The Global Market: On the Precipice

Who said a collapse of the global trade market would be a bad thing.  We would be back to where we were in 1980 or 1984 - trading in separate markets.  Sovereign states trading with sovereign states and making deals individually.




An entire system of global trade is at risk



Next month’s G20 summit must go beyond the usual rhetoric. Confidence in the eurozone’s banking system has to be restored through recapitalisation of its banks.



By Telegraph View
8:04PM BST 07 Oct 2011



Sir Mervyn King, the Governor of the Bank of England, this week called the current financial crisis “the most serious… since the 1930s, if ever”, in justification for a further £75 billion of “quantitative easing”. Since Sir Mervyn cited the chaos of the inter-war years, it seems appropriate to quote Winston Churchill: “Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusions of counsel, until the emergency comes, until self-preservation strikes its jarring gong – these are the features that constitute the endless repetition of history.”

We are at just such a moment again. Little more than two years ago, global leaders were happily congratulating themselves on having avoided the mistakes of the 1930s, thereby averting a depression. But now it appears that the difficulties of 2008 were but a foretaste of what was to come. With the European banking system again on the verge of collapse, there is a sense that politicians and economists are out of options, that governments and central banks are powerless before events. The best of the cavalry has been sent into battle, and it has come back in tatters. The fiscal armoury has been exhausted, the support offered by the boom in emerging markets such as China and India over the past two years seems to be on its last legs, and there is but the small rifle fire of the central bank printing presses left to defend us.

If it has been obvious for some time that we are caught up in an extreme financial crisis, the extent of its severity has acquired greater clarity in being described by the Governor of the Bank of England. Never before has the global financial system been so interlinked and integrated, which means that problems in one part of the world are capable of causing severe stress almost everywhere else. We once more face a perfect storm of cascading default, contracting credit and collapsing economic activity.

Yet, despite the parallels, the current situation need not end in the same catastrophe of economic, political and social meltdown as occurred in the 1930s. For most advanced economies, these outcomes are still avoidable. But escaping them is going to require leadership, nerve and collective resolve – things that have so far been in short supply.

The problem is not in Britain – which, despite the appalling legacy of debt left by the last government, is doing most of the right things – but in mainland Europe, where lack of foresight, unwillingness to act, confusion of counsel and lack of clear thinking are indeed everywhere to behold. We can but hope that self-preservation will eventually force governments into corrective action, but they are leaving it perilously late.

It is, first, essential that confidence in the eurozone’s banking system be restored through recapitalisation of its banks, where necessary with public money. This would help bring a halt to the destructive downward cycle in credit.

Politically unpalatable though it would be, Britain may have to stand ready to participate in the process by similarly supporting its own banks. To once more dip into our pockets to bail out the bankers, at a time of deep public spending cuts and swingeing tax increases, will to most people be anathema. And for UK banks, it may not be strictly necessary – the Chancellor, George Osborne, insisted yesterday that they were well capitalised and liquid.

Yet, like it or not, we remain joined at the hip to Europe. This is especially the case through the banking system, which is highly exposed to the eurozone’s inner tortures. If a plan of mass recapitalisation is to work, it has to include everyone, good as well as bad. For countries and bankers to start squabbling among themselves about who needs to be bailed out and who doesn’t merely risks accentuating the paralysis.

There are, in any case, ways of sugaring the pill. A precedent already exists with the Royal Bank of Scotland, which pays £320 million a year for a promise by the Government that it will provide £8 billion of new capital if it is ever needed. This is a kind of insurance policy which could be used as a model for a wider recapitalisation of European banks – a way of underpinning confidence in the system without actually having to put up the money to do so.

But in the end, none of these measures can be any more than sticking-plaster solutions. Until the imbalances between creditor and debtor nations in the eurozone and the wider world economy are addressed, it is only a matter of time – and possibly not much time at all – before the crisis returns anew. It is therefore to be hoped that the G20 summit in Cannes next month can come up with some form of global contract that goes beyond the meaningless commitments and rhetoric of the past to provide convincing mechanisms for addressing such imbalances and strains once and for all.

At risk is a system of global trade and interaction unparalleled in human history – one that has lifted hundreds of millions out of poverty and delivered unprecedented prosperity to hundreds of millions more. Will this really be thrown away for want of resolve?




 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
economy

New World Order

There'll be nowhere to run from the new world government


'Global' thinking won't necessarily solve the world's problems, says Janet Daley



By Janet Daley
19 Dec 2009
The Telegraph

There is scope for debate – and innumerable newspaper quizzes – about who was the most influential public figure of the year, or which the most significant event. But there can be little doubt which word won the prize for most important adjective. 2009 was the year in which "global" swept the rest of the political lexicon into obscurity. There were "global crises" and "global challenges", the only possible resolution to which lay in "global solutions" necessitating "global agreements". Gordon Brown actually suggested something called a "global alliance" in response to climate change. (Would this be an alliance against the Axis of Extra-Terrestrials?)


Some of this was sheer hokum: when uttered by Gordon Brown, the word "global", as in "global economic crisis", meant: "It's not my fault". To the extent that the word had intelligible meaning, it also had political ramifications that were scarcely examined by those who bandied it about with such ponderous self-importance. The mere utterance of it was assumed to sweep away any consideration of what was once assumed to be the most basic principle of modern democracy: that elected national governments are responsible to their own people – that the right to govern derives from the consent of the electorate.

G8 summit must recognise that green taxes won't help the environmentThe dangerous idea that the democratic accountability of national governments should simply be dispensed with in favour of "global agreements" reached after closed negotiations between world leaders never, so far as I recall, entered into the arena of public discussion. Except in the United States, where it became a very contentious talking point, the US still holding firmly to the 18th-century idea that power should lie with the will of the people.

Nor was much consideration given to the logical conclusion of all this grandiose talk of global consensus as unquestionably desirable: if there was no popular choice about approving supranational "legally binding agreements", what would happen to dissenters who did not accept their premises (on climate change, for example) when there was no possibility of fleeing to another country in protest? Was this to be regarded as the emergence of world government? And would it have powers of policing and enforcement that would supersede the authority of elected national governments? In effect, this was the infamous "democratic deficit" of the European Union elevated on to a planetary scale. And if the EU model is anything to go by, then the agencies of global authority will involve vast tracts of power being handed to unelected officials. Forget the relatively petty irritations of Euro‑bureaucracy: welcome to the era of Earth-bureaucracy, when there will be literally nowhere to run.

But, you may say, however dire the political consequences, surely there is something in this obsession with global dilemmas. Economics is now based on a world market, and if the planet really is facing some sort of man-made climate crisis, then that too is a problem that transcends national boundaries. Surely, if our problems are universal the solutions must be as well.

Well, yes and no. Calling a problem "global" is meant to imply three different things: that it is the result of the actions of people in different countries; that those actions have impacted on the lives of everyone in the world; and that the remedy must involve pretty much identical responses or correctives to those actions. These are separate premises, any of which might be true without the rest of them necessarily being so. The banking crisis certainly had its roots in the international nature of finance, but the way it affected countries and peoples varied considerably according to the differences in their internal arrangements. Britain suffered particularly badly because of its addiction to public and private debt, whereas Australia escaped relatively unscathed.

That a problem is international in its roots does not necessarily imply that the solution must involve the hammering out of a uniform global prescription: in fact, given the differences in effects and consequences for individual countries, the attempt to do such hammering might be a huge waste of time and resources that could be put to better use devising national remedies. France and Germany seem to have pulled themselves out of recession over the past year (and the US may be about to do so) while Britain has not. These variations owe almost nothing to the pompous, overblown attempts to find global solutions: they are largely to do with individual countries, under the pressure of democratic accountability, doing what they decide is best for their own people.

This is not what Mr Brown calls "narrow self-interest", or "beggar my neighbour" ruthlessness. It is the proper business of elected national leaders to make judgments that are appropriate for the conditions of their own populations. It is also right that heads of nations refuse to sign up to "legally binding" global agreements which would disadvantage their own people. The resistance of the developing nations to a climate change pact that would deny them the kind of economic growth and mass prosperity to which advanced countries have become accustomed is not mindless selfishness: it is proper regard for the welfare of their own citizens.

The word "global" has taken on sacred connotations. Any action taken in its name must be inherently virtuous, whereas the decisions of individual countries are necessarily "narrow" and self-serving. (Never mind that a "global agreement" will almost certainly be disproportionately influenced by the most powerful nations.) Nor is our era so utterly unlike previous ones, for all its technological sophistication. We have always needed multilateral agreements, whether about trade, organised crime, border controls, or mutual defence.

If the impact of our behaviour on humanity at large is much greater or more rapid than ever before then we shall have to find ways of dealing with that which do not involve sacrificing the most enlightened form of government ever devised. There is a whiff of totalitarianism about this new theology, in which the risks are described in such cosmic terms that everything else must give way. "Globalism" is another form of the internationalism that has been a core belief of the Left: a commitment to class rather than country seemed an admirable antidote to the "blood and soil" nationalism that gave rise to fascism.

The nation-state has never quite recovered from the bad name it acquired in the last century as the progenitor of world war. But if it is to be relegated to the dustbin of history then we had better come up with new mechanisms for allowing people to have a say in how they are governed. Maybe that could be next year's global challenge.





 
 
 
 
 
 
globalization