The Global Economy–Heading Where?

EDITORIAL, 2 Dec 2013

#302 | Johan Galtung, 2 Dec 2013 - TRANSCEND Media Service


Charles Darwin, in The Voyage of the Beagle, has a passage where he condemns an egalitarian native people on the tip of South America to stay primitive. Development presupposes inequality, having chiefs–human, animals, races–to look up to and learn from; no word wasted on the humans, animals or races at the bottom. And the evolution theory emerging from a mind thus pre-programmed is obvious: competition, struggle for survival, not mutual aid, as the substitute narrative for Genesis 1:20-28, 4th to 6th day–but without God.

However, a man of God, Pope Francis–if anyone is saving Western civilization from itself it is he, not economic growth presidents-PMs–comes out and decries inequality and “trickle-down economics” in particular as a “crude and naive trust in the goodness of those wielding economic power” (Washington Post, 27 Nov 2013, p. 1).  Or, maybe “those wielding intellectual power”, the servants, the economists, rather?

Look at BRICS, 45 percent of the world’s population, 25 percent of the Gross World Product, GWP.  NO to inequality and trickle-down: Brazil under Lula-Rousseff, Russia with revolution, China lifts the bottom up, South Africa breaks down Apartheid. India has some trickle-down, but social walls are too strong to break. The Social Protection Index of the Asian Development Bank is three times higher in China than in India (Japan is almost three times China–starting distribution already in the 1870s).

But the USA and EU have increasing inequalities.  It matters:

  • more people suffer, and may threaten the social “order”;
  • even a minimum social protection costs;
  • people at the very bottom produce with very low productivity;
  • people at the very bottom consume with very low “consumptivity” (value consumed per person-hour); hungry, at the brink of starving.

Lift the bottom up, and consumption and production will follow. People with adequate food, health, and education work better. They increasingly pay for themselves and more, and get the economic wheels turning.

The cuts in US social protection are pathetic. Obamacare fails, Medicare-Medicaid-food stamps shrink, pensions suffer from speculation, Congress fails to increase minimum hourly wages. But states and local authorities may do so, lifting the bottom in rich states (with the US Southeast–Tea Party territory–lagging behind, Washington Post, 29 Nov 2013).

The four costs above add up to USA committing economic suicide. Lift the bottom up so that they buy from the lower middle classes who will buy more from the middle middle classes. Wheels turning. People often buy upwards but consume downwards to save. Stimulus of cooperatives at the bottom will give better returns than stimulus to small existing businesses. The problem is stimulus vs bailout, and low class vs middle class stimulus, and alleviation of suffering.

How about debt? The problem is not debt, but servicing debt at the cost of servicing people, and servicing by printing, “easing”. A debt is investment in a productive future managed by competent actors, not by stupid incompetence. The new debt ceiling day is approaching, with no new ideas floating in the air, no road map out of the mess.

And how about the EU debt relative to GNP? Five countries–like the USA–are above 100: Greece (close to 170!), Italy, Portugal, Ireland– and then not Spain; Belgium and France are in-between. Spain is doing slightly better, France worse (Le Nouvel Observateur, 31 Oct 2013).

But then comes the private debt, by households and companies. Eight of the 17 euro-countries have private debt above twice GNP: companies do not invest and households consume less–like in the USA. The idea of cutting the numbers risking misery and exclusion by 20 million from 2008 to 2020 became a reality of adding 24 million (Klassekampen, 2 Nov 2013). Gone are great visions. Struggle for survival to fill an EU niche in the world and to keep a Union between key creditor Germany and indebted EU members to the West and the South, with old enmities lurking under the surface, is in.  The Euro will survive.  But Euro-pe?

For the world the key creditor is China. When the US government had an 18-day shutdown, Obama could not travel to meetings of ASEAN-APEC (Association of Southeast Asian Nations-Asia-Pacific Economic Cooperation) to launch a Trans-Pacific Partnership (TPP) that excludes China. Chinese President Xi Jinping went, reviving a China-ASEAN Maritime Silk Road from 500-1500 AD, added to Silk Rail. Chinese inter-governmental diplomacy: equal footing, mutual benefit, compromise, non-interference. By 2020 China-ASEAN trade may reach $1 trillion, with China-Malaysia in 2017, $160 billion. The militaristic pro-US Malaysian Prime Minister Najib Razak says he may pull out of TPP to preserve sovereignty (Just World). Deals come more easily for the world’s biggest creditor than for the biggest debtor. The USA is now better at breeding enemies than friends; with NSA-Snowden the Trans-Atlantic Partnership (TAP) may never be what the US envisaged. TPP-TAP make Big Business the winners through protectionism and increased inequality.

Imitate the leader!–while China is playing the mutual aid card.

Add the speculation that Wall Street–with JP Morgan Chase-Citibank-Bank of America-Goldman Sachs accounting for more than 90 percent of the known derivative trade–is perpetrating on the world. Glen Ford, a former EU Parliament Member: “Wall Street Bets a Quadrillion dollars of Everybody Else’s Money” (TMS, 14 Oct 2013); $1.2 quadrillion, 16.7 times the GWP. Derivatives are valued at six times the world wealth. Madness.

Add to this the contradictions in the US economy between serving debts and serving people, between money in circulation and US worth, and between the growth of the financial economy and the real economy. Which bubble bursts first is hard to tell. But with 80 percent of US workers with no real wage raise in last three decades, and 400 individuals owning more than the bottom 180 million (The Nation, 28 Oct 2013) the situation is worse than before the French and Russian revolutions.

Friends of USA: give sound advice; but de-americanize, keep distance. The global economy is heading East and South: BRCS+, with a stagnant EU. Growth with distribution, not stagnation with inequality.


Johan Galtung, a professor of peace studies, dr hc mult, is rector of the TRANSCEND Peace University-TPU. He is author of over 150 books on peace and related issues, including ‘50 Years-100 Peace and Conflict Perspectives,’ published by the TRANSCEND University Press-TUP.

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