Twenty-five years on from the fall of the Berlin Wall, the post-Cold War order which led to the G20 global economy is now fast unravelling. And the much vaunted global recovery of 2014 is only actually happening, if at all, in the Anglo-Saxon western economies (and the oil-based Gulf), while the EU, BRICS, South Africa and Turkey are stumbling or have fallen.
An awful truth is becoming apparent: political and military power depends on economic power, like never before, or at least since the 1930s.
Russia is on the brink of invading EU-associate territory – in fact it already is, in Eastern Ukraine; many oil-fields of the Middle East are on fire, with Sunni versus Shi’ite; the Arab Spring rumbles on with North Africa out of control and terrorism spreading from Nigeria and Mali, through Sudan and Somalia, and via Syria on to Afghanistan and north-west China; and China’s long-standing rivalry with Japan over disputed seas and islands is also hotting up, as China seeks to replace US influence in the Pacific.
One major spark, like Putin invading Ukraine in August, could easily ignite others and threaten the economies of just about everywhere.
The really weak point, however, in the Year of the Dawning New Reality, is the EU. Growth has stopped, unemployment is stuck at 25 million and the EU, under Jean-Claude ‘Cromwell’ Juncker, has not the slightest idea of what to do about it, except keep on drinking the wine lakes dry.
The EU’s so-called foreign policy has caused mayhem in Ukraine, and if Russia does invade that country on a full-scale, there is nothing the EU’s WDU (its Western Defence Union, meant to replace NATO) can do about it, other than dial 0800-AM-UNDER-ATTACK and ask the King of the Belgians to come and stop it.
Don’t laugh! This is the actual procedure set out for the WDU in the absurd Maastricht Treaty. The truth is that the EU has lost economic power and political/military power along with it, and now credibility, especially among its own economically-strapped citizens. It is ripe for exploitation this winter by Putin’s gas pipelines, at a price that really hurts, to avenge and recoup the sanctions against him and Russia.
The EU’s response to Global Crunch has been leaden-footed throughout – requiring as it does 28 countries’ yeses. Why, it’s only five years after the event that the ECB will this October finally get round to sorting out its busted banks.
The US and UK knew that disclosing and writing-off the bad debts had to be immediate, so that recovery could start again. In the EU, however, the banks all hid their crap loans like a bunch of cats, under the carpet, hoping that growth in the US and China would haul them up with it. This fanciful notion, however, was just that.
That all-too-idly assumed leg-up has decidedly not happened. Now the EU is embracing the new GDP rules like they are a solution: adding in R&D spend and tourism and, wait for it, the added-value business of prostitution! This will raise GDP, however, and lower the Debt:GDP ratio – just like that, Tommy Cooper-style.
It is only in the US and the UK that any meaningful response to the crumbling post-USSR order can be found. And yet these two economies still have their own major problem too: despite having called their debt-induced recoveries, growth is not yet anywhere near the point where their national debt is beginning to decline. On the contrary, they are both continuing to rise.
In the US taxes must rise, especially for the better-off, while in the UK the Social Security and NHS budget must be cut by £50 billion, or so. Both countries face elections: the UK in 2015, the US in 2016.
The notion that we are still looking at a typical post-WWII recovery pattern is as dead as Monty Python’s parrot. And for the UK there is also the inevitability of leaving the sinking federalist EU behind, drowning in its own bureaucratically and democratically-deficit corrupt and bankrupt fantasies.