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Europe's Ride To Hell In A Handcart

Politics / Euro-Zone Dec 13, 2011 - 12:05 PM GMT

By: Andrew_McKillop

Politics

Best Financial Markets Analysis ArticleIn a recent article 'Smokescreen Europe' I underlined one of the scariest, most laughable new realities of the European ride to oblivion. Nothing comes out of the endless ballet of special crisis summits where heads of state predictably pose and preen. The crisis deepens.


To be sure, heavyweight propaganda from the Sarkozy-Merkel clan says we are muddling through in a great way. The so-called "real economy" however is a lot sicker than anybody wants to say or admit in mainstream politics and the tame mainstream media. According to most long-term projections, by 2050  the world’s three largest economies will certainly include China, India - and possibly the United States. For Europe things are much clearer. Europe’s share of G20 GDP will be more than halved in the next 40 years, from 25% to about 10%. This decline of economic power will inevitably result in a similar big hit to European political power. For a long list of why we only get a glimpse of the iceberg's tip like steerage class passengers on the Titanic, this helps:
http://theautomaticearth.blogspot.com/2011/12/december-8-2011-youre-either-at-table.html

WHAT HAPPENED ?
Enter the conspiracy theories one after the other. Among the most heavily worked is the Anglosaxon global governance theory. This asks us to believe the world's most powerful bankers, corporate chiefs and both present and recent political leaders Have A Plan. But first they have to destroy the economy. After that "we" will accept anything and everything of course - there is No Alternative.

General lines of this theory say we move to a police state of governed austerity, likely with eugenics, like a latter-day Orwell "1984" but with smartphones and downloadable apps in the transition. Maybe the economy slowly builds its way back up, but maybe not. This seems to forget the backdrop to "1984" was total and permanent war - and as Albert Einstein said, the third world war will surely be nuclear, but the fourth world war will be fought with sticks and stones. By a lot less persons.

Preventing war (except for "designer wars" over the horizon, Afghan-style) is usually included as a global governance theme because wars are so bad for business excluding war business. So we have to accept the Governors did a change of heart or fundamental rethink and now want war, even if it destroys the economy, even more certainly than the debt and deficit bomb. The governance theme is richly decorated with extra frills by some long-time producers of written products on the theme, like Naom Chomsky. They add the ever less credible frill that the USA is the dark threat Rogue State and hyper-power most committed to global governance. Sometimes, modernity oblige, we can have Chinese and why not Indian co-governance. We can also add several other G20 countries, also why not ?

The list of rogue states therefore grows and the certainty of all these "players" being committed to first destroying the world economy possibly through hot war, then running a police state post-disaster show, declines to nothing. This would be a real waste of effort, since the seamless play of market forces, as they are humorously called can do all thats needed, even if it takes a little longer.

CULTURE SHOCK
Another line is that in the same way that a swath of Black Swan events, called "extreme low probability" hit the casino-based late stage neo capitalist economy, they also wrecked established and traditional values, ideology and politics. The culture shock of the 1970s, with the oil shocks for all major oil consumers and then Iran shock, for the USA and European countries, triggered a tsunami of change. Most of this was underwater iceberg-style, but visible parts included clarion calls for Neoliberal economics and politics from Thatcher and Reagan.

Supporting this cut, one fundamental trait of "neoliberalism" was that it didnt exist. The conference circuit was filled by talk about Adam Smith and Ricardo, Jean-Baptiste Say and other way-back figures from a totally different, antique era. Today's version of neoliberalism is heavily mutant, even less easy to define and harder to fathom. The huge mix of different factors which mutated this already shadowy New Thing to nothing can be summed up by comparing the total amount of government spending (and borrowing !) today, compared with the high times of neoliberal delirium, in the 1980s. Whatever it was, the neoliberal cult in no way downsized government spending, even if it downsized government by giving political governors a great excuse not to govern.

Other massive culture shocks came with events like the collapse of the Soviet Union. This was the comforing permanent enemy, the Evil Empire, replaced by its own downsized mutant police state run by Vladimir Putin - who already faces a nascent Arab Spring type revolt. For the globalizing economy of the 1980s, the Soviet Union was about as relevant as the European Union is, today - in fact more useful because at least it exported oil and gas. Further culture shocks came, and keep coming every day with the unstoppable growth of China and India through the 1990s, neither of which used anything like the supposed "neoliberal model", if it ever existed.

Increased mercantile-type competition from the Emerging economies can at least help explain the stampede into hyper-debt and vastly accelerating economic decline of the Old World rich states, but is far from able to explain all. What we know is the Soviet Union wasnt responsible for it. And while neoliberalism provided a smokescreen for political deciders to decide nothing "because markets decide" it is more than difficult to imagine this mutant 18th century economic-political doctrine was anything more than a minor factor of change explaining the now very high speed ride to oblivion.

ECONOMIC SHOCK
Attempts made to explain how things got so bad, so fast often only start with the 2007 US subprime crisis. Before the 2007-2009 sequence and supposed key events like the Lehman Bros crash and the Madoff affair all was supposedly OK. This totally ignores the at least 30-year-long decline of the US and Japan, and European economic decline which in fact goes back to the very first founding of European federal-type agencies and institutions in the 1950s and 1960s.

We can set up a credible "pure economic model", locked-on by decisional inertia and the ideological commitment of so-called deciders to do nothing, called laisser-faire, to explain how the economies of the Old Rich world were winnowed down to fragile card castles, although "we didnt know it". This is fine, the pipedream of late model de-industrialized consumer society living on debt to pay their Chinese industrial goods and Arab oil, but any check on the weights and volumes of old-fashioned raw materials, food and energy that are consumed, today, by these "postindustrial" states makes it necessary to ask why producing nothing at all became the Nice Thing to do, or rather not to do.

The pure economic model applies well to the present and certainly ongoing European crisis. The biggest media rip-off of the Special Summits Story is that Europe's debt and deficit crisis can somehow be solved by Germany - the so called anchor economy - while the openly has-been economy of the UK has sulked out, due to lost glory. Bank debt in all the major EU27 countries is in fact as lurid as anything the USA can throw at the world, and printing money can only light the fuze for further and deeper economic crisis. All the figures prove it, all the data is available: more debt will make the future worse, not better. But more debt is the "only possible solution", otherwise we get total meltdown. Back to the global governor theory.

What we find if we check global governor house mags and Web sites, like the Club of Madrid or WorldShift Network, is a strange schizophrenic mix of crisis fear of overpopulation, and the cry that the world needs more babies. According to the UN, world population could reach 9 billion in 2050, from the current 7 billion, and this would expand the global labor force by some 1.25 billion with most of the increase from Asia and Africa - but in Europe the working-age population will decrease by over 110 million people by 2050. Especially big losers will include Germany.

ECOLOGY SHOCK
Starting at almost the same time as oil fear and fear of lost Imperial power and authority by the Old Rich states, the ecology crisis theme is now a long-running player with major political, and growing economic spillover most concentrated in European states. Very significantly, overpopulation fear is heavily muted, even forbidden by major ecology parties close to, or in government. Likewise, staying in political play and relevant for primetime TV shows, media-acceptable ecology parties must call for economic growth, green to be sure. Debt-based for certain.

However, even within the space of less than 2 years ecology parties and movements in Europe, slower in the USA and outside the western world, have recycled to Green Austerity to get more media scope and political reach. In a declining economy, European-style, growth is an endangered species and maybe already extinct, so saving the planet no longer needs $45 000 electric cars, it can feature bottle recycling by the homeless and scavenging repairable hairdryers in city waste dumps. The problem however is the ecology messsage can easily stretch to extreme revolutionary concepts, values and demands, which explains its long and tortured trail in and out of European politics since the 1970s.

More important for the global economy in its present format, which has no more long-term credibility or intrinsic survivability than either the Soviet Union had, or the European Union has, the "ecology shock" thesis says China and India have the same no-win future as the USA, Europe, Japan or any other OECD country. Their downsizing may come slow, or it may come fast, but it will come due to the 4 Horsemen of the Apocalypse: Depletion, Demography, Debt and Despair. While no media-presentable ecology party spokesperson will talk like that, winning themes for European ecology parties include the anti-nuclear movement, or crusade, with doomster talk at least as impressive as that used to sell global warming apocalypse. Quickly exiting nuclear power is a risky bet, will be expensive and may not work, but spurred by rising and mostly hidden public fear the great experient is now underway. 

Given the political context of the great anti-nuclear experiment, ecology parties being near-government or in-government but in no way dominant, the potential for this experiment falling apart - failing like other despair themes run by the elites - is a large and real risk. Post-failure conspiracy theory can explain that the elites, who are committed to nuclear power, allowed the ecology parties to run their failed attempt to quit nuclear power, leading to further and deeper economic ruin. In fact, countering this conspiracy theory, rapidly exiting nuclear power will cost so much that governments will be forced to borrow huge additional amounts, further accelerating the sure and certain decline of the economy.

This only ecologically recycles to a basic driver for decline. Since borrowing is second-nature to late stage "neolib" governors, borrowing to quit nuclear power and stampeding into green energy should be fine for them, and good for the global governance conspiracy theory: deeper debts might be a key to conspiracy theory, but are a real "strategy" for destroying the economy.

ARAB SPRING SHOCK
This means civil resistance to established power, with as yet few conspiracy theorists arguing the Arab Spring was set up as a dry run for the same thing, in the Old Rich states. The less impossible theme of Arab Spring being encouraged and activated by the Anglosaxon governors is itself difficult to swallow, from any careful look at how civil resistance boiled up, then morphed into revolution in the Arab states - with a powerful economic crank handle, easy to compare with what the so-called governors did and are doing at home in their own states.

Examples like the current Syrian revolution and civil war are a key for both conspiracy and no-conspiracy theories. Putin's Russia, along with China have so far refused to give a green light to Libyan type regime change, with reasons claimed by commentators including Russia's military bases in Syria, small as they are, and China's oil supplies from Syria, small as they are. Iran also has reasons for wanting to see the el Assad regime survive. Whatever the reasons however, Syrian resistance fighters can only be pushed into more intense struggle by the el Assad regime's barbaric repression and long-term economic failure to employ, house and feed its own people. More likely as explanation why little yet moves outside for bringing down Bashr el Assad, when his regime falls the spillover through the region promises to be large, very large. Depending on scenario, oil prices could double, hitting the long-running raw nerve of the Old Rich states, and oil import dependent China and India.

But more diffuse factors are operating: the Arab Spring revolt has itself morphed since its start in January 2011. This process is now "organic" and anarchic in the sense of being anti-power, anti-establishment. Support comes to this from the little understood, much criticized victory of Political Islam when elections do take place, in post-revolution Arab states. Closer to communism than capitalism, Political Islam is a long term traditional alternative to democracy and the nation state - which were themselves early victims of the "neoliberal revolution" and globalized economy. The apparent goal of creating or restoring democracy does not have to apply in the European (or US) version of Arab Spring, the movement may run a lot deeper than that because democracy is a discredited theory like absolute rule by "the markets". For Europe and the US, their coming Spring of 2012 can be a post-democracy struggle with almost hidden anarchic goals of a necessary postindustrial society far along from the faded notion of the Nation State.

PUTTING IT TOGETHER
The late stage "neoliberal" economy and society could be simply a phase in the process that will dissolve the industrial-urban society and economy. Whatever comes next does not have to be planned. In the space of less than 6 months, in Europe, and 9 months in the Arab world change has moved so fast that the huge range of results are forgotten. The mutant type capitalist economy, the nation state, the politics of urban "postindustrial" consumer society, the Arab world's seemingly timeless and unchangeable dictatorships - have all taken massive hits to their credibility and permanence. Once upon a time there was No Alternative, but now there are only alternatives. How will they be run together ?

Claims that this global surge of change is due to or enabled by the Internet and smart phones are about as credible as saying Hillary Clinton planned the downfall of Egypt's Mubarak in the Rose Garden. At most, the process was only accelerated by alternate media and new communication tech. The collapse of European "democratic dictatorships" symbolized by Berlusconi's fall, and replacement by unelected technocrats is a good example of how change, in Europe, does not have to go the same way as in Arab states. After the basically dysfunctional trappings of late stage "democracy" of the Berlusconi type, the next stage is openly undemocratic rule, in Europe, in part because the debt and deficit crisis is so extreme and growing so fast.

Obviously to anybody watching things from Mars, one key change-to-come is the end of late stage neoliberal-type capitalism's own last stage: the pinwheel gambling smoke-and-mirrors economy. Bad bets and deep debts have unsurprisingly snowballed to monstruous scales, which in the European case are casually described by present incumbent political leaders and their tame media as needing "10 or 20 years" to dissipate or absorb "if everything goes right". What comes after that economic model isnt easy to map, but could include just about the opposite of everything we have today.

Chance events, even freak events - always called unrepeatable - will certainly play on the time needed to move further along the curve. Iran crisis leading to Gulf war, as one major example, is in fact a 30-year-old freak event with big potentials for repeating itself. Only for a very short while would oil at $150-a-barrel spur equity traders to talk up their betting chips, before panic set in and gold went parabolic. In the current framework, this could be enough to trigger the awaited collapse of the euro and trigger a Fortress Europe federalist plan for survival, this time with the UK happy to play. Likewise, it may only need a short winter (possibly aided by Global Warming !) to get the anti-government protestors massing again across Europe, in the USA and Russia. The dice have been shaken and the results will come hard and fast.

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2011 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Anatoli Ostapenko
14 Dec 11, 09:35
Conspiracy Theorists vs. A. McKillop Death-match

In the right corner we have A. McKillop with his "Wow! No one is driving the plane!"

In the left corner is mostly anonymous group of blind-folded conspiracy theorists, wetting their pants.

Who is going to win? Ladies and gentlemen make your bets. But ... wait! Whoever wins - we lose.

"No pilot on board" point of view relaxes the public opinion to a degree sufficient for the so-called "deciders" to avoid responsibility for any wrong-doing.

On the other hand, the psychotic conspiracy theories allow "deciders" to ridicule perfectly legitimate questions, thus achieving exactly the same result.

Why there cant be a bad pilot or maybe short-sighted pilot? How about two pilots and a group of airline managers pressing contradicting orders? This isn't to say that Mr. McKillop's airliner analogy is bad. I think its brilliant. It's just the evidence that doesn't support the "autopilot" scenario is too compelling to ignore - even if the "event horizon" of the "front men", "deciders" or whoever doesn't extend any further than the next election date.

Anatoli Ostapenko

Electrical Engineer and dedicated reader of A. McKillop's essays

Western Australia


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