Hashem Sherif
22/01/2015
http://www.binghamton.edu/fbc/commentaries/index.html
Commentary No. 393, January 15, 2015
“It is Painful to Live Amidst Chaos”
The world-system is in serious trouble and it is causing pain to the vast majority of the world’s population. Pundits and politicians grasp at straws. They magnify every momentary, and usually transitory, occurrence of slight improvements in the various measures we are accustomed to using.
In the last month or so, we were suddenly being told as the calendar year ended that the market looked much better in the United States, even if it looked worse in Europe, Russia, China, Brazil and many other places. But as the New Year began, there was a serious decline in both stocks and bond prices in the United States. It was a quick and sharp turnaround. Of course, the pundits immediately had explanations, but they offered a wide gamut of explanations.
The real question in any case is not the prices of the stock and bond markets in any given country. It is the picture of the world-system as a whole, which doesn’t seem to me to look very good at all. Let us start with the principal measure utilized by Establishment thinkers - “growth” rates.
By growth rates, we tend to mean prices in the stock market. Of course, as we know and is obvious, many things can lead to a rise of stock prices other than an improved economy, first of all speculation. Speculation has become so easy and so entrenched in the everyday activity of large operators in the world market that we have begun to assume that this is not only normal but more or less desirable. In any case, we tend to argue that there is nothing anyone can do that can stop it, should we wish to do so. This last assumption is probably correct, which is precisely the problem.
In my view, the only figure that measures the well-being of the world-economy and the well-being of the vast majority of the world population is employment rates. As far as I can tell, unemployment has been abnormally high for quite a while now if one looks at the world as a whole. Furthermore, the rate has been creeping up steadily, rather than the reverse, for the last 30-40 years. The best we seem to be able to anticipate is that the rate will stabilize where it is. Reversing the trend does not seem likely. Of course, if you measure employment rates country by country, they vary and they oscillate. But worldwide the rate of unemployment has been rather regularly rising.
The reality is that we are living amidst a wildly oscillating world-system, and this is very painful. Employment rates are not the only measures that oscillate. They simply measure the most immediate source of pain. Exchange rates between major currencies are also a visible source of pain for persons at all levels of income. At the moment, the dollar is rising rapidly vis-à-vis most other currencies. A rising currency rate favors cheap imports and lowers inflation. But it hurts exporters as we know and risks longer-term deflation.
Energy costs are also wildly oscillating. The most obvious example is oil. The price was first on a sharp rise across the world during most of 2014, giving enormous income and political power to countries which were producers (as well as to states within North America that were producers). Then, seemingly all of a sudden, there was said to be a glut on the market, and the prices of energy began catapulting downward to a quite low level. Those political structures that had profited from the upswing now face both a rise in sovereign debt and unhappy citizens.
To be sure, there is a political factor involved in these wild swings. But the ability of even large producers, such as Saudi Arabia or Texas, to affect the price swings should they want to do so is vastly overstated. These swings are like tornados ripping open houses in their way. In the process, banking institutions that had bet on the direction of prices (either way) find themselves in radical trouble, and no longer with a guaranteed back-up from their governments.
Geopolitical alliances are almost as unstable as the market. The United States has lost its unquestioned hegemony of the world-system and we have moved into a multipolar world. U.S. decline started not recently but in 1968. It was for a long time a slow decline, but it became precipitate after 2003 as a result of the disastrous attempt to reverse the decline by the invasion of Iraq.
Our multipolar world has perhaps 10-12 powers strong enough to pursue relatively autonomous policies. However, ten to twelve is too large a number for any of them to be sure their views can prevail. As a result, these powers are constantly shuffling alliances in order not to be outmaneuvered by the others.
11Many, if not most, geopolitical decisions are impossible to control, even by stronger powers, because there are no good options available. Look at what’s happening in the European Union. Greece is about to have elections, in which it seems that Syriza, the anti-austerity party, may win. Syriza’s policy is to demand a revision of the austerity measures that were imposed on Greece by a coalition of Germany, France, the International Monetary Fund, and indirectly the U.S. Treasury. Syriza says that it does not wish to leave the euro and will not do so.
Germany says it will not be “blackmailed” by Greece into altering its policy. Blackmailed? Little Greece can blackmail Germany? In a sense the Germans are right. Greece under Syriza would be playing hardball. The euro zone has no treaty provision either for withdrawal or for expulsion. If the strong powers try to expel Greece from the euro zone, a large number of countries may rush to withdraw for good and bad reasons.
Soon the euro zone might not exist at all, with Germany the single biggest loser. So, from Germany’s (and France’s) point of view, the Greek demands are a lose-lose proposition. Germany at the moment sticks to its position but has softened the threat of expulsion. France has said that it is against expulsion. This serves Syriza’s objectives. That Germany in particular loses whichever stance it now chooses is one of the political consequences of chaos.
The world-system is self-destructing. The world-system is in what the scientists of complexity call a bifurcation. This means that the present system cannot survive, and that the real question is what will replace it. While we cannot predict what kind of new system will emerge, we can affect the choice between the substantive alternatives available. But we can only hope to do this by a realistic analysis of existing chaotic swings and not hide our political efforts behind delusions about reforming the existing system or by deliberate attempts to obfuscate our understanding.
by Immanuel Wallerstein
perceval78
22/01/2015
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