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The income of many people around the world has considerably increased due to the economic globalization of the last 50 years. However, these income gains are unevenly distributed. A study by Dr. Valentin Lang, junior professor of political economy at the University of Mannheim, and his co-author Marina M. Tavares of the International Monetary Fund shows that the top 10% of the national income distributions, in particular, have benefited from this development.
In their study, published in The Journal of Economic Inequality, the researchers tried to answer the questions if and how the globalization of the last 50 years has affected inequalities between people worldwide.
Their research found that globalization has led to greater income inequalities within many countries. The gap between rich and poor has widened particularly in countries that have become more integrated into the global economy, such as China, Russia and some Eastern European countries. At the same time, globalization has reduced inequality between countries. The differences between countries therefore play an increasingly minor role in the global inequality rate.
“The influence of globalization on income inequalities worldwide was greater than we had expected,” summarizes Valentin Lang, junior professor of International Political Economy at the University of Mannheim and author of the study. “We were particularly surprised that these differences were mainly due to the gains of the richest and that the lower income groups benefited little or not at all.”
Increasing skepticism towards globalization
The study also shows that globalization in its early and middle stages led to considerable income increases in the individual countries but that the growth effects diminish as the degree of globalization increases…
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While recent shocks have made the current inflationary surge and growth slowdown more acute, they are hardly the global economy’s only problems. Even without them, the medium-term outlook would be darkening, owing to a broad range of economic, political, environmental, and demographic trends.
In short, McAfee uses data on domestic material consumption (DMC), which tallies up the resources that a nation extracts and consumes each year. But this metric ignores a crucial piece of the puzzle. While it includes the imported goods a country consumes, it does not include the resources involved in extracting, producing, and transporting those goods. Because the United States and other rich countries have come to rely so heavily on production that happens in other countries, that side of resource use has been conveniently shifted off their books.
In other words, what looks like “green growth” is really just an artifact of globalization. Given how much the U.S. economy relies on globalization, McAfee’s data cannot be legitimately compared to U.S. GDP, and cannot be used to make claims about dematerialization. If McAfee wants to compare GDP to domestic resource consumption, then he needs to first subtract the share of US GDP that is derived from production that happens elsewhere. He does not. Nor is this possible to do.
Ecological economists have been aware of this problem for a long time. To correct for it, they use a more holistic metric called “raw material consumption,” or Material Footprint, which fully accounts for materials embodied in trade.
…click on the above link to read the rest of the article…
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| Society Needs Good Jobs |
Many jobs will not be coming back after the covid-19 crisis ends. We can say goodbye to millions of jobs as events unfold and markets evolve. Millions of small businesses being decimated by Fed policies that favor huge companies coupled with a surge in automation bodes poorly for those looking for work. Over the last three decades, robots have become far more common in factories. In many manufacturing facilities, robots do most of the work. A typical factory may contain hundreds of robots working on fully automated production lines, as it rolls by on a conveyor, a product can be welded, glued, painted, and finally assembled at a sequence of robot stations.Robots are rapidly replacing humans in performing repetitive and dangerous tasks that people prefer not to do or are unable to do due to size limitations. This includes working in places such as in outer space or at the bottom of the sea where humans cannot survive the extreme environments. Industrial robots are also used extensively for placing products on pallets and packaging of manufactured goods, for example for rapidly taking drink cartons from the end of a conveyor belt and putting them into boxes, or for loading and unloading machines.
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| Factories Are Now Full Of Robot Workers |
The rise in populism and Trump’s trade war has brought front and center how globalization has often put America’s self-interest behind that of corporate profits. In an article written in April of 2013, I claimed that if factories filled with mostly robot workers are the future then we should do all that we can to see that they are located in America.
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Financialization was never sustainable, and neither was the destructive globalization it enabled.
All the happy-story analogies to past pandemics being mere bumps in the road miss the mark. A popular claim is that the 1918-1919 flu pandemic killed millions but no biggie, the Roaring 20s started the following year. It’s onward and upward, baby, once we toss the masks.
Wrong. Completely, totally, dead wrong. The drivers of the past 75 years of growth– globalization and financialization–are dead, and so is everything that depended on them for “growth”. (Growth is in quotes because once external costs and currency arbitrage are factored in, most of what’s been glorified as “growth” is nothing but losses covered by accounting trickery.)
Here’s what’s poorly understood: globalization and financialization die when they stop expanding. Just as a shark dies if it stops swimming forward, globalization and financialization die once they stop expanding, because their viability depends on expansion.
Globalization and financialization have been losing momentum for years. Under the guise of “opening markets,” globalization has stripmined every economy that can’t print a reserve currency and hollowed out economies globally as only globally competitive sectors survive globalization. The net result is that once vibrant, diversified economies have been reduced to fragile monocultures completely dependent on global flows of capital and spending for their survival.
Tourism is a prime example: every region that has seen its local economy crushed by global arbitrage and corporate hegemonies, leaving global tourism as its sole surviving sector, has been devastated by the drop in tourism, which was always contingent on disposable income and credit expanding forever.
…click on the above link to read the rest of the article…
The coronavirus pandemic has shown that the twin processes of globalization and planned obsolescence are deficient and moribund. Globalization was predicated on a number of assumptions including the perpetuity of consumerism, and the withering away of national boundaries as transnational corporations so required.
What we see instead is not a globalization process, but instead a process of rising multipolarity and a rethinking of consumerism itself.
Normally a total market crash and unemployment crisis would usher in a period of militant labor activity, strikes, walk-outs and community-labor campaigns. We’ve seen some of this already. But the ‘medical state of emergency’ we are in, has effectively worked like a ‘lock-out’. The elites have effectively flipped-the-script. Instead of workers now demanding a restoration of wages, hours, and work-place rights, they are clamoring for any chance to work at all, under any conditions handed down. Elites can ‘afford’ to do this because they’ve been given trillions of dollars to do so. See how that works?
All our lives we’ve been misinformed over what a growing economy means, what it looks like, how we identify it. All our lives we’ve been lied to about what technical improvement literally means.
A growing economy in fact means that all goods and services become less expensive. That cuts against inflation. Rather all prices should be deflating – less money ought to buy the same (or the same money ought to buy more). Technical innovation means that goods should last longer, not be planned for obsolescence with shorter lifespans.
Unemployment is good if it parallels price deflation. If both reached a zero-point, the problems we believe we have would be solved.
…click on the above link to read the rest of the article…
How the virus exploits traits of our economy extolled as modern triumphs.
This pandemic, with an estimated mortality rate of one to two per cent, is not a world ender or something to be truly feared.
But it deserves our respect and it certainly has our attention.
Pandemics, which go off like improvised bombs, don’t have to be formidable killers to be bad. Even modest biological detonations can upend your day and alter your world.
As SARS-CoV-2 — the respiratory virus that causes the disease COVID-19 — begins its explosive global journey, it has proven its ability to clog hospitals and freeze economies.
It is worth remembering that SARS-CoV-2, unlike influenza, is a novel cold-like virus that Homo sapiens have never experienced before. We have no immunity and must acquire it either through exposure to the virus or a vaccine that most likely won’t be ready till the pandemic is over.
SARS-CoV-2 will play with different populations differently, making use of the demographic material at hand along with human follies such as the criminal dearth of testing in the United States for the last month.
And it won’t be the last. This particular biological invader springs from an ancient, large and diverse family of viruses hosted by a variety of wild animals including bats and birds.
These species are particularly hard pressed by global economic forces now ruinously reducing biological diversity everywhere. As biological biodiversity declines, viruses will seek reliable hosts and jump from animals into people at any given opportunity. Peter Daszak, a pioneering disease ecologist, says we now live in Age of Pandemics.
…click on the above link to read the rest of the article…
The servitude of society to a globalized economy is generating extremes of insecurity, powerlessness and inequality.
Does our economy serve our society, or does our society serve our economy, and by extension, those few who extract most of the economic benefits? It’s a question worth asking, as beneath the political churn around the globe, the issues raised by this question are driving the frustration and anger that’s manifesting in social and political disorder.
A recent essay examines these issues in light of Brexit, which the author sees as a manifestation of dramatic but poorly understood changes in Britain’s economy over the past 60 years:
How Britain was sold: Why we need to rethink the case for a national capitalism in the age of uncertainty.
“One of the reasons Brexit has become unstuck is that the changing nature of the British economy since the 1970s and 1980s has made it hard to identify what the economic interests of the nation really are.
If nothing else, Brexit has been a long overdue education in the realities of Britain’s economy.
While both liberals and Marxists argue that the nationality of capitalism does not matter, there is a need to rethink the case for a national capitalism in this age of economic inequality, political fracture and geopolitical uncertainty. If nothing else, by embedding the economy more deeply into the nation and the daily lives of its citizens, and by directing itself towards national purposes and having a greater stake in developing national skills and innovations, a national capitalism would underline and reinforce that lost idea of the common good.”
It’s shocking to recall that Britain had a large and vibrant domestically owned auto industry in the 1960s, and remained a major industrial power / exporter.
…click on the above link to read the rest of the article…
The global economy is certainly at crossroads. Protectionism and nationalism, a well-matched marriage of global chaos at the moment, has threatened to end the third wave of globalization that began in the late 1980s.
Capital Economics has published a compelling research note, titled “The end of globalization,” specifying how 150 years of globalization could’ve put in a significant peak in the last several years, all thanks to President Trump’s trade war with China.
The third wave of globalization began in the late 1980s, mostly driven by technological advancements and shifting labor and capital around the world to the most cost-effective regions.
While the Western hemisphere consumed for three decades, the Eastern hemisphere manufactured the goods (which produced rising inequality in the West and thus how protectionism and nationalism were sparked), but the status quo of how supply chains are organized around the world could be changing as world trade volumes have hit a significant wall.
U.S. Economy Grew at 1.9% Pace in Third-Quarter
In terms of the Elliott wave principle, a third wave eventually gives out to a corrective fourth wave. Capital Economics believes the world is headed towards a period of de-globalization, or as history will call it a fourth corrective wave.
“It is possible that this is just a temporary hiatus and that an unforeseen technological breakthrough will trigger a new wave of globalisation. But such waves are rare. In fact, there are several reasons – even before we consider the trade war – why globalisation has peaked. First, all the major steps to integrate the global system have been taken. Second, advanced manufacturing techniques mean that the location of manufacturing no longer hinges on where labour costs are cheapest. Third, complex supply chains have reached their limit. Fourth, China is unlikely to open up its capital markets significantly.
…click on the above link to read the rest of the article…
In the end, it will mean all the difference
My business partner Adam and I recently met with a successful business owner whose career began on Wall Street. The kind of guy who should be rooting for the system, because it has treated him well.
Instead, he was quite nervous about the sustainability of the status quo. “Starting in August,” he said, “Maybe it was the Amazon catching fire, maybe it was the negative interest rates – I don’t know for certain what the trigger was – but something has snapped.”
I agree. Because I feel it, too.
As do so many others. And not just those who regularly read PeakProsperity.com. Increasingly, even ‘mainstream’ voices are stating to report a profound sense that something really isn’t right. That — from the economy to geopolitics to the natural world — things are swiftly worsening.
Public perception is beginning to shift from complacency to fear. Countries are fast rejecting globalization in favor of nationalization. The holes in our ecosystem — vanishing birds, insects, amphibians and fish stocks — are becoming frighteningly obvious. The threats to life as we’re accustomed to it are becoming more visible while accelerating in both magnitude and frequency.
I expounded on the danger of this in my recent report It’s the Pace of Change That Kills You. Negative developments can spark their own vicious cycle. The more components of a system that fail, the more at risk the remaining components become.
That report was published just two weeks ago. Since then the world’s largest oil refinery was attacked by hostile forces and knocked out of commission, throwing the future integrity of the global oil market into question. Scientists just announced that North America has lost 29% of its total bird population (a drop of -3 billion) in the past half century.
…click on the above link to read the rest of the article…
In Jackson Hole on Friday, Bank of England’s outgoing governor Mark Carney talked about a Synthetic Hegemonic Currency (SHC) that the world ‘must’ create, and I thought: that sounds as creepy as anything Halloween. Now, Carney is a central banker as well as a former Giant Squid partner, hence a certified cultist, but still.
He even mentioned Facebook’s Libra ‘currency’ as some sort of example for something that should replace the US dollar internationally. And that replacement is allegedly needed because countries are hoarding dollars. And/or “protecting themselves by racking up enormous piles of dollar-denominated debt.” Whichever comes first, I guess?!
I’ve read quite a few comments on Carney’s speech, but far as I’ve seen they all ignore one aspect of it: the current shape and form of globalization. See, Carney can see only one thing: more centralization, more things moving more in the same direction. Remember, he’s the man who with Michael Bloomberg in 2016 wrote “How To Make A Profit From Defeating Climate Change”. Aka things are worth doing only if they make you richer.
It’s a state of mind that works fine when you’re inside a system and an echo chamber, when you’re a central banker or a corporate banker. But there’s nothing that indicates it’s a useful state of mind when the system you’re serving must undergo change. What is as true when it comes to climate change as it is for changing the entire global economy. Carney’s got blinders on.
World Needs To End Risky Reliance On US Dollar: BoE’s Carney
Carney [..] said the problems in the financial system were encouraging protectionist and populist policies. [..] Carney warned that very low equilibrium interest rates had in the past coincided with wars, financial crises and abrupt changes in the banking system.
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Sometime in the fall of 2018 a lowly gofer at the New York Stock Exchange was sweating bullets. He’d made an honest mistake. One that could forever tag him a buffoon.
After trading sideways for most of the spring, the Dow Jones Industrial Average was on the move. When it closed at 26,828 on October 3, it appeared the Dow was but one trading day away from eclipsing 27,000. Everyone, including Jim Cramer, just knew it was about to happen.
And this was precisely what the NYSE gofer feared most. For he’d failed to procure Dow 27,000 hats. What a shame it would be for Wall Street’s most revered index to notch this historic milestone with no commemorative hats for floor traders to put on while they go bananas.
But then a miracle happen. The Dow didn’t go up; rather, it went down. A week later, to the gofers relief, the Dow 27,000 hats arrived…in advance of Dow 27,000.
And now, nearly eight months later, Dow 27,000 remains elusive. After pulling back in October of last year, the Dow made another run at it last month. But, again, fell short. Hence, the hats remain stowed away in a box in the back of a broom closet.
By our estimation, that’s where the Dow 27,000 hats will stay until about 2050 – or even later. Moreover, when it’s finally time to pull them out, we suspect Wall Street cheerleading will have long since gone out of style. What a waste of perfectly good hats.
But fear not. All’s not lost…
Another Day in Paradise
By all commonly accepted weights and measures we’re living in paradise. Our federal government’s broke. Our state and local governments are crazy as ever. Yet things still work wonderfully well.
…click on the above link to read the rest of the article…
All across America, U.S. farmland is being gobbled up by foreign interests. So when we refer to “the heartland of America”, the truth is that vast stretches of that “heartland” is now owned by foreigners, and most Americans have no idea that this is happening. These days, a lot of people are warning about the “globalization” of the world economy, but in reality our own soil is rapidly being “globalized”. When farms are locally owned, the revenue that those farms take in tends to stay in local communities. But with foreign-owned farms there is no guarantee that will happen. And while there is plenty of food to go around this is not a major concern, but what happens when a food crisis erupts and these foreign-owned farms just keep sending their produce out of the country? There are some very serious national security concerns here, and they really aren’t being addressed. Instead, the amount of farmland owned by foreigners just continues to increase with each passing year.
Prior to seeing the headline to this article, how much U.S. farmland would you have guessed that foreigners now own?
Personally, I had no idea that foreigners now own nearly 30 million acres. The following comes from NPR…
American soil.
Those are two words that are commonly used to stir up patriotic feelings. They are also words that can’t be be taken for granted, because today nearly 30 million acres of U.S. farmland are held by foreign investors. That number has doubled in the past two decades, which is raising alarm bells in farming communities.
How did we allow this to happen?
And actually laws regarding land ownership vary greatly from state to state. Some states have placed strict restrictions on foreign land ownership, while in other states it is “a free-for-all”…
…click on the above link to read the rest of the article…
NEW YORK – The new reality with which many advanced economies and emerging markets must reckon is higher inflation and slowing economic growth. And a big reason for the current bout of stagflation is a series of negative aggregate supply shocks that have curtailed production and increased costs.
This should come as no surprise. The COVID-19 pandemic forced many sectors to lock down, disrupted global supply chains, and produced an apparently persistent reduction in labor supply, especially in the United States. Then came Russia’s invasion of Ukraine, which has driven up the price of energy, industrial metals, food, and fertilizers. And now, China has ordered draconian COVID-19 lockdowns in major economic hubs such as Shanghai, causing additional supply-chain disruptions and transport bottlenecks.
But even without these important short-term factors, the medium-term outlook would be darkening. There are many reasons to worry that today’s stagflationary conditions will continue to characterize the global economy, producing higher inflation, lower growth, and possibly recessions in many economies.
For starters, since the global financial crisis, there has been a retreat from globalization and a return to various forms of protectionism. This reflects geopolitical factors and domestic political motivations in countries where large cohorts of the population feel “left behind.” Rising geopolitical tensions and the supply-chain trauma left by the pandemic are likely to lead to more reshoring of manufacturing from China and emerging markets to advanced economies – or at least near-shoring (or “friend-shoring”) to clusters of politically allied countries. Either way, production will be misallocated to higher-cost regions and countries.
…click on the above link to read the rest of the article…