutions
1) state and capital that thwart its aspirations for self-determination
2) allows hospitality towards the other

Right populism defines the enemy in personalized terms
Insecurity and anxiety are necessary,
unavoidable, even a favorable product
of capitalist social relations.
They generates acceptable fear of the
stranger and a punitive state.

Left populism defines the enemy
in terms of socio-economic structures.
Insecurity and anxiety are caused by
a
dismantling of the welfare state
and workforce casualisation.
These egalitarian solutions can
also turn authoritarian
.

Part 5 Populism is the Reset Mechanism

Populism
caused by 3 decades of market driven globalization

It is not just about wage stagnation, loss of jobs income inequality

It is about disempowerment,
social exclusion, unfairness,
and humiliation.

Many Trump Populists seek recognition,
having a meaning, a say in shaping forces
that govern their collective lives.

from M. Sandel: Populism, Trump, and the Future of Democracy

See Discussion

Important Question: is Kantian Morality Enough for the Public Sector,
especially since some think it is too much!

Should public discussion go beyond safe and delimiting morality
and moral duty, beyond the legality of rights and human dignity.

Should respect for work and be part of the discourse?

Should competing conceptions of the "good life" be on the table of public discussion?

Update from Ian Bremmer Populism in Europe & America  1/24/19
Battle is not over between right and left populists.
Populist power will increase as European Parliamentary Elections, the big 2019 story.
Dysfunction between bureaucrats and politicians will weaken Europe.
Difficult to govern, harder to manage geopolitically arrangements between countries
 

Editor's Note: Michael wants more that Kant. Kant is enough.

Michael Aandel is a lot like Charles Murray who is basically correct,
but wants too much control of what constitutes correct morals and ethics.

Extreme conservatives want too much control, extreme liberals want no control.

Left wing populism is economic, the main stream view feels this is the starting point

Right wing populism is about the cultural loss caused by immigration, not prejudice

Summary of Summary

Neoliberal globalization
increased economic insecurity and cultural anxiety.

Insecurity may need more attention by populist theory.

These are key to understanding the difference between right and left forms of populism

Related Studies Nazism And Neoliberal Mythmaking

German Reconstruction As State-Phobia      

The State As Killer   

Europe and the Centre-Left Fall under Hayek’s Spell

A Map of Hayek's Delusion

return to top

Part 6. Creating a New International Order

Prelude

1) Post WW 2 American Led Prosparity and Stability

2) Stability Ends, U.S. Dominance Continues

3) Liberal Foreign Policy Hegemony Must End

4) A Dangerous Direction


Prelude: Politics at Yalta
Began a Post War International Political Era

Prelude:
1648 Peace of Westphalia
Sovereignty of participants over their lands, people, and
agents abroad was established.
Broken by European Colonialism

1941 Atlantic Charter 
No spheres of influence, territorial self-determination required

First problem came immediately as Soviets did whatever it took
to keep Communists in charge of Poland.

The US responded with the Truman Doctrine eventually actions like the
U.S. and Britain sponsored covert activities like 9/8/53  Iranian Coup.

1) Post WW 2 American Led Prosparity and Stability

 

 

 

 

 

 

 

 

Prelude: Centuries Always Consist of Eating, Drinking, Loving, Hating

1-1 Great Wars Led to New International Order

1-2. Six Weeks That Changed the World

1-3. Nationalism Was Back

1-4 The Future of International Relations

1-5 End of Two Myths

Source The Creation of a New International Order
Dr. George Friedman, Geopolitical Forecaster 20 min video

1-1 Great Wars Led to a New International Order

A. New Boarders Especial in the Middle East  

B. Europeans Faced the Moral Abyss because, as the most civilized people,
     she had killed 100 million people.

C. Nations must be controlled before they destroy each other.

D. Multiple International Organizations were needed to create
a unity not created by the League of Nations and Munich
Political Organizations-NATO, European Union ...
Financial Organization- IMF, World Bank...
Success resulted as there was a 70 Year peace.
Moral Justification was provided by this
success, organizations represented no one.

1-2. Six Weeks That Changed the World
A. Russia invaded Georgia on 8/8/08
Political Organizations did nothing which ended 1991 political assumptions
Russia was back and there is going to be trouble

B. Financial Organizations failed to stop Lehman Brothers and resulting Great Recession

C. Self-Ruling Technocrats failed Europe because they did not understand.

U.S. [politicians] allowed experienced financial crisis technocrats to hand out the pain.
Europe, needing approval of many national central bank, has not handed out pain.
Germany wouldn't forgive loans and Greece did not want to pay loans.

1-3 Nationalism Was Back

A. Unemployment of 20% was not German pain and
low 6% unemployment in Germany was not Greek success.
Reality had changed
, they returned to being two different countries.

B. Polarization was dramatic within countries as
Technocrats who ran the government and finance were fine
except where austerity force government layoffs.

C. European Union was usurping the future
of those absorbing of 20% unemployment.

D. Not only did technocrats fail to see the problems,
they attacked politicians trying to protect the people,
the nation and they limited liberal central authority solutions.

E. Hatred, anger and outrange had to be dealt with.

1-4 The Future of International Relations

A. The 21st century will be politically volatile,
more like the 19th century than the second half of the 20th century.

B. World is no longer "hard wired" to a liberal international order.
    
C. The French Revolution and Enlightenment were correct.
The nation state is needed to bind people together.

D. World will revolve around nations
1. US with 25% of the world economy, even when acting stupidly, still must be considered.
2. Russia,
dependent on oil prices, will again continue her decline.

3. China
will begin more normal economic growth but must deal with a billion poor people.
4. Germany
is trade dependent in stagnating world, continues mercantilism, will not lead.
5. Japan
has third largest GDP, a stable society, a strong Navy and is the Asian power.
6. Russia
who faces an equal Turkey, hopes for coexistence, and hopes not to react.
7. Poland
is fastest growing European economy and must be considered.

1-5 End of Two Myths
A. Multilateral Organizations Solve All of Problems.
B. Harvard Graduate Manage Organizations Solves Problems.

See

1. America First' has won, by Robert Kagan at NYT.

2. Saving Liberal Democracy from the Extremes, FT's M. Wolf

3. The Far-right Book Every-Russian General Reads

See Trump's New Political Era?

Another View: Peter Zeihan on Power and Global Disorder in 2018  11/8/18
See his book interviews: The Accidental Superpower and The Absent Superpower
 

See The Next 100 Years

2) Stability Ends U.S. Dominance Continues

2018 Begins A New International Order
Peter Zeihan on Power and Global Disorder in 2018 22 min video11/8/18
See book videos The Accidental Superpower
   The Absent Superpower

Index

Preface:
Peter bases his analysis on the US no longer maintaining global order
which only existed to win the now over for 25 years Cold War.

Index

1. Designing a US Foreign Policy

2. Friends and Family Plan

3. A Strong U.S. Position

4. Requirements for Success

5. Expected Global Conflicts

6. Very Recent Changes

2-1 Designing a US Foreign Policy

Determining what we want requires

Fixing the Political Party System at a time when political parties are in a reinvention process
which last happened in the 1930's. It took 12 years.

Have a Conversation on replacing the Breton Woods trading system
which was designed to win the Cold War by fostering world trades.

Set a Foreign Policy Goals

2-2 Friends and Family Plan
Earn agreement of countries that are cultural and politically similar to US.
Canada, New Zeeland, United and probably Mexico

Earn agreements from a next group countries needing little maintenance
France, Japan, India, Thailand and some other southeast Asian countries 

TAKE IT or LEAVE IT message to Germany, China, Russia, Korea and say

2-3 A Strong U.S. Position

1. Largest strip of high-quality arable land in the world

2. Most Navigable Water ways in the world

3. Control best parts of a continent with moats on either side

4. If US trading system breaks down, US suffers the least! but

5. Trade is how we subsidized the Global system so getting NAFTA correct is important.

6. US delusion of China being the next super power,
    given she has only managed to hold together for 300 years, is amusing.

2-4 Requirements for Success

Geography that is productive and protected from outside forces
U.S very good , Georgia very bad

Economically Favorable Demography for high growth with
younger members spending, mature members earning and investing
US doing well as baby boomers had kids, the Millennials
Financial burden of the US relatively small baby boomer demographic will end
China, Japan, Canada, United Kingdom, Germany, Italy, Spain
have the highest tax paying work force they will ever have.
Only Spain and GB are not past the point of Demographic regeneration.
The others are "terminal countries."
Few countries, maybe the French and New Zeeland have a favorable demographic

3. Ample energy to fuel the economy as dependency put a governor on grown

Doing this analysis was reported in Accidental Superpower/.

2-5 Expected Global Conflicts

Nuclear armed Russia, a seriously terminal country is our biggest fear
and we should keep relations reasonable positive.
She is an economic and demographic tragic disaster and
will probably  not exist as a country within 40 years.
Bush 2 and Obama's Russian relations were criminally mishandled

Withdrawing as world's protector means little need to
contain China, that is Japans concern
contain Iran, that is Turkey and the Saudis concern

Nukes will be used but not against us as no one is close
to our equal except Russia, which is a US concern.

Korean nukes are only a delivery problem,
there existence is a South Korean/Japanese worry

Potential Conflicts
Persian Gulf between Iran and Saudis
Eurasian Fringe War with Russia vs. Germans, Poles, Scandinavians and Brits
Naval conflict between China, Japan S Korea and Taiwan as they try to keep themselves
fueled as middle east and Russian supplies become harder to come by.

2-6 Very Recent Changes

Happening faster because Obama did less than expected,
almost as if he did not want to have conversations with people.

Near the end he new how important factors were Interconnected.
How China's economy worked
Why Russia interfered with the election system,
Solar energy needs a backup
What a good tax policy would look like

Obama did not care enough to have related policies.
He had understanding but no policy.
With Trump, no understanding but a commitment some policy
Which is worse?

US has forced a acceleration of adjustments by world players
Brexit as the European Union disintegration accelerates
Chinas need for rapid growth while US still managing World security
Xi tries to cooperate as without free trade, china fall apart.

 

3) Liberal Foreign Policy Hegemony Must End

3-1 Definitions
Liberalism:
Focus on individualism and makes room for social contracts.
All have inalienable rights, it is universalism.
Nationalism:
Focus on social group, tribalism, make room for individualism.
Realism:
Focus on the state, the top of the geopolitical food chain.
Balance of Power is realist's only concern, political system is irrelevant, a black box.
Liberal foreign policy to spread liberal democracy not possible.
Defensive Realists
feel competitive geopolitics, limits aggression, perpetuate status quo.
Against force in Vietnam because balance of power was not at stake.
Nationalism, "the" most powerful geopolitical doctrine, made US Vietnam success problematic.

3-2 Unipolar World
Collapse of Soviet Union
created a Unipolar World.
U.S. Liberal Foreign Policy
has three goals.
Spread Liberal Democracy
by toppling dictatorships.
Build Open International System.
Expand International Institutions.

3-3 U.S. Liberal Geopolitical Hegemony Advantages
Human Rights generally protected
Interstate conflict, terrorism are less prevalent.
 

3-4 Failures of Liberal Foreign Policy
Perusing a Liberal Hegemony throughout Middle East
after the Iranian confrontation was won failed because of Nationalism.

Zone of Liberal Democracies created by expanding NATO eastward
soured important positive relations with nuclear superpower Russia,
who will be needed to balance the power that is China.
Problems created by the West in Georgia and Ukraine resulted in Russia reentering geopolitics.

Driving both Russia and Iran toward China is not appropriate policy.

Liberal foreign policy toward China ignored balance of power concern creating a Goliath.

National Security State is needed to fight for Democracy around the world has
led to the bypassing of Congress and the degradation of individual liberties.

A Foreign Policy aimed at creating a Liberal Hegemony has failed.
 

3-5 Realist Grand Strategies
Isolationism to avoid foreign entanglements
Offshore Balancing
uses regional powers to check potential hostile power.
Selective Engagement limits US engagement to events affecting security and Prosparity.

4) A Dangerous Direction

Like 2014, West Not Managing Social and Economic Change

Source by Yves Smith

Summarized by Walter Antoniotti

Europe enjoyed nearly 100 years of peace.

One reason was the 1815 Treaty of Vienna had given top priority in negotiations over how various territories were to be ruled.

Second, the new liberal order, powered by the Industrial Revolution was producing improved apparent domestic prosperity reducing the attractiveness of war.

Third, British and European states territorial ambitions and colonial land grabs offered more upside with less risk of manpower and treasure.

By Anatol Lieven. a professor in the War Studies Department of King’s College London and a senior fellow of the New America Foundation in Washington DC. See Anatomy of American Nationalism republished in September 2012. Originally published in The National Interest on December 22, 2018; cross posted from open Democracy

Peace ended with World War 1 in which some 16 million Europeans died, two great European countries destroyed, and others crippled was recently celebrated. This year may be the last of 29 relatively quiet years before the world’s major powers once again moved into deep and structural mutual hostility.

WW 1 engendered the scourges of Communism and Nazism. It led to a Second World War and the near destruction of European civilizations.

Nothing the political and cultural elite who were swept away for leading their countries into war could potentially be worth the potential lost.

Western allies portrayed the war as civilizations against German barbarism. Today one can certainly say the British and French systems were better than the German; but one must admit that an Algerian subject of the French Empire or an African subject of the British Empire might have a different perspective. Also, the Russian Empire made a pretty odd member of the supposed alliance for democracy.

The 1914 barbaric threat to European civilizations was the ruling establishments.   It came from decades of social and economic changes which generated hatreds and tensions building within European societies.

Before 1914, the European conservative elites encouraged aggressive nationalism to divert mass support away from socialism. To preserve the old European order, they moved in a most disastrously direction.

Today, the new cold war against China and Russia represent grave threats being generated by the conservative western establishment. A new geopolitical direction, it is comparable to that taken in during the early 20th century.

This new cold war is serving as a distraction from vastly graver threats. Western political elites are unwilling to address threats which would involve radical changes to their ideological positions. Their obsession with their own righteousness and civilizational superiority is leading to the moral civilizational fantasies that had helped bring on the 1914-18 disaster. This is liable to engender the distortion in judgment which, in the blindness of crusading frenzy, destroys nations and civilizations.

Ironies involved with the US leading a new “league of democracies” against an “authoritarian alliance” include the anti-Chinese participation of Vietnamese communists, murderous Filipino authoritarian populists, and above all Indian Hindu neo-fascists. Authoritarian and cultural nationalistic member Poland is bitterly anti-Russian. Add France in 2022 if she elects a president from the National Front. 

Diverting domestic discontent into external hostility rarely works because the factors that created the discontent remain unchanged. Does anyone who has interviewed the “Yellow Vests” in France seriously think that they are acting as they do because of manipulation from Moscow? Does anyone who has seriously studied the crisis of the white working classes in the USA believe they have voted for Trump because they have been swayed by Russian propaganda?

A More important link between Russia and America is the rise of Putin and Trump. Another is the rising death rate among working class males since the 1990’s in Russia and recently in America. In addition is the diseases and addictions fueled by economic, social and cultural insecurity and despair. In Central America a far more terrible version of these pathologies is driving millions of people to seek US asylum. This is driving U.S.  radicalization. Yet total US aid to Mexico in 2017 was less than that to is Ukraine or Egypt, and a fraction of that to Afghanistan. Does any truly responsible national establishment neglect its own neighborhood in this way?

Climate change threatens damage greater than anything the Chinese or Russian governments could or would wish to inflict. Yet media-politically generated hysteria over a minor Russia/Ukrainian clashes in the Sea of Azov could overshadowed close US-Russian co-operation to block the latest UN report on climate change.

There are real threats from Russia and China (notably trade) where the USA needs to push back. But these are limited issues which are negotiable or containable. They do not justifies restructuring western national geopolitical strategies and institutions around a new cold war.

If Khrushchev had not transferred Crimea from the Russian Soviet Republic to the Ukrainian Soviet Republic in 1956, everyone would recognize the Sea of Azov as Russian, and this issue would not even exist. In the South China Sea, the USA is pushing back against China in the name of an international Law of the Sea which the USA itself does not recognize. If the Chinese were ever so mad as to use their position in the South China Sea against US trade, the US Navy could block Chinese trade to the whole of the rest of the world.”

Serbian nationalist triggered WW 1. Most British soldiers who died in the First World War had ever heard of Serbia or of Sarajevo. In the name of God, let us not make this mistake again.

This entry was posted in Doomsday scenarios, Economic fundamentals, Europe, Guest Post, Income disparity, Politics, Russia on January 17, 2019 by Yves Smith.

Part 7 Foreign Policy Options for the 21st Century

1. Designing U.S. International Strategy by P. Zeihan

2. Responding to China: A Strategic Plan by K. Rudd

3. Creating a New International Order by G. Friedman

4. Trump's Foreign Policy by T. Wright

5.  GZERO Worldwide Threat Assessment

1. Designing U.S. International Strategy

Source
Peter Zeihan on Power and Global Disorder in 2018 22 min video
11/8/18  
See book videos The Accidental Superpower   The Absent Superpower

Index

Designing Strategy
Friends and Family Plan
A Strong U.S. Position
Requirements for Success
Expected Global Conflicts
Very Recent Changes

Determining what we want requires

Fixing the Political Party System
at a time when political parties are in a reinvention process which last like
1930's when it  took 12 years.

Have a Conversation on replacing the Breton Woods trading system
which was designed to win the Cold War by fostering world trades.

Set a Foreign Policy Goals

Friends and Family Plan
Earn agreement of countries that are cultural and politically similar to US.
Canada, New Zeeland, United and probably Mexico

Earn agreements from a next group countries needing little maintenance
France, Japan, India, Thailand and some other southeast Asian countries 

TAKE IT or LEAVE IT message to Germany, China, Russia, Korea and say

A Strong U.S. Position

1. Largest strip of high-quality arable land in the world

2. Most Navigable Water ways in the world

3. Control best parts of a continent with moats on either side

4. If US trading system breaks down, US suffers the least! but

5. Trade is how we subsidized the Global system so getting NAFTA correct is important.

6. US delusion of China being the next super power,
  
 given she has only managed to hold together for 300 years, is amusing.

Requirements for Success

Geography that is productive and protected from outside forces
U.S very good , Georgia very bad

Economically Favorable Demography for high growth with
younger members spending, mature members earning and investing.

US doing well as baby boomers had kids, the Millennials.
Financial burden of the US relatively small baby boomer demographic will end.

China, Japan, Canada, United Kingdom, Germany, Italy, Spain
have the highest tax paying work force they will ever have.

Only Spain and GB are not past the point of Demographic regeneration.
The others are "terminal countries." Few countries, maybe the French and
New Zeeland have a favorable demographic

3. Ample energy to fuel the economy as dependency put a governor on grown

Doing this analysis was reported in Accidental Superpower/.

Expected Global Conflicts

Nuclear armed Russia, a seriously terminal country is our biggest fear
and we should keep relations reasonable positive.

She is an economic and demographic tragic disaster and
will probably  not exist as a country within 40 years.

Bush 2 and Obama's Russian relations were criminally mishandled

Withdrawing as world's protector means little need to
contain China, that is Japans concern contain Iran, that is
Turkey and the Saudis concern

Nukes will be used but not against us as no one is close
to our equal except Russia, which is a US concern.

Korean nukes are only a delivery problem,
there existence is a South Korean/Japanese worry

Very Recent Changes

Happening faster because Obama did less than expected,
almost as if he did not want to have conversations with people.

Near the end he new how important factors were Interconnected.
How China's economy worked
Why Russia interfered with the election system,
Solar energy needs a backup
What a good tax policy would look like

Obama did not care enough to have related policies.
He had understanding but no policy.

With Trump, no understanding but a commitment some policy
Which is worse?

US has forced a acceleration of adjustments by world players
Brexit as the European Union disintegration accelerates
Chinas need for rapid growth while US still managing World security
Xi tries to cooperate as without free trade, china fall apart.

2. Responding to China: A Strategic Plan

source Latest from Kevin Rudd

1. Preface

U.S. Government Not Designed for Governmental Grand Strategies
a. Separation of powers requires compromise
b. Many want limited government
c. Private Sector Renewals solve problems

Recent Exception After WW 2
a. The Long Telegram described a very aggressive Soviet Union.

b. Result was a 40-year multi-administration coordinated policy of containment.
c. It worked-The Cold War ended peacefully

Containment Success
a. Fragility of Soviet Economy and Society Caused Implosion from Within
b. China is very different.

Trump Would Say We Have a Strategic Policy

1. National Security Strategy issued in 12/2017
2. National Defense Strategy issued in 1/2018
3. Future of US Defense Manufacturing Industry issued mid 2018

2. US Strategic Plan

Era of Strategic Engagement Over Replaced by Strategic Competition

a. Engagement-you engage and one side backs down.
b. Competition is more adversarial but no guidelines given.
c. Rules to be determined

3. Washington's Latest Attitude Toward China Not Positive.
a. Makes any kind of convergence of societies difficult
b. Move toward McCarthyism in U.S. and Australia is not good Foreign Policy.

4. Geopolitical Factors for Next Four Years
a. China under Xi Jinping "will resist any forces: economic, social, political, or foreign
    which in any way challenge the long-term survival of the Communist Party.
b. Strong-man, long-time party member, assistant Vice Premier
Li_Keqiang
    has moved toward markets rankling conservative politburo bureau members.

 

3. Creating a New International Order

Source The Creation of a New International Order
Dr. George Friedman, Geopolitical Forecaster 20 min video

1. The 21st century will be politically volatile,
more like the 19th century than the second half of the 20th century.

2. World is no longer "hard wired" to a liberal international order.
    
3. The French Revolution and Enlightenment were correct.
The nation state is needed to bind people together.

4. World will revolve around nations
a. US with 25% of the world economy, even when acting stupidly, still must be considered.
b. Russia,
dependent on oil prices, will again continue her decline.

c. China
will begin more normal economic growth but must deal with a billion poor people.
d. Germany
is trade dependent in stagnating world, continues mercantilism, will not lead.
e. Japan
has third largest GDP, a stable society, a strong Navy and is the Asian power.
f. Russia
who faces an equal Turkey, hopes for coexistence, and hopes not to react.
g. Poland
is fastest growing European economy and must be considered.

5. Old Mistakes
1. Multilateral Organizations Solve All of Problems.
2. Harvard Graduate Manage Organizations Solves Problems.

See The Next 100 Years

Related Materials

1. America First' has won, by Robert Kagan at NYT.

2. Saving Liberal Democracy from the Extremes, FT's M. Wolf

3. The Far-right Book Every-Russian General Reads

See Trump's New Political Era?

 

4. Trump's Foreign Policy

Trump’s Foreign Policy Is No Longer Unpredictable

Trump  visceral foreign policy instincts date back three decades. He has long rejected the

1. US security alliances as unfair to the taxpayer, with allies of conning Washington into defending them for free.

2. Trade deficits are a threat to U.S. interests rejecting virtually all trade deals that the United States has negotiated since World War II.

3. Admires strongmen around the world: in 1990, for example, he lamented Soviet leader Mikhail Gorbachev had not cracked down  on demonstrators as Beijing had in Tiananmen Square one year before.

Phase 1 was that of constraint from his inauguration until he grew frustrated at [things like] McMaster’s arguing to keep troops in place.

Phase 2 began in 9/17with the unilateral action began to bypass the formal deliberative interagency decision making process and announced the U.S. embassy in Israel to Jerusalem. Soon he ended the Iran nuclear deal, imposed tariffs on friends and rivals alike, renewed his criticism of NATO  keeping  troops in Syria. Most famously, he decided to meet with Kim in Singapore without consulting his national security cabinet and  made the unilateral decision to meet with Russian President Vladimir Putin.

A new empowering team began  2018 with the removal of Tillerson, McMaster, and Cohn over three-weeks  with their replacements—Mike Pompeo, John Bolton, and Larry Kudlow—all having personal loyalty to Trump. Then UN Ambassador Nikki Haley’s departed then the Mattis’ resignation on December 21. 

A recent positive development from the administration was welcomed by many foreign policy experts was a new National Security Strategy and National Defense Strategy moving focus from terrorism to great-power competition.

This strategy recognized that Russia and China posed to the U.S.-led international order and affirmed the importance of alliances. But Trump seems uninterested and his remarks introducing the National Security Strategy he uttered a single sentence about rival powers followed by a plea for the importance of cooperation with Russia.

This unified foreign policy has no permanent friends and no permanent enemies. It takes a transactional place ing little value in historical ties. Authoritarian governments often offer such swift concessions it easier to deal with them than with democratic allies. For example, Saudi Arabia was able to reduce the price of oil to appease the president after the president sided with it following the murder of the journalist Jamal Khashoggi.

The administration regularly uses leverage to gain an economic advantage over other countries. For example  1) Trump’s team entertained Poland’s bid to pay for a U.S. military base in its country 2) has pressured the United Kingdom to pursue a hard Brexit so that the United States could pocket concessions in talks on a bilateral U.S.-British free trade agreement.

 

" Paradoxically, the advent of a more unified and predictable U.S. foreign policy is likely to weaken American influence and destabilize the international order. A deeply divided Trump administration was the best case for those who believe in the United States’ postwar strategy, defined by strong alliances, an open global economy, and broad support for democracy, the rule of law, and human rights. Because Trump was never going to change his worldview, his administration has had to be marked by either division or agreement on his terms. We now have the latter. Thus begins phase three—the impact of a unified Trump administration on the world.

source foreignaffairs.com 2019-01-18

Editor's Note:

Because Trump's methods puts much of the foreign establishment out of business, trusting this and similar Trump articles is difficult. As a result, I include few opinions reporting mostly historical activities.

 

 5. GZERO Worldwide Threat Assessment

As we noted in the Wednesday edition, the US intelligence community
 has released its latest Worldwide Threat Assessment.

Much of the media focus this week has fallen on
President Trump’s criticism of the US intel chiefs,
but let’s begin with the report itself. Here are its key findings:

The Trump administration’s trade policies have damaged US interests
by pushing allies to build new relationships with other governments.

“At present, China and Russia pose the greatest espionage and cyber attack threats.”

ISIS isn’t finished.

Climate hazards such as extreme weather are intensifying,
threatening infrastructure, health, and water and food security.”

North Korea
“is unlikely to completely give up its nuclear weapons and production capability.”
North Korea has continued nuclear development in some areas
and taken actions that are reversible in others.

Iran continues to support terrorist groups in the Middle East and Europe,
but it’s still complying with the terms of the nuclear

Source

 

 
   

Sundry

Trumps Energy Dominance Actions

The Bad and Soon to Be Ugly
 

1. Cold War to 1980 AD > AS

2. Neo Liberal Reset 1980- 2008 AS > AD 3) Reactions to Neo Liberalism
Full Employment Goal = Inflation, Debtors Paradise

Business Responded to Inflation Led to
Deflation and a Creditors Paradise

 Sustained Deflation has 
Winners and Losers

Globalization Failed 3Pickett's R > G
and Back to Equilibrium
Structural Causes Structural Causes Winners Losers    Winners and Losers Historical Long Run?
Return on Capital Growth R > Growth rate of the Economy G. 90% of Income Gains Went to Top 1% and since 2012, most of this (70% of that 90%) went to Top 1/10 of 1%. Credit to consumers, business and governments  expanded to equate AD with AS.
Strong Unions
Restricted, Rigid Labor Markets
Central Government Strong
Central Bank Weak
Finance Weak
Weak Unions
Open Flexible Globalized Labor Markets
Government Less Economic Responsibility
Central Bank More Economic Responsibility
Finance Strong
Debtors: Can't or Wont Pay as Deflation Kills Wage Growth and Increases Real Debt Value Creditors lost as
Real Value Up
But Some Don't Pay
World's Very Poor and
Very, Very Rich Win

Vast Middle of Rich Western Nations are Stagnate
Economic Results
Sustained Inflation
Wages Share All Time High
Corporate Profits All Time Low
Inequality Low
Economic Results
Secular Deflation
Wages Share All Time Low
Corporate Profits All Time High
Inequality High
Populist Nationalist Parties attracted voters with renationalization and anti-austerity policies

 

Center Left Parties in control lost as lower wages and fighting more over less cartel politics blamed capitalism and globalism

Center right parties in control blamed immigrants and globalism

Francis Fukuyama may yet prove to be right in predicting the end of history. But there is no doubt that he was premature. The idea that people have reached an "end point" of "ideological evolution and the universalization of Western liberal democracy as the final form of human government" quite obviously seems out-of-step with our political reality in 2018. It could still happen one day. But it surely hasn't happened yet.

Fukuyama knows this. However, to ensure that this is only a temporary setback — not a permanent blow — for his thesis, he has penned Identity: The Demand for Dignity and the Politics of Resentment.

Collapse of Soviet communism, Western liberal democracy and the free market had triumphed and history had reached its "end" — Humans had finally formed a political organization in harmony with their inner nature. Though nations still on the other side of history could certainly cause trouble for liberal democracies, they could not offer a serious alternative.

America and populist right wing "dietarian" movements all around Europe have jolted Fukuyama out of his Hegelian certitude. And so he has hurriedly written Identity: The Demand for Dignity and the Politics of Resentment, a book that goes back to the beginning of Western thought and retraces its evolution to see where it took a wrong turn.

What emerges from it, however, is not a new way forward but an old and beaten path of income redistribution and a national unity program. Basically, Fukuyama's solution is to redirect the ethnic identity politics of the left and the right into a renewed "creedal identity" that satisfies the natural human need for dignity and recognition that Hegel said was the main driver of history. Such a Big Government roadmap will actually work or make matters worse.

Hegel postulated that as human consciousness evolved so would human institutions or social organizations until all the internal contradictions of the psyche were resolved in a final rational polity. Hunter-gathering and tribal societies developed into slave-owning ones that morphed into monarchies or theocracies that finally modernized into liberal democratic polities.

So why are liberal democracies in trouble? Because, notes Fukuyama, they have ignored a core psychic need.

Plato and other ancient Greek philosophers believed that thymus, or pride, was as essential as desire and reason. And it craved satisfaction just like the others. But they also believed that this part was in tension with itself. On the one hand, individuals wanted equal recognition of the fundamental worth or inner dignity of human beings (isthmian). On the other hand, they also wanted to be recognized as better than everyone else (megalothymia). Megalothymia results in constant jockeying for power and domination in every facet of human life, especially politics.

Hegel's great insight was that recognition achieved through domination is self-defeating because people crave the recognition not of their inferiors (slaves) but superiors (masters). The minute they succeed in dominating someone, that person's recognition becomes worthless. The quest for recognition can thus only be satisfied in a society of equals. For Hegel, the quest for dignity and recognition — or identity politics, in our parlance — has been the ultimate driver of history, and will end in an egalitarian liberal democracy with a commitment to individual rights and justice.

Two developments have prevented liberal democracies from delivering on Hegel's utopia, as Fukuyama explains.

First, the rise of income inequality. Thanks to globalization and productivity growth between 1988 and 2008, the world has become immensely richer. However, the lion's share has gone into the pockets of the rich, hollowing out the middle class. Fukuyama does not claim that this growth has necessarily hurt anyone. To the contrary, he admits that those in the 20th to 70th percentile experienced bigger income increases than those in the 95th. However, the global population around the 80th percentile — which corresponds with the working middle class in the West — experienced only marginal gains. These trends were most pronounced in Britain and the United States, the two countries at the forefront of the "neoliberal revolution" that Margaret Thatcher and Ronald Reagan spearheaded.

Middle-class stagnation, in Fukuyama's telling, is more problematic from a thymotic standpoint than an economic standpoint because the real purpose of income, once you reach a certain point at least, isn't to feed material needs but positional ones. So even if the middle class in the West has suffered no absolute loss of income, the relative loss of status makes these people feel ignored and invisible.

The other factor is the rise of the wrong kind of dignity or identity politics.

Some identity politics seek to honor the inner "dignity" of individuals by extending basic state protections to all citizens irrespective of race, caste, creed, or religion. This is noble, but in practice has transmogrified into a "therapeutic state" whose main aim became to rescue what the French philosopher Jean Jacques Rousseau called the innate "goodness of man" from the corrupting demands and conventions of society. Self-actualization rather than social cohesion became the political project. As but one example: California formed a task force to "Promote Self-Esteem and Personal Social Responsibility." The 1990 manifesto could have been plucked out of the Esalen Institute. (Sample statement: "The point is not to become acceptable and worthy, but to acknowledge the worthiness that already exists.")

This type of identity politics has uncorked personal pathologies that religion had kept in check, particularly an unquenchable narcissism that social critic Christopher Lasch famously called out because it sought external social validation from the very society it constantly undermined.

Another kind of identity politics seeks the dignity of "collectives," essentially rejecting the idea of some generic inner dignity of individuals while disrespecting the sense that their particular racial, cultural, religious, linguistic, and other connections could satisfy the thymotic needs of marginalized groups. Fukuyama acknowledges that this sort of identity politics has done some good. After all, blacks couldn't launch their struggle to end the atrocities of the Jim Crow era without building black pride. Similarly, women couldn't dislodge engrained social "discrimination, prejudice, disrespect, and simple invisibility" without a feminist movement that celebrated womanhood.

But the advent of multiculturalism took things too far, Fukuyama believes. It encouraged an ever-proliferating panoply of micro-identities to seek not equal treatment from society but separation from it because, ostensibly, each group's "lived experience" of victimization — another concept borrowed from Rousseau, Fukuyama points out — was different and inaccessible to outsiders. Multiculturalism built silos instead of bridges with broader society.

Multiculturalism also prodded the left to abandon its traditional emphasis on economic inequality precisely when the dignity and status of the Western middle class was taking a beating from globalization. This left many ordinary people without a political home to voice their insecurities, paving the way for right-wing demagogues to launch their own brand of reactionary blood-and-soil identity politics — using the language and tactics of their leftist fellow travelers.

"That the demand for dignity should somehow disappear is neither possible nor desirable," notes Fukuyama.

This is a charmingly old-fashioned idea. There is much to like about it. But the Big Government roadmap that Fukuyama lays out is problematic to say the least.

Fukuyama admits that he has no use for limited government libertarianism and, in fact, believes that it was unfortunate that the right's critique of the unintended consequences of ambitious social programs unnerved the left. It's high time, he thinks, to stop being shy about using government to achieve national unity.

The Netherlands, for example, must end its age-old acceptance of "polarization," or letting different religious groups establish their own schools, newspapers, and political parties. It was one thing to go along with this arrangement when it meant buying social peace among Catholics, Protestants, and secularists. But it has ghettoized Muslim immigrants and prevented them from assimilating, claims Fukuyama.

This sounds good on its face. But America's relatively limited experiment with state-enforced busing to end segregation was a disaster. White families who didn't want their children to have to spend hours being transported to another school district put their kids in private or parochial schools or fled from inner cities to distant suburbs outside of the busing zone. All of this exacerbated segregation and racial tensions. But Fukuyama seems so determined to ignore the danger of unintended consequences that he doesn't entertain any downside to his proposal, much less question its feasibility.

In America, Fukuyama believes, the left needs to return to a class-based politics that unites various marginalized groups around pocketbook concerns. At the electoral level that means that Democrats should quit playing identity politics and nominate a younger version of Joe Biden who can connect with the working class, regardless of race, sex, or religion. At the programmatic level, it means a renewed embrace of redistribution programs on the scale of the New Deal and the Great Society. He also wants a "national service" program that replicates the military's stellar success in assimilating recruits of diverse backgrounds.

The primary point of returning to a redistributive politics is not so much to expand the social safety net as to even out envy-inducing social hierarchies. In other words, make the rich poorer and the poor richer to make the working class feel better about itself. That such policies would be fiscally unaffordable and economically deleterious, Fukuyama doesn't consider. But the bigger problem from his own standpoint is that giving government more control over more wealth is likely to deepen existing social fissures by triggering a fiercer race for the spoils, especially in the post-Trump era where whites are emboldened.

Fukuyama's call for national service is perhaps more innocuous, but it's hard to see how it'll accomplish much. The military is united around a clear mission — protecting the nation — that helps overcome other divides. What would be the unifying passion of national service? Digging sewers in poor neighborhoods might appeal to congenital do-gooders but it's not the kind of thing that brings people together like the enemy at the gate.

What's befuddling about Fukuyama's recommended agenda is that it ultimately departs from his own Hegelianism. Hegel, contra Marx, believed that ideas shaped the material — economic — world, not vice versa. That means that the political battle is ultimately an ideological battle. Victory depends on winning hearts and minds, not economic appeasement. If that's the case, Fukuyama would have been better off exposing what's false, contradictory, and self-negating about the new and pernicious identity politics of the left and right and leaving it at that.

Nevertheless, Fukuyama has written an intricate account of this peculiar phenomenon. It is a must-read for anyone interested in understanding our bewildering political times in a broader historical and philosophical context.

What's needed now is a renewed commitment to    "e pluribus Unum," Fukuyama says.

 

 
 

Global Economic Growth and
 the Rise of Populism

Return to
Political Economy Book Summaries  1/21/18  Please share!

Thanks to Experts: Mark Blyth, Adam Tooze, Francis Fukuyama
Steve LeVine, Samir Gandesha
, Michael Sandel, Peter_Zeihan


1. Post WW 2 Economic Adjustments

2. Neoliberal's Caused Financial Collapse

3. Democracy Failures Caused Latest Popularism

4. Understanding Right and Left Populism

5. Populism is a Reset Mechanism

6. Creating a New International Order

7. Foreign Policy Options for the 21st Century

See Trump's New Political Era?\
o

U.S. Russia, China: Rivals, Adversaries, Enemies?

Did Capitalism Cause Middle-Class Plight?

 

 

Sundry

Trumps Energy Dominance Actions

The Bad and Soon to Be Ugly
 

1. Cold War to 1980 AD > AS

2. Neo Liberal Reset 1980- 2008 AS > AD 3) Reactions to Neo Liberalism
Full Employment Goal = Inflation, Debtors Paradise

Business Responded to Inflation Led to
Deflation and a Creditors Paradise

 Sustained Deflation has 
Winners and Losers

Globalization Failed 3Pickett's R > G
and Back to Equilibrium
Structural Causes Structural Causes Winners Losers    Winners and Losers Historical Long Run?
Return on Capital Growth R > Growth rate of the Economy G. 90% of Income Gains Went to Top 1% and since 2012, most of this (70% of that 90%) went to Top 1/10 of 1%. Credit to consumers, business and governments  expanded to equate AD with AS.
Strong Unions
R

restricted, Rigid Labor Markets
Central Government Strong
Central Bank Weak
Finance Weak

Weak Unions
Open Flexible Globalized Labor Markets
Government Less Economic Responsibility
Central Bank More Economic Responsibility
Finance Strong
Debtors: Can't or Wont Pay as Deflation Kills Wage Growth and Increases Real Debt Value Creditors lost as
Real Value Up
But Some Don't Pay
World's Very Poor and
Very, Very Rich Win

Vast Middle of Rich Western Nations are Stagnate
Economic Results
Sustained Inflation
Wages Share All Time High
Corporate Profits All Time Low
Inequality Low
Economic Results
Secular Deflation
Wages Share All Time Low
Corporate Profits All Time High
Inequality High
Populist Nationalist Parties attracted voters with renationalization and anti-austerity policies

 

Center Left Parties in control lost as lower wages and fighting more over less cartel politics blamed capitalism and globalism

Center right parties in control blamed immigrants and globalism

Francis Fukuyama may yet prove to be right in predicting the end of history. But there is no doubt that he was premature. The idea that people have reached an "end point" of "ideological evolution and the universalization of Western liberal democracy as the final form of human government" quite obviously seems out-of-step with our political reality in 2018. It could still happen one day. But it surely hasn't happened yet.

Fukuyama knows this. However, to ensure that this is only a temporary setback — not a permanent blow — for his thesis, he has penned Identity: The Demand for Dignity and the Politics of Resentment.

Collapse of Soviet communism, Western liberal democracy and the free market had triumphed and history had reached its "end" — Humans had finally formed a political organization in harmony with their inner nature. Though nations still on the other side of history could certainly cause trouble for liberal democracies, they could not offer a serious alternative.

America and populist right wing "dietarian" movements all around Europe have jolted Fukuyama out of his Hegelian certitude. And so he has hurriedly written Identity: The Demand for Dignity and the Politics of Resentment, a book that goes back to the beginning of Western thought and retraces its evolution to see where it took a wrong turn.

What emerges from it, however, is not a new way forward but an old and beaten path of income redistribution and a national unity program. Basically, Fukuyama's solution is to redirect the ethnic identity politics of the left and the right into a renewed "creedal identity" that satisfies the natural human need for dignity and recognition that Hegel said was the main driver of history. Such a Big Government roadmap will actually work or make matters worse.

Hegel postulated that as human consciousness evolved so would human institutions or social organizations until all the internal contradictions of the psyche were resolved in a final rational polity. Hunter-gathering and tribal societies developed into slave-owning ones that morphed into monarchies or theocracies that finally modernized into liberal democratic polities.

So why are liberal democracies in trouble? Because, notes Fukuyama, they have ignored a core psychic need.

Plato and other ancient Greek philosophers believed that thymus, or pride, was as essential as desire and reason. And it craved satisfaction just like the others. But they also believed that this part was in tension with itself. On the one hand, individuals wanted equal recognition of the fundamental worth or inner dignity of human beings (isthmian). On the other hand, they also wanted to be recognized as better than everyone else (megalothymia). Megalothymia results in constant jockeying for power and domination in every facet of human life, especially politics.

Hegel's great insight was that recognition achieved through domination is self-defeating because people crave the recognition not of their inferiors (slaves) but superiors (masters). The minute they succeed in dominating someone, that person's recognition becomes worthless. The quest for recognition can thus only be satisfied in a society of equals. For Hegel, the quest for dignity and recognition — or identity politics, in our parlance — has been the ultimate driver of history, and will end in an egalitarian liberal democracy with a commitment to individual rights and justice.

Two developments have prevented liberal democracies from delivering on Hegel's utopia, as Fukuyama explains.

First, the rise of income inequality. Thanks to globalization and productivity growth between 1988 and 2008, the world has become immensely richer. However, the lion's share has gone into the pockets of the rich, hollowing out the middle class. Fukuyama does not claim that this growth has necessarily hurt anyone. To the contrary, he admits that those in the 20th to 70th percentile experienced bigger income increases than those in the 95th. However, the global population around the 80th percentile — which corresponds with the working middle class in the West — experienced only marginal gains. These trends were most pronounced in Britain and the United States, the two countries at the forefront of the "neoliberal revolution" that Margaret Thatcher and Ronald Reagan spearheaded.

Middle-class stagnation, in Fukuyama's telling, is more problematic from a thymotic standpoint than an economic standpoint because the real purpose of income, once you reach a certain point at least, isn't to feed material needs but positional ones. So even if the middle class in the West has suffered no absolute loss of income, the relative loss of status makes these people feel ignored and invisible.

The other factor is the rise of the wrong kind of dignity or identity politics.

Some identity politics seek to honor the inner "dignity" of individuals by extending basic state protections to all citizens irrespective of race, caste, creed, or religion. This is noble, but in practice has transmogrified into a "therapeutic state" whose main aim became to rescue what the French philosopher Jean Jacques Rousseau called the innate "goodness of man" from the corrupting demands and conventions of society. Self-actualization rather than social cohesion became the political project. As but one example: California formed a task force to "Promote Self-Esteem and Personal Social Responsibility." The 1990 manifesto could have been plucked out of the Esalen Institute. (Sample statement: "The point is not to become acceptable and worthy, but to acknowledge the worthiness that already exists.")

This type of identity politics has uncorked personal pathologies that religion had kept in check, particularly an unquenchable narcissism that social critic Christopher Lasch famously called out because it sought external social validation from the very society it constantly undermined.

Another kind of identity politics seeks the dignity of "collectives," essentially rejecting the idea of some generic inner dignity of individuals while disrespecting the sense that their particular racial, cultural, religious, linguistic, and other connections could satisfy the thymotic needs of marginalized groups. Fukuyama acknowledges that this sort of identity politics has done some good. After all, blacks couldn't launch their struggle to end the atrocities of the Jim Crow era without building black pride. Similarly, women couldn't dislodge engrained social "discrimination, prejudice, disrespect, and simple invisibility" without a feminist movement that celebrated womanhood.

But the advent of multiculturalism took things too far, Fukuyama believes. It encouraged an ever-proliferating panoply of micro-identities to seek not equal treatment from society but separation from it because, ostensibly, each group's "lived experience" of victimization — another concept borrowed from Rousseau, Fukuyama points out — was different and inaccessible to outsiders. Multiculturalism built silos instead of bridges with broader society.

Multiculturalism also prodded the left to abandon its traditional emphasis on economic inequality precisely when the dignity and status of the Western middle class was taking a beating from globalization. This left many ordinary people without a political home to voice their insecurities, paving the way for right-wing demagogues to launch their own brand of reactionary blood-and-soil identity politics — using the language and tactics of their leftist fellow travelers.

"That the demand for dignity should somehow disappear is neither possible nor desirable," notes Fukuyama.

This is a charmingly old-fashioned idea. There is much to like about it. But the Big Government roadmap that Fukuyama lays out is problematic to say the least.

Fukuyama admits that he has no use for limited government libertarianism and, in fact, believes that it was unfortunate that the right's critique of the unintended consequences of ambitious social programs unnerved the left. It's high time, he thinks, to stop being shy about using government to achieve national unity.

The Netherlands, for example, must end its age-old acceptance of "polarization," or letting different religious groups establish their own schools, newspapers, and political parties. It was one thing to go along with this arrangement when it meant buying social peace among Catholics, Protestants, and secularists. But it has ghettoized Muslim immigrants and prevented them from assimilating, claims Fukuyama.

This sounds good on its face. But America's relatively limited experiment with state-enforced busing to end segregation was a disaster. White families who didn't want their children to have to spend hours being transported to another school district put their kids in private or parochial schools or fled from inner cities to distant suburbs outside of the busing zone. All of this exacerbated segregation and racial tensions. But Fukuyama seems so determined to ignore the danger of unintended consequences that he doesn't entertain any downside to his proposal, much less question its feasibility.

In America, Fukuyama believes, the left needs to return to a class-based politics that unites various marginalized groups around pocketbook concerns. At the electoral level that means that Democrats should quit playing identity politics and nominate a younger version of Joe Biden who can connect with the working class, regardless of race, sex, or religion. At the programmatic level, it means a renewed embrace of redistribution programs on the scale of the New Deal and the Great Society. He also wants a "national service" program that replicates the military's stellar success in assimilating recruits of diverse backgrounds.

The primary point of returning to a redistributive politics is not so much to expand the social safety net as to even out envy-inducing social hierarchies. In other words, make the rich poorer and the poor richer to make the working class feel better about itself. That such policies would be fiscally unaffordable and economically deleterious, Fukuyama doesn't consider. But the bigger problem from his own standpoint is that giving government more control over more wealth is likely to deepen existing social fissures by triggering a fiercer race for the spoils, especially in the post-Trump era where whites are emboldened.

Fukuyama's call for national service is perhaps more innocuous, but it's hard to see how it'll accomplish much. The military is united around a clear mission — protecting the nation — that helps overcome other divides. What would be the unifying passion of national service? Digging sewers in poor neighborhoods might appeal to congenital do-gooders but it's not the kind of thing that brings people together like the enemy at the gate.

What's befuddling about Fukuyama's recommended agenda is that it ultimately departs from his own Hegelianism. Hegel, contra Marx, believed that ideas shaped the material — economic — world, not vice versa. That means that the political battle is ultimately an ideological battle. Victory depends on winning hearts and minds, not economic appeasement. If that's the case, Fukuyama would have been better off exposing what's false, contradictory, and self-negating about the new and pernicious identity politics of the left and right and leaving it at that.

Nevertheless, Fukuyama has written an intricate account of this peculiar phenomenon. It is a must-read for anyone interested in understanding our bewildering political times in a broader historical and philosophical context.

What's needed now is a renewed commitment to    "e pluribus Unum," Fukuyama says.