Sunday 5 August 2018

Capitalism, Globalisation, Nationalism. Part 3 Nationalism


“I’m not a white nationalist, I’m a nationalist. I’m an economic nationalist…The globalists gutted the American working class and created a middle class in Asia. The issue now is about Americans looking to not get f—ed over. If we deliver.” • Steve Bannon, Quoted in the Hollywood Reporter, 11/18/2016

Looking at the below chart, like him or hate him I think he has a point.  

Chart that speaks volumes

To put a little flesh on Mr Bannon's argument, I look at how China manipulated Capitalism and made it work within its core economic system.  In 1999, around 29 million people could have been considered middle class according to Pew Research benchmarks based on levels of disposable income. By 2013, that number had ballooned to 421 million people or over one-quarter of its population.  Markets there for luxury goods, technology and food products have risen precipitously, and the travel sector has grown along with them.  If we take tourism for example: "Over the past two decades, Chinese tourism has risen by a factor of 25, climbing from 5.3 million in 1997 to 130 million in 2017. That year, Chinese tourists poured $258 billion into the global economy. This puts their spending at double that of U.S. tourists and three times that of German ones. China is now the top origin point for tourists visiting Thailand, Japan, South Korea, Vietnam, Russia, the Maldives, Indonesia, North Korea, the United Kingdom and South Africa."

While in the United States...  

In 1915 the top 1% had 18% of all earned national income.
In 1930 the top 1% had 10% of all earned national income.
In 2007 the top 1% had 24% of all earned national income.

In 1977 the top 0.1% controlled 9% of all national wealth
   In 2007 the top 0.1% controlled 22% of all national wealth.

In 2011, the top 1% one per cent of US households controlled 40% of the nation's entire wealth.

Since 1980 the richest 0.1% of the world's population have increased their combined wealth by as much as the poorest 50% - or 3.8 billion people.  In 2017 the top 1% of people own 27% of the world's wealth

These figures worth thinking about that level of disparity defies all theories of justice, naturally in need of some urgent attention.  We need to question whether we are nearing the end of Capitalism or whether liberal democracy is imploding spelling the end of centrist politics.  But before we can bid goodbye to Globalisation and neoliberalism, I think it is good to try to get a grip on this subject to look at the before and after situation up to this point and see what it has come to mean.  In the seventies before the neoliberal period, we had a stable government, inflation finally under control, labour's share of the national income was acceptable, compromises between Capital and Democracy finally reached, low inequality with interest rates that encourages both savings and investments alike.  Whereas now we have almost zero interest rates, no incentives for savers, wage share and workers power both are at an all-time low, weak unions, high inequality, robust globalised finance market and weak governments under the banner of free trade.  All in all, The One Dollar T-shirt coming into Europe has proved to be very expensive and damaging.  For many, it feels that governments are straddling an unfair system of an income distribution through a complicated labyrinth.   An economy is working for everyone it ain't instead for the majority causing grievances, insecurity, resentment and fear.  Those on the wrong end of the inequality ladder are hurting.  A backlash to such injustices gives way to Populism which is what we have today.

As fear spreads it spawns Nationalism and the rhetoric by outliers increases by playing on that fear often preaching xenophobia.  They are easy to recognise. Populists and Nationalists have a habit of wrapping their respective flags around them, and present-day examples are not in short supply.  Top of the tree sits Donald Trump, Brexit campaigners, UKIP, National Front leader Marie Le Pain in France, Vladimir Putin, Russian President, Recep Erdogan, President of Turkey to name a few.  We also have Right-wing Nationalist who are currently defying EU immigration rules, in Poland, Czech Republic, Hungary, Austria are also to some degree undermining democracy and the internationalist liberal order.  Populists also come from the Left wing of political spectra such as parties like the League and The Five Star movement in Italy.  Mainstream parties are weakening, and the election of centrist parties in Germany and France only serves as a mask against a wave of strong anti-immigration nativist feelings and populist sentiments growing in both countries.  Left-wingers blame Capitalists and globalisation while right-wingers blame immigrants and globalisation.  They win big on 'Anti ticket'; anti-immigrants, anti-establishment, anti-elitists, anti-Euro (UKIP) and of course anti-globalisation, playing on scepticism and fear is a vote winner.

There are reasons why populists play on emotions and prejudices. Demagoguery comes in different rhetoric but all colours are very useful in building up a following even to a cult status where yet a lie becomes truth.  Globalisation has weakened Democracy and National Sovereignty, and in the face of that, people become inward-looking, want to take back control of their destiny and laws.  There is a national identity to protect so people reach out for ideological walls.  People also seek political accountability from those representatives they vote for to somehow resolve the dilemma of high inequality and high capital mobility amid the persistent relative downward shift in wages.  Globalisation has made the labour market far too flexible without compensation destroying its ability to command a share of any surplus; a wage stagnates effect.  People en masse are angry and resentful. Many feel helpless, alienated and frustrated.  Combined they form the ingredients of nationalism and identity politics, and that is what we see thriving.  In Germany, the common denominator is resentment and protest. Only 34% of people who voted for AfD (Alternative for Germany) did so with conviction. Twice as many voted that way because of their “disappointment” with the established parties. This pattern applies Elsewhere in Europe, You can label it: “We feel betrayed and abandoned.”

The political backlash also stems from resentment against tax loopholes of the kind that help tax evasions by individuals and globalised corporations.  Their existence has been known all along but its extensive use recently coming to life by the exposure of the 'Panama Papers.'  For ideas here are at least ten accounting tricks for avoiding payment of tax.  Most of these for individual use whereas what large conglomerates get up to is mind-boggling.  The corporate tax rate in the United States is 35 per cent, but only a few pay this rate.  Others syphon or ‘park’ most of the profits in tax haven outside the US.  If you are a boss of a conglomerate here are some mesmerising ideas for you. All these alarming ways for not paying their due taxes is ethically wrong causes injustice for all and untold damage to public finances and the economy, all that of course means less money to go round.  Aside from attempts at controlling money laundering, circulation of profits has free reign to roam around the world.  The free choice also extends to park their profits in a haven away from government reach.  A case in point is Amazon.  It has revealed that its UK corporation tax bill almost halved to £4.5m last year, days after the US company posted a record profit of $2.5bn (£1.9bn) in its most recent quarter.

There is a current trend for political alignment is shifting to readjust the balance between the tiny elite and those disadvantaged and dispossessed masses in Europe and the United States.  In efforts to close the yawning gap, there is a desperate need to bring back the compromises between Democracy and Capitalism (see part 1).  Socialism is knocking at Europe's door even in the US Democratic Socialism is making some headway.  It is coming dressed up along cultural lines as well as economic, for both to amplify popular resentments and divisions.  Seeing communities turning inwards, unilateralists, hollowing out support for Globalisation.  To fend off these currents compromises will need to iron out these grievances along these issues to proceed in tandem to ensure democracy does not turn to authoritarianism.  There is a chance; however, that unhinged cultural, ideological issues will dominate in the short run giving way for the populists to do their work that will override materialist values.  These will replace economic matters from their central role temporarily but would do so permanently if governments maintain the current free fall in their financial systems.  In the meantime we see right-wing demagoguery gaining ground by diversions from economic ills, preferring to attack same-sex marriage, abortion, immigration, Islam and generally popularise conservative ideas to run Anti to all of them. 

Such practical use of tactics to attack these soft targets will not last, liberalism and individual freedom will not go into reverse but having set a course of globalisation, a new system needs to run alongside to police it.  There also lies a likely danger ahead; the populists highly unlikely be able to deliver on their promises.  Although, there is a remote chance they do on one or two minor issues but nothing like what they promise. One of the weaknesses of the Anti crowd'' is they have no idea what to replace them with.  Waiting on the wings there are uncompromising hurdles they need to tackle: new Technology, robotics, the Internet they are indiscriminate and wait for no profession irrespective of skill. It is important they realise, change is inevitable but need not be ungovernable, and a pullback from integration from a rule-based universal order need not be the answer.  

Populists cannot bring back old and lost jobs, and President Trump’s idea of “We’re going to negotiate like crazy,” is mere rhetoric.  Despite his promise to drain the swamp Trump hasn’t drained the Swamp. He never intended to drain the swamp. Neither would the Brexit leadership who repeatedly echo Boris Johnson’s claim that Britain sends £350 million a week to the EU, as money lost to the NHS will be seen for what it is: bogus and devious. In such inevitability, it will be a dangerous road ahead, will see hostilities towards democracy and the undermining the rule of law.  Already early ominous signs point to the number of people in England and Wales filing for insolvency hit more than six-year high in the second quarter of this year does not bode well for the future. People are looking for job protection and a political kickback, but with the political class despised as they are, it remains to be seen as the story unfolds what happens next; it may not be pretty.   However, if the latest poll is anything to go by, most people are seeing the light with Brexit looming, a hard edition could be economic suicide.   

As we have seen Globalism is a follow up of neoliberalism, but it has come to mean a broken system of economic governance such as has been discussed in Part 1.  Nationalist Populism, a derivative of Globalism, has been a wakeup call for democracy and the liberal elite.  To look at where it is coming from gives us a beginning how to tackle it.  It is not enough to criticise their supporters for being illiterate, racist or unintellectual but to look at the reasons for voting the way they do.  There are dangers within the conduits of the economic and political system such as those discussed in part one and two. 

Finally, ending these series where they started, we have seen the recession hit the economies in 2008. Still, the crisis is not over, clearly, with persistently troubled Capitalism, for many, not the few, dare I say, we are not out of the woods yet. For ten years we have bumped along with extraordinary measures, massive quantitive easing (QE), interest rates at virtually nothing, neoliberalist ideas, free trade, concentrating on inflation rather than full employment.  Taking over Freddie Mac and Fannie Mae in the US and The Northern Rock in the UK almost nationalising the mortgage market yet the depression persists. Pushing interest up and reversing the system as explained in part one could be frightening to contemplate especially for those on a low income will pile up the pressure on an already creaking system.  

As it stands, therefore, the present Capitalist order of boom and bust is incompatible with progress. Rather than an economic entropy a dire need for a balance in world capitalism.  New economic ideas to restructure and to regenerate the system with modern imagination.  Intelligent policies with which people find common cause not to disengage must now come to centre stage. Time to call time to the bonanza of the super-rich elite reversing their gravitational pull and put in place a corrective mechanism overseas and regulates social justice with economic growth disciplined to fair income distribution.  Progressive thinking enshrining both economic and social trajectories to meet 21st-century economic challenges spanning national borders; a drive towards utopia maybe but aiming high never hurt anybody. 

"The actual and prospective performance of the capitalist system is such as to negative the idea of its breaking down under the weight of economic failure, but that its very success undermines the social institutions which protect it, and "inevitably" creates conditions in which it will not be able to live and which strongly point to socialism as the heir apparent"

---- Joseph A. Schumpeter
'Capitalism, Socialism and Democracy' 

Compiling these series I had access to many sources and sincerely hope to have done justice to their contributions.  I, therefore, like to thank the following:

Professor Ronal Inglehart of the University of Michigan
Professor Mark Blyth of Brown University
Professor Michael Cox of London School of Economics
Professor Julia Black  of London School of Economics
Professor David Harvey of London School of Economics
Professor Simon Deakin of Cambridge University
Last but not least Nomi Prins, former Wall Street insider. 

1 comment:

OUFI said...