For three decades now, under the leadership of the WEF in Davos, paeans have been sung to the “one world” and the “overcoming of nation states”, the progression from a national economy to a global economy and an unlimited freedom of capital, products, services and labour.
In theory, this was correct because international exchange can be an advantage for all participants:
- Countries with low capital resources, low wages and cheap product prices offer cost and profitability advantages for international investment, which in turn helps them to build their own industries and thus generate economic progress.
- Conversely, countries with high capital resources, high wages and high product prices can gain economic growth at cheaper costs through foreign investment and imports.
- According to Ricardo’s law of comparative costs1, foreign trade offers a cost advantage to both sides, and more foreign trade offers cost and wealth advantages to both sides. That is why the surge in foreign trade has contributed significantly to world prosperity over the last 50 years.
- But everyone knew that foreign trade is fragile, that it depends on all partners behaving fairly and not causing disruptions to world trade.
- However, economists believed that such foreign trade barriers could be removed through international cooperation, for example legal barriers to investment through World Trade Organisation (WTO) and investment country bans, and so forth.
- The USA claimed that it had to enforce the “freedom of the energy market” through sanctions against those countries (Russia, Iraq, Iran, Venezuela) that did not want to have their oil or gas marketed by American oil multinationals but wanted to keep the profits for themselves.
- Since the USA imports more than it exports and therefore has to accept increasing trade deficits, the FED was forced to increase the money supply in order to finance these deficits. In the same way, the ECB was forced to permanently finance the deficits of the highly indebted European countries Greece, Italy, Spain, France, etc. – in other words, foreign trade was financed out of debt.
- Conversely, countries that achieve permanent export surpluses (above all Germany) have had these surpluses drained from them through forced loans (target crediting, “bailout financing”, indirect state financing of the central banks) (with the exception of China, which has accumulated dollar assets of over three trillion US dollars and is now frantically seeking investments for them all over the world).
- The USA is fighting the import of, for example, the European automobile industry with high punitive sanctions for alleged technical transgressions and in doing so, has subjected all companies and countries trading with America to American jurisdiction and its punitive options (example also: Nord Stream 2). Against more and more countries like Russia, Iran, Venezuela and against companies that did not want to submit to the American monopolies, ever harsher sanctions were imposed by the USA and its satellite governments, i.e., economic warfare was got off the ground.
- Since Vladimir Putin has been fighting the takeover of Ukraine by the USA, there has been the largest worldwide surge of NATO sanctions (i.e., the start of the economic war against Russia) through supply stops, financial blockades and expropriations of Russian assets all over the world. This economic war has already torn globalisation apart, split the world, cut traditional supply relationships, especially in raw materials, and plunged the world into the biggest recession in history.
Those who had previously trusted in globalisation are now suddenly the losers:
- Those who have invested in Russia or established stable business relations with Russian companies suddenly find themselves without these partners and therefore with supplier problems.
- Those who have shifted their production to low-wage countries – especially China – see their supply chains torn and even have to fear that China, just like the USA, will also sanction or expropriate foreign companies if the Ukraine war escalates.
- If foreign trade collapses, the export surpluses of, for example, Germany will also plummet, the prosperity based on exports will collapse.
- The international corporations are therefore already taking refuge in national investments in order to produce nationally again what they used to get cheaper from abroad, in order to get it at all.
- Medium-sized suppliers are also now realising that their world production has become uncertain, is causing them growing difficulties and that they have to create national alternatives.
- The triggered decline in global foreign trade and especially the decline in previous export opportunities means shrinking production and falling economic activity with all its consequences for investments, jobs, incomes and national prosperity throughout the world.
The regression from the previously globalised export boom to nothing but safe national production will be a difficult transitional phase of several years, could bring the dreaded stagflation, will in any case have cost-increasing and inflationary consequences from the declining exports and imports as well as from the increasingly expensive relocations of production, which will make the whole world poorer.
How long the recession process lasts will largely depend on how long the US economic sanctions freeze world production and how the Ukraine war develops, whether it can be ended and overcome in peace, or escalates and becomes the third world war waged by the economic blocs.
So, we are facing a shorter or longer globalisation contraction – perhaps the end of globalisation altogether. The long feared economic crash2 or recession will cause our bogus prosperity, based first on exports and then on massive fiat money multiplication, to collapse; the global world will once again become national and our bogus prosperity will sink back into real poverty.
Have the sanctions war-mongers and wealth expropriators considered or even only wanted to consider these consequences? •
1 If each country specialises in the production and export of those goods that it can produce with the smallest absolute cost disadvantage – relative comparative cost advantage – this is an advantage for all.
2 See also Hamer, Eberhard. Was passiert, wenn der Crash kommt? (What will happen when the crash comes?), Hannover 2000