The 'transition' to a new world order is beyond most of the West
Only some understand that the Western economic paradigm, based on debt and hyper-financial consumerism, has had its day and that change is inevitable.
By Alastair Crooke via Reseauinternational.net
The new era marks the end of the "old politics": the labels "red versus blue" or "right versus left" are no longer relevant.
Even the need for a transition—let's be clear—is only just beginning to be recognized in the United States.
For European leaders, however, and for the beneficiaries of financialization who arrogantly lament the "storm" Trump has recklessly unleashed on the world, his fundamental economic theses are ridiculed as bizarre notions completely disconnected from economic "reality."
This is completely false.
Indeed, as Greek economist Yanis Varoufakis points out, the reality of the Western situation and the need for a transition were clearly articulated by Paul Volcker, former chairman of the Federal Reserve, as early as 2005.
The harsh "reality" of the globalist liberal economic paradigm was already evident at the time:
"What sustains the globalist system is a massive and growing flow of foreign capital, amounting to more than $2 billion every working day—and growing. There is no sign of strain. As a country, we are not consciously borrowing or begging. We don't even offer attractive interest rates, nor do we have to protect our creditors from the risk of a falling dollar."
"All this suits us very well. We fill our stores and garages with foreign products, and competition has done a great deal to moderate our domestic prices." This has certainly helped keep interest rates exceptionally low despite our disappearing savings and rapid growth."
"And it has also been comfortable for our trading partners and those providing capital. Some, like China [and Europe, particularly Germany], have relied heavily on the expansion of our domestic markets. And overall, emerging market central banks have been willing to hold more and more dollars, which are, after all, the closest thing we have to a truly international currency."
"The difficulty is that this seemingly comfortable model cannot last indefinitely."
Exactly. And Trump is blowing up the global trading system in order to reset it. These Western liberals, who are now gnashing their teeth and lamenting the advent of "Trumpian economics," simply refuse to admit that Trump has at least acknowledged the most important American reality: that this model cannot last indefinitely and that debt-driven consumerism is well past its expiration date.
Recall that most players in the Western financial system have known nothing but Volcker's "comfortable world" their entire lives. No wonder they're having trouble breaking out of their bubble.
This doesn't mean, however, that Trump's solution to the problem will work. It's possible that the particular form of structural rebalancing Trump proposes will make the situation even worse.
Nevertheless, restructuring of some kind is clearly inevitable. Otherwise, a choice will have to be made between a slow and rapid collapse and a disorderly one.
The dollar-dominated global system worked well initially, at least from the US perspective. The United States exported its post-war industrial overcapacity to a newly dollarized Europe, which consumed the surpluses. Europe also benefited from its favorable macroeconomic environment (export-oriented models, guaranteed by the US market).
The current crisis, however, began when the paradigm shifted, when the United States entered an era of unsustainable structural budget deficits and financialization led Wall Street to build its inverted pyramid of derivative “assets,” resting on a tiny pivot of real assets.
The stark reality of the crisis of structural imbalances is bad enough. But the Western geostrategic crisis goes far beyond the simple structural contradiction between inward capital flows and a “strong” dollar that is eating away at the heart of American manufacturing. For it is also linked to the concomitant collapse of the fundamental ideologies that underpin liberal globalism.
It is this profound Western devotion to ideology (as well as to the Volkean "comfort" provided by the system) that has unleashed such a torrent of anger and derision against Trump's "rebalancing" plans. Hardly any Western economist has a kind word to say—and yet no plausible alternative framework is offered. The passion they display toward Trump only underscores the bankruptcy of Western economic theory.
In other words, the profound geostrategic crisis facing the West lies both in the collapse of an archetypal ideology AND in the paralysis of the elite order.
For thirty years, Wall Street sold a fantasy (that debt didn't matter)... and that illusion has just been shattered.
Yes, some understand that the Western economic paradigm, based on debt and hyper-financial consumerism, has run its course and that change is inevitable. But the West is so invested in the "Anglo-Saxon" economic model that, for the most part, economists remain paralyzed in the spider's web. There is no alternative (TINA) is the watchword.
The ideological foundation of the American economic model lies first and foremost in Friedrich von Hayek's book, "The Road to Serfdom," which considered any government intervention in the management of the economy an attack on "freedom" and tantamount to socialism. Then, following Hayek's union with the Chicago monetarist school, embodied by Milton Friedman, who wrote the "American edition" of The Road to Serfdom (which, ironically, was titled Capitalism and Freedom), the archetype was established.
Economist Philip Pilkington writes that Hayek's illusion that markets are synonymous with "freedom" and are therefore in line with the deeply rooted libertarian movement in the United States "has spread to the point of completely permeating the discourse":
"In polite company and in public, you can certainly be left or right, but you will always be, in one way or another, neoliberal; otherwise, you simply won't be allowed to participate in the debate."
"Each country may have its own particularities (...) but, broadly speaking, they all follow a similar pattern: debt-based neoliberalism is, above all, a theory aimed at reorganizing the state to ensure the success of markets—and their most important actor: modern corporations."
So here's the fundamental point: the crisis of liberal globalism isn't just a matter of rebalancing a failing structure. Imbalance is inevitable anyway when all economies pursue the export-driven "open" Anglo-Saxon model in the same way, all together, all at the same time.
No, the more serious problem is that the archetypal myth that individuals (and oligarchs) pursue their own individual utility maximization—thanks to the invisible hand of the market—is such that, overall, their combined efforts will benefit the community as a whole (Adam Smith) has also collapsed.
Indeed, the ideology to which the West clings so firmly—that human motivation is utilitarian (and only utilitarian)—is an illusion. As philosophers of science such as Hans Albert have pointed out, utility maximization theory a priori excludes any mapping of the real world, thus rendering the theory unverifiable.
Paradoxically, Trump is nevertheless the leader of all utilitarian maximizers! Is he, then, the prophet of a return to the era of flamboyant 19th-century American tycoons, or is he an advocate of a more fundamental overhaul?
Simply put, the West cannot move to an alternative economic structure (such as a "closed" model with internal circulation) precisely because it is so ideologically invested in the philosophical foundations of the current structure—to question these roots is to betray European values and the fundamental libertarian values of the United States (derived from the French Revolution).
The reality is that today, the West's view of its so-called Athenian "values" is as discredited as its economic theory in the rest of the world, as well as among a significant portion of its own angry and disillusioned population!
In conclusion, don't count on European elites to give you a coherent vision of the emerging new world order. They are in the midst of collapse and are preoccupied with their own survival in the face of the collapse of the Western sphere and the fear of reprisals from their voters.
This new era, however, also marks the end of the "old politics": the labels "red versus blue" or "right versus left" are losing their relevance. New identities and political groupings are already taking shape, even if their contours are not yet defined.
Alastair Crooke - Source: Strategic Culture Foundation