Page 1 of 2 A world still half red
By Julian Delasantellis
Do you ever wake up in the morning, and realize that you wish that you didn't
feel as good as you do? You're up, the sun is shining, the birds are singing,
the traffic reporter says that the roads are free and clear, even the
drive-thru lane at Starbucks is open, with your favorite - a vente double half
calf extra shot mocha frappachino in a fair-trade blend, with a Carly Simon CD
on the side - ready to serve up.
Yes, you sure got a problem here and need to find some remedy. If this was the
1970s, you could always go and see a first-run movie that would get rid of your
happiness pretty fast. This was the heyday of dour, depressing directors such
as Ingmar Bergman and Woody Allen, and their films, best exemplified by
Bergman's 1972 Cries and Whispers or Allen's 1978 Interiors were
guaranteed to take the spring out of the step of those with even
the perkiest perspective. The consummate opus of the genre, Allen's 1987 September,
was so depressing that the Financial Times review of it recommended that it be
shown to manic depressives in their up phase.
I don't know about you, but these days, when I feel that the aura on my
rose-colored glasses is a just a bit too rufescent for my liking, all I have to
do is access the writings of Ambrose Evans-Pritchard, an economics columnist
for the Daily Telegraph in London. These well disabuse one of the notion that
everything, or, for that matter, just about anything, is all right with the
world economy.
The son of Cambridge University anthropology don E E Evans-Pritchard, Ambrose
first came to prominence in the 1990s, writing rabidly unflattering columns
about president Bill Clinton as the Sunday Telegraph's Washington bureau chief.
In this, he was surely a distinctive voice, in that his refined, melodious
Trinity College and Cambridge University accent must undoubtedly have
contrasted greatly with the Arkansas trailer park twang of the rest of, in
Hillary Clinton's famous words, the "vast right-wing conspiracy" out to get her
husband.
Freed from that pesky, inconvenient albatross of other journalists, the need to
provide facts and documentation to back up their writings, Evans-Pritchard
accused Clinton of everything from being an active agent in the 1993 suicide of
Clinton White House aide Vincent Foster to knowing complicity in the 1995
Oklahoma City federal building bombing that killed 169 people.
Recalled from Washington to become the Telegraph's Brussels/European Union
bureau chief from 1999 to 2004, he most recently has been writing and blogging
on matters of general interest in finance and economics. Apparently, with his
now much better adjusted doses of Prozac (just kidding, Ambrose, just kidding!
) he now contributes some very unique ideas to the worldwide debate on money
matters.
Head for the panic room
True, if you're looking for commentary on how productive and bountiful the
current world economic situation is, this probably is the wrong place to look.
Last year, his speculations that the Chinese government was switching from US
dollars to euros as the currency to hold their reserves in caused sharp dollar
selloffs. This year, just looking at some of the recent titles of his postings,
is enough to send you bounding in terror towards the panic room.
"Water crisis to be biggest world risk" went one, "Crisis may make 1929 look a
walk in the park." One of the best is this recent blog post, "A 50-50 chance
that climate change will destroy civilization this century."
Give the devil his due - in the finest Fleet Street tradition, the man knows
how to sell newspapers, or, more important these days, drive eyeballs to the
Telegraph's web site.
Last week, in a column devoted to the growing inflationary threat in the
capitalist economies, Evans-Pritchard posed this unique way to look at the
world economy.
The West is in the full grip of a debt deflation as
years of credit abuse come back to haunt it. The East - loosely speaking - is
in the blow-off phase of an inflationary boom. Russia, Ukraine, Vietnam and the
Gulf are out of control. China has dithered beyond the point of no return. It
is they who have repeated the errors of the 1970s, not the West. The two camps
face radically different problems at this point.
In March,
1946, another British observer, then ex-prime minister Winston Churchill, in a
speech at Westminster College in Fulton, Missouri, also looked out onto the
world and found a way to divide it into two, diametrically opposed blocs.
From
Stettin in the Baltic to Trieste in the Adriatic, an iron curtain has descended
across the continent. Behind that line lie all the capitals of the ancient
states of Central and Eastern Europe. Warsaw, Berlin, Prague, Vienna, Budapest,
Belgrade, Bucharest and Sofia, all these famous cities and the populations
around them lie in what I must call the Soviet sphere, and all are subject in
one form or another, not only to Soviet influence but to a very high and, in
many cases, increasing measure of control from Moscow.
This
was the famous "Iron Curtain" speech, the first usage of the term that would
come to dominate the standard view of the international system from then, less
than a year after the defeat of Nazi Germany, all the way to the fall of the
Berlin Wall in 1989, and the collapse of the Soviet Empire following the failed
communist revanchist coup attempt in 1991. At the time Churchill gave his
speech, Mao Zedong's victory in the Chinese civil war and the subsequent
establishment of communist dominion in the country, was still more than three
years away.
Following that, it was easy to look at a map and see a huge swath of the
Earth's surface, from the western border of East Germany, thousands of miles
east to the Pacific coast of China, colored red, denoting communist influence,
with perhaps nations such as India, somewhat sympathetic to the USSR during the
Cold War, but never an actual Soviet satellite, colored in a paler shade of
pink.
Red becomes green
China began moving away from doctrinaire communist economic management in the
late 1970s; after 1991, except for a few ink blots in Cuba and North Korea, the
red of nations under communist economic management was erased from the map. The
free market economic ideology of the capitalist ethic reigned planet wide, and,
as illustrated in books such as Francis Fukuyama's 1992 The End of History and
the Last Man, would surely do so for ages on ages to come.
And now, less than 20 years past the total victory of their free market
anti-government ideology, the two nations that espoused it most aggressively
and enthusiastically, Great Britain and the United States, are mired in an
economic calamity wholly derived from their boundless hubris. Meanwhile, those
nations of the East, prostrate and defeated back then, are now powering forward
with the strongest economic performances on the planet, economic growth so
strong that the unmistakable, definitive sign of too rapid economic growth,
inflation, is now moving to the fore as the world's most serious economic
malady.
Today, the anticommunist nations that led the fight in the Cold War would be
filled in with red on the map, denoting the dire situation of all the public
and private debt they are laboring under, while the former communist nations
would be colored green, representing both their very healthy economies and huge
swollen foreign exchange reserve surpluses.
How did this happen? How is it, as foretold in the book of Matthew, that
the "first shall be last; and the last [shall be] first?"
Economic statistics show clearly the contrast between the two worlds. For the
first quarter of 2008, economic growth in four of the countries with the most
fervent dedication to the free market ideology, the US, Britain, Spain and New
Zealand, averaged just over 2.5%. What these countries have in common is that
in recent years they all have allowed themselves to fall victim to housing
booms and bubbles that are now deflating.
In contrast to the travails of the winners of the early 1990s, an axis of the
Cold War's losers, Russia, Ukraine, Vietnam, India and China, continued to
bound ahead in this year's first quarter; their GDP growth averaged just under
8.5%. As Evans-Pritchard implies, if you're talking about strong economic
growth these days, you're most likely talking about something happening in
these countries, not in free market capitalism's most recently fervent
cheerleaders.
So what happened?
In my review
of Alan Greenspan's autobiography last October, I wrote of an article I
remembered reading in an academic journal around the fall of the Berlin Wall,
by an author whose name I have since forgotten. His contention was that, with
the threat of the communist world gone, nothing would then stand in the way of
the corporate funded and minded rulers of the capitalist world totally losing
their acquisitive inhibitions; they would aggressively move towards shaping and
forming government regulations to their liking.
Out of ignorance to the actual author's name, I called him "Brain".
As
I remember, Brain's apprehension was centered around his contention that, with
the communist threat no longer stalking the corporate suites of the capitalist
world, the capitalists would no longer be under any restraint to throw off the
shackles that had been inhibiting them from a total campaign of rape and
pillage of the middle and working classes of the capitalist world, indeed, of
the entire planet. Brain's argument was that, during the Cold War, the
governments of the capitalist world tamped down on the most avaricious impulses
of their ruling class because of fears that the ensuing social dislocations,
poverty and unemployment could have been exploited to further the interests of
the communist bloc.
Safety-nets cut
The prediction here was that the absence of the communist threat would lead to
a much more aggressive dismantling, in order to fund tax cuts for those in
upper-income brackets, of the various
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