My Amazon Review of Peter Zeihan's "The End of the World is Just Beginning......."

 

The Coming Global Disorder

 

Peter Zeihan “end of the world” thesis is based on the demography of collapsing birthrates and the globalization we have been living with since the 1944 Bretton Woods agreement is in terminal free fall. To him, the era of “order” is over and will soon be remembered as an aberration. I agree with him with respect to global demographics, but, although weakening, globalization will still be with us. Of course, if Zeihan’s view of the end of globalization is correct, the world as we know it will be in a world of hurt.

 

Simply put, much of the world has benefitted from the international division of labor brought about by the monetary stability of Bretton Woods and the presence of the U.S. Navy protecting freedom of the seas for all of the participants in the global economy. Instead of pirates trawling the seas, we have giant container ships bringing a harvest of goods to global producers and consumers.

 

Zeihan adopts a neo-Trumpian view of global trade where the U.S. worker has subsidized the rest of the world and as a result the U.S. will withdraw from the global economy no longer interested in enforcing international norms. Thus, with the unity of the Cold War struggle with the Soviet Union over, the support of Western Europe and East Asia less important. Less important, maybe; irrelevant not quite.

 

Where Zeihan is on much sounder footing is his discussion of demographics. Both Russia and China along with most of Europe and northeast Asia are rapidly depopulating. Simply put, the world is getting older at a very rapid pace and will soon be without workers. Watching Russia and China grow old might not be so benign for the world, because I fear that their leaders understand this and are in the process of expanding their reach before it is too late. Hence Russia’s invasion of Ukraine and China’s increasing aggressiveness over Taiwan. Further Zeihan under-rates the capabilities of the Chinese navy.

 

Zeihan goes into great detail in discussing global transportation, finance, energy industrial materials, manufacturing, and agriculture. In the case of the last the end of globalization will bring with it the prospect of mass starvation. During World War I the Central Powers were cut off from global agricultural trade bringing with it mass starvation.

 

According to Zeihan the United States, because of better demographics, its resource base and proximity to both Canada and Mexico is in far better shape than the rest of the world. To be sure the U.S. would end up poorer, but compared to the rest we would be looking pretty. Of course, a war with Russia or China would radically alter this picture.

 

Zeihan has a breezy writing style making the book easy to read. My guess is that he is directionally right, but he over-states his case.

For the full Amazon URL see: The Coming World Disorder (amazon.com)

My Amazon Review of Tara Zahra's "Against the World: Anti-Globalism........."

The Revolt of the Masses

 

University of Chicago history professor Tara Zahra describes a world of growing trade protectionism, rising anti-immigrant sentiments, growing antisemitism, the rise of right-wing populist demagogues, and the fear of a global pandemic. This sounds all to familiar, but she is not discussing the world of today, but rather the inter-war period of 1919-1939. The primary difference is that the wheels have yet to fall off the global economy.

 

In the halcyon era for the global elite before World War I, all was right with the world bringing ever-growing prosperity for those plugged into the global economy. However, just as today many were left behind and there resentments were smoldering beneath the surface and when World War I upset the global apple cart, those resentments exploded which in its extremis brought fascists to power, especially in Germany and Italy. In central Europe, the dependence on imported food brought with it massive starvation as the allied blockade starved out the population. Hence, after the war the goal was to become initially self-sufficient in agricultural commodities and later, as was the case for Germany, to go as far into autarky as possible. Along the way, according to Zahra, democracy fell by the wayside.

 

What Zahra has ignored in this important book is that it was not only the elite who benefited from globalism but is was also the rising middle-class in all of the countries that the global economy touched. And when the global economy started to circle the drain in 1929, it was the middle class that went down with it planting the seeds of the authoritarianism that was to come. She also ignored the role of left-wing populism in reinforcing the power of the right. The fear of Bolshevism pushed many otherwise sensible conservatives into the hands of the far right.

 

The way out of the deglobalization trap, was, according to Zahra, was a form of global Keynesianism, where each country would prop domestic demand, making it easier to accept imports from the outside. Throughout her book, Zahra humanizes what happened with vignettes about leading industrialists and liberal-minded internationalists. In many ways this is a scary book, because it seems that history is rhyming in its own way today.

For the full Amazon URL see: Revolt of the Masses (amazon.com)

The Economist Joins Shulmaven in Forecasting Regime Change

The October 8^th Economist titles its lead article “Regime Change” where it forecasts a pivotal moment for global economic policy that calls for a much tighter monetary policy combined with a much looser fiscal policy. (See: Regime change | Oct8th 2022 | The Economist, Paywall.)  The article notes that the monetary authorities will have a difficult time bringing down inflation to their 2% target and, as a result, a more relaxed 4% target would be in order. The author also believes that the savings glut of the past two decades will return in the post-Covid environment.

 

Although we completely agree that a regime change is coming which is being signaled by the global bear market in stocks and bonds, our regime is far different from theirs. (See: Shulmaven:The U.S. Economy is Entering a New Thirteen Year Cycle and Shulmaven:Higher Inflation and Higher Interest Rates: Get Used to it )  In our regime, far from having excess savings, we envision a capital spending boom based on deglobalization, energy transition, and climate resilience. Economists have under-estimated the deflationary effects of the globalization of the economy over the past three decades. Those effects are now going into reverse thereby undoing the salutary effects of the international division of labor.

 

Further inflationary pressure will come from a demographically based shortage of labor and real wages catching up from the 3+% decline in the U.S. that occurred this past year. Throw in rising defense spending and you have a formula for higher inflation and with that a structural rise in interest rates. Although we and The Economist end up with higher inflation, we get there in a far different way.

 

 

Understanding Brexit

British electorate just stuck it to the man. In voting to leave the E.U. British voters said "no" to both global capitalism as represented by the "City" establishment and the left-liberal cognoscenti who supported remaining in the E.U. The left liberals responded with their typical bed-wetting attributing racism to the anti-immigrant stance of the Leave voters and the markets responded with a global sell-off rightly fearing a contraction in both global trade and capital flows.

Over the intermediate term those fears might prove to be justified. As Adam Smith taught us almost a quarter of a millennium ago, "the division of labor is limited by the extent of the market." Britain leaving the E.U. will likely reduce the size of the market causing economic output to decline. Moreover the British example has lit a fire under the E.U. skeptics in France, Italy and the Netherlands. Trust me, the politics ain't gonna be pretty.

However there is a way out, although its chance is small. To be sure the Leave voters were concerned about unchecked immigration and the impact of globalization on their daily lives, there also was the resentment of being under the control of the 40,000 nameless and faceless Eurocrats in Brussels who seem to be running their lives without any electoral accountability. Simply put national sovereignty was being eroded away to the E.U. Hence it was no accident that the Leave voters proclaimed last Thursday as "Independence Day."

Thus the way forward would be to fundamentally reform the E.U. by reducing its bureaucracy and rule making authority by devolving power back to its constituent nation states. This will require a coordinated revolution in thinking from above; otherwise the E.U. will face a very messy revolution from below. What the British people sensed and the elite did not, was that the E.U. wasn't working for the average European. Thus it has to reform if this noble experiment is to survive.

My Amazon Review of Adam Yuval's "The Fractured Republic: Renewing America's Social Contract in the Age of Individualism"

You Can’t Go Home Again

National Affairs editor and conservative policy wonk Adam Yuval has written a very important and very dense book as to how we arrived at our current political mess and how we may get out of it. He argues rightly that both the baby boomer Right and the baby boomer Left are nostalgic for the 1950s and early 1960s. As more than a few wags have put it liberals want to work in the 1950s while conservatives want to live there. In the words of Thomas Wolfe, “you can’t go home again.”  Simply put the 1950s represented a unique period of economic and social consolidation that was rendered obsolete by the full weight of globalization, technology, immigration and the social revolution of the 1960s. Thus no matter how the politicians may yearn we are not going back to the social mores of the 1950s  and similarly the cozy big labor/big business model of that era has long been buried.

To Levin our politics today evolve around the radical individualism brought about by the rights revolution of the 60s and 70s joined by a highly centralized national government that has crowded out the space for intermediating institutions. Levin elevates the principle of subsidiarity which entails that policy ought to be implemented closest to the local level as possible. By this he means family, religious institutions, civic organizations (including by the way labor unions) and local government. Where Levin is dead right he notes that radical individualism has brought with it rights without obligations and those obligations are largely to the local institutions mentioned. How we modify the rights mentality to accommodate is vision of subsidiarity is a big question mark. Further the forces of globalization and technology that are still well in train work to destroy the local institutions he wants to strengthen.

I also wish he would have discussed the implications of Jonathan Haidt’s “Righteous Mind….” on healing our fractured republic. Haidt’s thesis is that conservatives and liberals differ because they have different moral matrices. While liberals and conservatives are informed by care/harm, liberty/oppression, and fairness/cheating; however conservative morality is also informed by loyalty/betrayal, authority/subversion and sanctity/degradation. Thus if our republic is to be made whole the conservatives are going to have to give up on a host of obligations or the liberals are going to have to buy in to the idea that some of their individualism is going to have to give way for the good of society. We can hope, but it is going to be tough slog.

For the full amazon URL See: https://www.amazon.com/review/R2324X7Q28YY58/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv