A must read.
“…..After bitter experience, fewer Europeans, Americans and even Australians, are putting their trust in traditional left/right political parties. Rather, they align with the Right on social issues and the Left on economics, and fresh, populist, nationalistic leaders are successfully pandering to this new paradigm.
Brexit has given Eurosceptics heart and bolstered the anti-establishment cause. In France, the far right National Front candidate, Marine Le Pen, is well ahead in polls for next year’s presidential election. She wants a Frexit. In Italy, the anti-establishment Five Star Movement is now the country’s most popular. Leader Luigi Di Maio has called for a referendum on the euro which asks citizens if they want to retain it or return to the lira.
No wonder the credibility of the commission and the central bank has evaporated. Eurosceptics consider both organisations to be power hungry and unaccountable, run by dictatorial unelected bureaucrats who pursue their own welfare at the expense of the masses.
After decades of watching the establishment consistently get its forecasts wrong, millions of people in advanced economies everywhere are stuck in poverty and feeling disenfranchised. They see little to lose from voting for non-establishment parties offering naive, populist solutions. It is a worrying gamble that comes at a dangerous time, with global growth slowing and debt/GDP ratios at every level across the world higher now than when the financial crisis began….” Post-Brexit, we aren’t the world as anti-globalisation grows
FULL COLUMN BELOW
Other than Glenn Stevens, the outgoing governor of the Reserve Bank, who in authority will tell it like it really is? Who is going to start that “hard-nosed conversation” he says Australians need to have?
Of course after 25 years of uninterrupted economic growth and with strict border controls now in place, it’s easy to be smug. Beyond the headlines, we pay little attention to the plight of ordinary Europeans who have endured eight years of austerity or minimal growth and suffer the effects of uncontrolled Islamic migration. Yet cultural conflict, ageing demographics and high unemployment, especially among the young, are reshaping Europe in profound and unpredictable ways that one day soon will stir all Australians. That’s worth a conversation.
After bitter experience, fewer Europeans, Americans and even Australians, are putting their trust in traditional left/right political parties. Rather, they align with the Right on social issues and the Left on economics, and fresh, populist, nationalistic leaders are successfully pandering to this new paradigm.
Brexit has given Eurosceptics heart and bolstered the anti-establishment cause. In France, the far right National Front candidate, Marine Le Pen, is well ahead in polls for next year’s presidential election. She wants a Frexit. In Italy, the anti-establishment Five Star Movement is now the country’s most popular. Leader Luigi Di Maio has called for a referendum on the euro which asks citizens if they want to retain it or return to the lira.
In Sweden, Denmark, The Netherlands and Austria, the mood is the same. Surveys confirm twice as many Europeans want “less” Europe than “more”. Even the main beneficiary Germany is equally divided on the question, with two thirds wanting the EU’s champion, Chancellor Angela Merkel, to quit.
The EU is a relic of post-war French hubris, created to keep Germany under control. It has failed on multiple levels and is plainly unravelling. The two largest continental economies, France and Germany, are divided on post-Brexit policy. A confident Berlin is looking out, while lacklustre Paris turns in. This view is consistent with a recent Pew Research survey which finds the French value the EU even less than the British.
Mervyn King, former governor of the Bank of England, in his recent book The End of Alchemy, is highly critical of the policy failings of the European Commission, the European Central Bank and the IMF. Of Greece, a victim of eurozone defence, he writes: “I never imagined that we would ever again in an industrialised country, have a depression deeper than the US in the 1930s.” King believes the eurozone will have to be dismantled to free its weakest members.
No wonder the credibility of the commission and the central bank has evaporated. Eurosceptics consider both organisations to be power hungry and unaccountable, run by dictatorial unelected bureaucrats who pursue their own welfare at the expense of the masses. As the European economy stalls, the pressure on Brussels to hold the union together mounts. It will be a mammoth task. There is talk of north/south currency unions but this would be extraordinarily difficult to implement and when, in 70 per cent of EU nations, 50 per cent of the people want to solve their own problems and leave others to fend for themselves, sentiment favours exits. If eurozone members like Italy leave, the economic cost predicted from Brexit will be magnified many times. But the overwhelming force of circumstances mean only the foolhardy would bet against it.
It’s not just Eurosceptics who are looking inward. According to Pew Research, on both sides of the Atlantic globalisation is under attack with 49 per cent of Americans saying global economic engagement is bad for the US and 32 per cent of Europeans agreeing it is harmful to them too.
Sensing the mood, populist anti-globalisation politicians are putting a stop to the Transatlantic Trade and Investment Pact. Its counterpart, the Trans-Pacific Partnership, a proposed trade zone of 12 Pacrim countries, including Australia, is similarly being abandoned. Despite Barack Obama’s “full-fledged” push, US presidential hopefuls are seeing to that.
Hillary Clinton proclaims: “I will stop any trade deal that kills jobs or holds down wages — including the Trans Pacific Partnership. I oppose it now, I’ll oppose it after the election, I’ll oppose it as president.” She advocates “targeted tariffs” and says “past trade deals have been sold to the American people with rosy scenarios that didn’t work out”. Donald Trump refers to the TPP as “rape” and talks about ripping up trade deals, saying: “It’s time for the American people to take back their future.” In an impatient world the time needed for the benefits of free trade to materialise is incompatible with electoral cycles. Voters find spruikers who claim trade barriers boost profits and protect wages appealing.
David Lubin, head of emerging markets at Citi, fears “an unpleasant echo of the 1950s and 1960s”. Already according to Global Trade Alert global trade volume has stalled in the past 18 months. Its analysis suggests this may be due to rising protectionism, particularly in the form of bailouts and subsidies which impair the efficient workings of the market. This anti-globalisation backlash has major implications for Australia and it is gathering momentum.
After decades of watching the establishment consistently get its forecasts wrong, millions of people in advanced economies everywhere are stuck in poverty and feeling disenfranchised. They see little to lose from voting for non-establishment parties offering naive, populist solutions. It is a worrying gamble that comes at a dangerous time, with global growth slowing and debt/GDP ratios at every level across the world higher now than when the financial crisis began. For a country whose merchandise trade is a whopping 30 per cent of GDP, Stevens’s “hard-nosed conversation” is long overdue.