First published on 9 October 2017
The global market economy suffers from an acute case of political disruption.
Where does one begin?
US President Trump tweeted at the weekend that "only one thing will work" for North Korea. What that is remains unknown. If President Trump wants a war, he can make a war happen, but what the markets are pricing is that if he is seen to be wanting a war, then the real threat of a war will get vested interests to step back from the brink and conciliate, so the more a war appears likely the less likely it is to happen, and the real action may be happening elsewhere, like in the Iran - China - Russia US axis, and so it goes on and on. For the rest of the world there appears to be no way of managing President Trump’s global ambition, so it is a case of “wake me up when it's all over”, as the Avicii song goes*, except that everyone is too scared to fall asleep. Buy Facebook.
Europe, meanwhile, continues to struggle with its own political crises, resulting from (what else?) failure of diplomacy. Political discord permeates economic visibility at the national, regional and supra-national level, from the 207-day-long birthing pains of the Netherlands’ new government, to Madrid’s utter response failure to Catalonia’s cessationist sentiment and Spain’s resulting constitutional crisis, to the prematurely withered wholesale attempts of the UK’s Brexit government to re-nationalise UK trade and fiscal interests, against the interests of its closest economic partners in a shared Union.
To add unpredictability to UK political uncertainties, structural questions around the eventual outcome of EU Brexit negotiations raise concerns about Westminster’s future relationship with Scotland and the Island of Ireland, potentially undermining the political integrity of the United Kingdom. It is possible that Her Majesty the Queen is not sleeping too well, too.
Separatism is by definition divisive, and economists are not immune to this. Some have heralded the results of this year’s German and French elections as proof that the EU (“core”) has defied the global tide of populism, in contrast to US and UK political risk. Others feel that the EU’s rigid structures are to blame for the crisis of representation and its results, from Brexit to Catalexit, which makes dis-unification the answer. I (as you might guess) would take issue with both “purist” arguments.
The period of 2016-2018 will go down in history as a period of an acute crisis of democratic representation internationally, from the breakaway vote of an EU bedrock member state such as the UK, to the working class protest vote that brought Donald Trump to the White House, to the rise of cessationist sentiment and neo-nationalism across Europe’s nation states.
Europe’s still emerging political union is no answer to the crisis of political representation, or economic development and welfare inequality, endemic to nations as old as Spain or Greece, or
even the beacon of global democracy – the US. Instead, the meteors of vox populi across the continent tell us more about the EU’s future purpose than about its historic raison d'être. Blaming the EU
for the bankruptcy of post-war socialist endeavours in Europe, or the arrival of global post-China free market economics, is the material of populists' defence of welfare protectionism, from Grexit
to Brexit, but not of economic analysis.
As for the crisis of representation in modern democracies globally, the common denominators among the present-day political economies of the UK, Germany, France, Spain, the US (the G+) unsurprisingly share a common birth place, as well.
As we have written elsewhere, the global economic calamity of a decade ago repurposed the role of the global economy’s main economic management structures and the corresponding sub-architectures of national institutions. From the role of the G20 and the IMF, to the policies of national central banks and regulators, the world of 2017 is very different from the world of 2007.
Political structures, however, failed to adapt to the mega-trends of socio-economic disruption that unfolded in the aftermath of the Global Financial Crisis. They are adapting now.
*It seems appropriate to end with Avicii’s “Wake Me Up” lyrics:
“So wake me up when it's all over
When I'm wiser and I'm older
All this time I was finding myself
And I didn't know I was lost…”
MD & Chief Economist, (g+)economics
©2007 All rights reserved
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