economy: lever of power, source of conflict
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Lever of power, source of
conflict Paul Mason, economics editor, BBC Newsnight
September 2012
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War is not merely a political act, but
also a real political instrument, a
continuation of political commerce, acarrying out of the same by other
meansClausewitz, 1827
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politics is a concentrated
expression of economics
Lenin, 1921
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ECONOMY -> POLITICS ->
WAR
agency
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Economy as structure
Shaped by human actions over long periods
Mutating, structurally, through cycles
Cycles produce power shifts
Policy (politics) adapts to it rather than shapes it
Short-term disruptive action produces effect
not always the one intended
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crisisThe Global Imbalances
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USA: household debt/GDP
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Current account
imbalances
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Share of world saving
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Feldstein-Horioka coefficient(RHS)
Red line indicates ratio of
savings to investment in
15 countries.
Roughly 1:1 for most of
history of capitalism.
Touches 0:1 in 2000s
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The imbalances
Global savings glut
Excess consumption fuelled by credit in West
Sudden disappearance of national pools ofcapital
Capital flows uphill from East to West
Massive expansion of trade, currency trade,derivatives
Financialisation
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Financialisation
Distribution, financialisation and the financial and economic crisis implications for post-crisis economic policies. Eckhard Hein
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Inequality
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disruptionthe disruption is not the crisisthe disruption is what caused the crisis
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crisis
2006: Property bubble bursts
2007: First credit crunch
2008: Commodity bubble disorients central banks
Lehman Bros, AIG, Merrill, RBS, Dexia
2009: Global recession, market crash
Fiscal stimulus: China, US, Japan, E
2010: Recovery: Greek crisis; UK austerity
2011: Euro fiscal crisis: massive austerity
2012: Eurocrisis + Chinese slowdown = double dip
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GDP Growth 2007-11
Source: World Bank
52%
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Growth is slowing
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World trade stopped
growing
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China: Exports slowing
again
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Balance sheet recession?
Governments, businesses, consumers pay down
debt
Demand for credit low
Monetary stimulus does not filter through
Japanese style lost decade
Acute Fiscal stimulus? (Currency war)
Financial repression (wiping out savers)?
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Debt distribution
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USA: Fiscal cliff
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beyondthe crisis
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Long-cycle theory
50 Year Pattern
Technology,
Resources,
Economic model changesExogenous shocks
Upswing / Downswing
Four seasons
Nikolai Kondratieff
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Supercycle theory
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Disrupted wave
Tech revolution is real
New centres of growth/power emerging
ButFiat Money allowed extension of 50 yearcycle beyond limits
Depression sharper/deeperoffset by more Fiat
Money
Crisis of western elite: financialised, immobile,
politically disoriented
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World economy: 2010 -
2030
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BRICs drive growth
politics is
concentrated
economics
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leadershipCharles Kindleberger, The World in Depression,
1973
a country that is prepared, consciously orunconsciously to set standards of conduct for other
countries to take on an undue share of the burdens
of the system to accept its redundant commodities,
maintaining the flow of investment capital, and
discounting its paper
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The chaotic case
China / Russia do not normalise
Savings glut grows with Asian middle class
State capitalism strangles growth
Competitive exit routes:Competitive devaluations (Euro collapse)
Return of national pools of capital
Western model broken
Poor social cohesion
Prolonged fiscal crisis
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Very few of us realize with conviction the
intensely unusual, unstable, complicated,
unreliable, temporary nature of the economicorganization by which Western Europe has
lived for the last half century. We assume
some of the most peculiar and temporary of
our late advantages as natural, permanent,
and to be depended on, and we lay our plans
accordingly. On this sandy and false
foundation we scheme for social improvement
and dress our political platforms.
1919
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Haldane A, The Global Imbalances in retrospect and prospect Bank of
England, 2010
Lyons G, The Supercycle Report Standard Chartered, 2010
Hein E, Distribution, financialisation and the financial and economic
crisisimplications for post-crisis economic policies Berlin School for
Economics and Law 2011
Congressional Budget Office An Update to the Budget and Economic
Outlook: Fiscal Years 2012 to 2022 August 2012
OECD, What is the near term economic outlook September 2012 (ppt)
Reinhart C and Sbranica B, The Liquidation of Government Debt, IMF
2011Kindleberger C, The World In Depression 1929-1939
Harmondsworth,1987
Kondratieff ND, Long Cycles of Economic Conjuncture Moscow 1926
Mason P, Meltdown: The end of the Age of Greed, 2009
Mason P, Why Its Kicking Off Everywhere: The New Global
Revolutions 2012
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