Money Matters

Economics, Banking, Finance, and Supply Chains

Angrynomics – The summary: Part 5

Angrynomics: An image representation globalization
This entry is part 5 of 15 in the series Angrynomics - The Summary

This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.

If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above.

Angrynomics and the collapse of the neoliberal system

From 1945 to around 1975, the western world was in a period of economic expansion where economic policies targeted full employment, labour unions were strong, and wage growth kept pace with productivity growth.

This setup did however have issues and when in the 1970s it produced a combination of high unemployment and inflation, people got worried.

In the meantime, a competing economic narrative was making the rounds.

  • Global trade is good
  • Regulation is bad.
  • Privitatization is good
  • Unions are causing more harm than good.
  • State influence in the economy is bad.

This setup is called neoliberalism, and it became the setup to move towards as the prior setup was seen to be failing.

Why? Probably because the neoliberal narrative was “ready to go” having been discussed at length over the preceding several years.

Then, in 2008 when neoliberalism failed, what narrative took its place?

The reason none of us know what it is, is that there wasn’t one.

The failure of neoliberalism left a void, and that void was quickly filled with anger.

People are being punished because “their” elites screwed up

In essence, the political and economic elites of the western world messed up.

The neoliberal narrative listed above worked for relatively few of us and left the majority of us behind.

But, those same political and economic elites felt the bailouts of the big banks and big businesses needed to be paid for, and where did they go to find the money?

By reducing expenses on government programs that assist poor and middle-class people.

For all practical purposes, government programs to help people on the lower end of the income distribution were reduced in order to expand government programs (bailouts) benefiting people on the higher end of the income distribution.

And people are now demanding to be heard

The anger we’re seeing around the world is people demanding to be heard.

Brexit, Trump, the Yellow Vest protests, anti-immigration anger, the 6 Jan 2021 storming of the US capital, all of it.

Even by voting for “burn it down”

Even when “it” goes against their self-interests, such as Brexit and Donald Trump.

Brexit and Donald Trump were not voted for out of any sense of rational logical weighing of the alternatives.

They were the “F*** YOU!” votes of an angry electorate ready to burn the place down, if needed, in order to be heard.

The political center was blindsided

And what we call the political center did not see it coming.

Why? Because the political center is led by the very elites who have been saying all along “Everything is fine”, and for them, it was.

Lack of voice and perception of futility is toxic

When people feel they’re not being listened to, and that exercising their democratic right to vote is futile and meaningless, things get toxic.

As they did.

We can’t have it all: Globalization, democracy, sovereignty

And THIS seems to be WHY our elected leaders are so impotent.

What exactly does “globalization” mean?

Globalization means lowering barriers to international trade.

Our ability to manage supply chains has become more sophisticated, and we are no longer just shipping finished goods across international borders.

Large multinational companies are shipping components and subassemblies around the world in the process of creating their products.

A specific example of globalization

I worked at Seagate Technology in the late 1990s. While I’m sure the details have changed since then, at that time, the recording head platters were made in Northern Ireland. They were then shipped to Malaysia to be cut up and made into individual recording heads. They were then shipped to Thailand to be included in the head gimbal assemblies. They were then shipped to China to meet up with printed circuit boards which were made in Singapore. I do not know where the disc platters, motors, and disc enclosures came from.

But building the 100,000 disc drives a day they built back then, required manufacturing operations in AT LEAST five countries.

Trade agreements enable this.

The benefit of this is the costs to manufacture stuff have plummeted.

The companies experience lower costs to produce stuff, which means they can generate profits sufficient to satisfy their investors while selling their products cheaper.

What does this mean for the people in first-world nations?

The people in first-world nations have access to cheaper stuff.

The big cost to the first world nation residents is their manufacturing heartlands have been economically hallowed out.

To the people in the first world nations who are affected by globalization and worked in manufacturing, they’ve gained cheap stuff and they’ve lost good-paying jobs.

To the people in the first world nations who are affected by globalization and work in finance, they’ve made out good.

But the larger issue is…

Internation trade is not governed by the rules of any one nation. They are governed by the rules of trade agreements, which are international treaties.

Treaties such as:

  • NAFTA: The North American Free Trade Agreement
  • USMCA: The US, Mexico, and Canada Free Trade Agreement that replaced NAFTA
  • DR-CAFTA: Dominican Republic-Central America Free Trade Agreement
  • TPP: The Trans Pacific Partnership (which the USA is not currently a member of)

More specifically, the overall authority for the negotiation of trade agreements and of mediating disputes between nations, and between corporations and nations, is the World Trade Organization.

International trade treaties supersede sovereign laws

And… international treaties take precedence over the national laws of any nation.

So when the provisions of an international trade treaty conflict with the laws of participant nations, there is not much the lawmakers of the participant nations can do.

Capital crosses borders, labour does not

One feature all these treaties have in common is the concept of Direct Foreign Investment. Not only is capital allowed to freely cross borders, implementing globalization requires that it does.

However, due to national immigration laws, labour does not have the same freedom.

This has led to capital having much more power than labour.

Since the 1980s, the top 1% redistributed $50 trillion to themselves

This is not hyperbole. This happened.

Our political leaders had little to say post-2008

No matter how badly the people within the nations want their elected officials to “do something” to “fix it”, the real options are to renegotiate the treater which can take years, or withdraw from the treaty.

For the record, Donald Trump withdrew the United States from NAFTA and the US then negotiated the USMCA. This took months rather than years, but there were only three nations involved.

If our political leaders are so impotent, what good are they?

This seems to me to be a very valid question.


Series Navigation<< Angrynomics – The summary: Part 4Angrynomics – The summary: Part 6 >>

Leave a Reply

Your email address will not be published.