[yt_dropcap type=”square” font=”” size=”14″ color=”#000″ background=”#fff” ] A [/yt_dropcap] new distribution of the strategic, geoeconomic, military and political potentials is currently taking place in the world. Hence we must orient these new mechanisms towards a peaceful, homogeneous and stable development of the world market and the world system. Otherwise – and once again there are signs of a possible war – our global system will collapse without producing practicable alternative options.
The fault lines of this new world order – much different from the one set by the United States after the end of the Soviet hegemony over the Third World – are mostly shaped by the large regional alliances.
Currently war is waged to conquer fault lines, border areas, the Rimland.
Suffice to think of the Asia Pacific Economic Forum (APEC), set up in 1989 and now joining 21 countries, including China and the United States, in addition to Japan, which is the gateway for the economic integration of the Asian-Pacific region – an area with a very high economic and strategic potential at world level.
Or we can mention the Association of South East Asian Nations (ASEAN), founded in 1967 and now counting eleven members, which is the main bridge between Asia and Europe and partly overlaps with APEC in terms of membership.
Nor can we forget the Council of Arab Economic Unity (CAEU), created in 1964 by eighteen African and Arab countries to foster regional economic integration.
We must also mention the Caribbean Community (CARICOM), established in 1973 and based on the European Single Market model, which may even be turned into a political union, according to the plan already adopted by the Member States, which will be implemented between 2018 and 2020. Nor should we forget the Economic Community of West African States (ECOWAS), founded in 1975 and currently turned from an economic integration instrument into a mechanism of institutional and political reform – in this connection, suffice to think of the role played by ECOWAS in the recent coup in Ghana.
We should also mention NATO, but this topic will be analyzed later. Finally it is worth recalling the Southern African Development Community (SADC), founded in 1992 as regional common market for its eleven Member States, but currently also turned into an instrument for the political transformation of the region.
These are economic alliances established to take advantage of globalization by offering cheap labour and a series of infrastructure and, at the same time, resist globalization by blocking the inevitable attempts of each State to resort to the “beggar thy neighbour” rule.
They are all regional alliances established in previously dishomogeneous areas in terms of geopolitical loyalty, type of development, economic potential, as well as relations with the European countries or the United States.
This means that all the abovementioned alliances are alliances of the Rimland, of the peripheral areas surrounding the real geopolitical masses: the Sino-Russian Heartland, with the Indian and Iranian appendices towards the Greater Middle East, and the Eurasian appendix towards the European peninsula; Africa, and the Pacific peripheral areas, not surprisingly with many crossed economic alliances; finally, the United States and Canada with the Latin American appendix.
China wants to achieve hegemony over the Pacific, but it has difficulties in having access to that ocean. The Russian Federation records economic and strategic differences among its wide regions. Europe is deciding to fall apart, by favouring both the United States and Russia at the same time. India is planning a geopolitical future as hegemonic power over the Himalayan region and as global power broker on all Asian seas, in connection with the Mediterranean.
The Mare Nostrum, the future global hub, is in the hands of the most radical destabilizers, torn between jihad and counter-jihad, between increasingly weak nation-States and mass Islamic militants of “the sword jihad”.
Finally, a new sequence of trade and economic wars is shaping within this classic geopolitical system.
In the recent Davos Forum, Xi Jinping rightly said that “no one has to gain from trade wars.”
China exports to the United States more than the latter exports to China.
Hence none of the two has to gain from a trade war, but it is likely that the United States would lose more.
And China mainly controls the global chains of components, which are currently worth 80% of the whole global flow of goods.
Suffice to consider the fine electronics sector.
In fact, it was the quick fall in transport prices which enabled the large global companies to split the supply chains among various countries, many of which belonging to networks and associations of which we have already spoken.
Therefore the Rimland is no longer such and it is creating relations with the countries which define their primary productions: the South East Asian network reaches up to China and partly to India; the Middle East is joining the Sino-Russian axis (Iran) or the North-African one; Latin America will find itself divided between the United States, the European Union and China, which wants to unite the two Pacific shores.
A trade war between China and the United States, with the creation of symmetric trade barriers, would generate strong inflationary pressure in the United States, followed by a Federal Reserve’s policy which shall gradually raise interest rates more than the US economy needs.
The solution could be a new bilateral commercial treaty between the United States and China, which would enable the US companies to gain access to the huge Chinese market and would also enable China to increase its direct investment in the US market.
It is worth noting that America has large trade deficits with most of its trading partners in Asia – the Vietnamese surplus with the United States alone accounts for 15% of the Vietnamese GDP.
Probably, in the near future, President Trump will decide to revise trade relations also with India, Indonesia and Malaysia, but certainly a country that currently runs so large trade deficits, such as the United States, is highly vulnerable to any kind of economic warfare attack.
The Euro and the European Union have suffered – and are still suffering – from monetary and trade wars which are easy to predict: Greece’s persisting crisis, which will lead the European Union to lose its strategic Southern flank, to the benefit of Russia, China, Saudi Arabia and Turkey; “the spread war” between France and Germany – not to mention Italy’s decline and the new Spanish autonomy, halfway between Latin American temptations and North African plans.
Even in the Balkans, Croatia is imposing non-tariff restrictions on Macedonia, while there is a clear trade war going on between the United States and Germany.
While the Americans rightly think that the Euro is an undervalued German Mark, enabling Germany to take advantage both of the EU countries and the United States.
Therefore, in America, the Europeans attack some technology platforms, such as Apple or Google and, in response, the United States attack European and especially German car-making companies on the issue of emissions.
Today’s trade wars are waged with indirect strategies and are soft wars, although they are often heavily defamatory.
On the financial side, many multinationals buy the huge public debt of some smaller and weaker States (and this holds true also for Italy) and securitize it by hiding its origin and source; finally they sell it thanks to the shelter of their tax havens.
This, too, is a trade war – a new type, but even fiercer than the traditional one – possibly with the “Black Ships” of Commodore Perry for the opening of Japan to US trade, as happened in 1853.
Not to mention tax dumping which attracts major investors to a country, but leaves the others without a penny, compelled by their public debt or the bad valuation of their public debt securities to keep corporate taxes high.
Furthermore austerity policies make taxation regressive: those who earn less pay slightly more.
Hence markets shrink, with obvious knock-on effects on taxation and development rates.
Furthermore, the purely geopolitical and military crisis points are well-known, but basically they are all attempts to acquire peripheral territories to achieve the goal of controlling commercial networks, the comparatively more efficient production areas, the extraction of raw materials and public debt.
Ukraine, for example, could be invaded by the Russian Federation and force NATO to a counteroffensive.
It is also worth recalling the issue of the Senkaku-Diaoyo islands, a point of tension between Japan and China for controlling the Pacific – islands which are a very rich fishing area and a possible oil field.
The fact must not be neglected that the military treaties signed in the aftermath of the Second World War oblige the United States to support, with its Armed Forces, Japan and the other countries which would be certainly threatened by the Chinese operations in the Senkaku-Diaoyo archipelago.
Finally we must analyze the future tension between China and Russia on their Eastern border, which could increasingly mount due to China’s demographic characteristics and Russia’s weakness in this regard.
Iran does not yet know whether it wants to challenge the Saudi Sunni power with weapons and the “indirect strategy” of the Shiite Islam’s unification or to expand into the Shiite region of Central Asia, up to Afghanistan and well beyond.
He cannot wish both but, whatever Iran decides, it will have military relevance.
North Korea wants the stability of its regime and the security of its borders, as well as foreign investment to stabilize its economy.
Here again there will be a point of tension that China has no intention of supporting in the long run – and this is a further factor of instability in the region.
What can be done? We must immediately stabilize monetary balances, with a currency defined – in set percentages – by the US Dollar, the Chinese Yuan, the Euro, the Rouble, the Indian Rupee and the Japanese Yen.
This will automatically redesign the world trade trends and routes, thus avoiding the trade wars which persist in peripheral areas to conquer them.
Later we shall think of a sort of “Register of financial securities” at global level.
As the Land Register and the accurate measurements of plots led to the creation of modern taxation in nation-States, the integration of the various databases for the transactions of all kinds of financial securities will enable to have such a new taxation system as to avoid many of the current failed States.
The Bust: WeWork’s diminishing stature of the perfect “start-up”
Until recently, the globally acclaimed startup, WeWork was transforming the future of office spaces and staff hiring processes. Truly, it was transformational in the sense that the startup was providing a vital service point to many multinationals around the world. However, Mark Dixon, the cofounder of IWG, another workspace solutions company, was not getting the trick. Here was IWG, a decently profitable startup with consistent annual growth, still unable to compete with the superstar of the industry. Soon after SoftBank poured cash into the company, WeWork was valued for more than $40 bn. Then, it was making headlines for overwhelm; now, WeWork is in a state of awe. As market reports suggest, WeWork even lacks the cash to fire its existing employees.
As Adam Neumann, the chastened cofounder of the dwindling company once proclaimed, co-working was the future and that employees would prove to become more productive and efficient. In his own words, different cultures and organizational goals would inspire the entire floor. Much as the concept is about renting an office space, Mr. Neumann deliberately did not elaborate on the nuisances of dealing with office neighbors, as seen from a tenant’s perspective. The idea would have charmed many organizations; it was a great opportunity to redeem operating costs or dealing with unwarranted office culture problems. Or, as many renting executives thought, WeWork would define the ground rules, aptly in accordance with global standards. For many, it was also an experiment for the future. Also, nobody could take away the fact of losing varied insights from “not” participating in what at first seemed like a once in a time revolution.
SoftBank, a Japanese conglomerate investing fund is writing the most important plot in the story. Strangely, both the rise and fall of WeWork has been catalyzed by SoftBank. However, the fact that WeWork was blessed by an investing fund is not strange, or surprising. Amongst sovereign funders, there is competition to stay one foot ahead of another. The Europeans have long stressed on how very few startups from their region go onto becoming a global giant. SoftBank’s associations elsewhere is a testimony to its deliberate strategy of staying ahead in the future. Notwithstanding the fact that the Japanese investors would have loved the idea of co-working space more than others. In early 2017, WeWork’s market value, shot over $40 bn, even though the company was registering profits below what Mr. Dixon’s firm were accounting to. There was a strange gossip in the market around why other investors were not jumping to what the SoftBank deemed as highly profitable. For many like Mr. Dixon and other investors, answers were soon to be found. If it could only be timely, Japanese angels would have anticipated why Mr. Neumann would sell his rights of the name, “We” in WeWork. It was a five million dollar (plus) exit for the charismatic man, whose venture was taken over by those who thought of multiplying their fortunes. SoftBank will be sorry for its decision to trust the hierarchy in Mr. Neumann’s leadership. Nevertheless, post takeover, Mr. Dixon will not be contemplating any further on why it has decided to appoint two CEO’s. Nor will there be any sort of contemplation on why the new appointees have secured their severance package before paying out dues.
As it stands, IWG is not doing a bad business in comparison to WeWork’s downfall. The American start-up was destined for success from its early years. Co-working will still be a grand idea in our times but filthy abundance in a short period of time has brought a winning project to a standstill. There will be other co-working competitors for IWG, but it will learn from the mistakes of a competitor who was bigger than the entire industry. If anything, Mr. Dixon will be smelling opportunities ahead.
Alibaba on Platform Economy
Alibaba on national mobilization of
entrepreneurialism on platform economy: today, Alibaba sold $38 Billion within 24
hours: Around the world, currently, there are 100 nations with less than $38
Billion dollars in annual GDP. Imagine if this single company performed at the
same rate for next 365 days, it would equal to annual GDP of Japan, Germany,
India, France, UK and Canada all combined. Bravo Alibaba, well done, the world in shock
is now fondling in own toolboxes.
Are Nations Awake: Are there enough reasons to explore how national mobilization of entrepreneurialism on platform economies and how it will uplift local grassroots prosperity? Are there enough trade-groups, Chambers of Commerce, Trade Associations with enough skills to play in these AI centric digitally advanced and globally friendly market-places? Outside a miniscule number most seriously out-dated trade-groups are in rapid transformation so they too would become shiny butterflies for the new global-age.
Old days of old ways are now new days of
Salvaging of exportability lost during last decade: Nation by nation, the grassroots medium-size economy was basically, ignored, abandoned and rejected, killing exportable goods and services. So long the trade groups around the 200 nations stuck in their old fashioned comfort zones spanning a century, outside handful organizations most nations are in deep trouble. Observe how nations with riots have the most disorganized, disconnected trade-groups, not due the lack of funding but due to lack of poor leadership with little or no global age skills.
Uplifting working-citizenry after a lost
decade on skills: So long the national leadership assumes that MBA degrees are
the saviors of their next economy and so long the corporations feels comfortable
that all their management is being well trained on YouTube, no additional proof
of this fallacy is necessary other than decimated economies and chaos on the
Understanding The Third Economy: During the first economy; rules of engagement and rules of balancing the books were established, the second economy; where fancy jargon was invented to cook the books to balance with political agenda and now the upcoming third economy where real numbers will balance the real books with real columns all managed by artificial intelligence and block-chain delivering honest picture instantly to all and all the times.
Alibaba proves the direct benefits of a Third Economy; such prosperity can only assured by respecting the balancing of pennies and cents with mobilizing millions of abandoned small and medium enterprises and using free technologies as starting base. Such deployments are only possible when leadership is skillfully equipped to understand global-age and able to serve the special transformation demands, by firing the first person for incompetence for saying they have no new funding to change and firing the next person for disorganization for saying they are too busy and have no time to change.
Public sector around the world had almost all
these resources available to deploy since last decade. Nation by nation, outside
the top business sectors rest of the small medium enterprise players
systematically abandoned and crushed were replaced by too big to fail nonsensical
hype. Now national races in the age of digital platform economy will demand
clarification on their internal conflicts of “digital-divide and mental-divide” and explain dysfunctional imbalanced spending on trade expansion
without “national mobilization of entrepreneurialism” …it is also a fact that
majority nations need massive in-depth-training at all top leadership levels to
understand the new language of the new days.
It’s time to choose; either build world-class export promotion agencies, vertical trade groups to foster trade by global-age showcasing on platform economies and bring home some grassroots prosperity or allow restless citizenry and rise of populism. It time to balance, that where public sectors mostly all over the world failed on such progressive affairs, technology has now blossomed as salvage operation with dramatic tools and deployment options. Is your national leadership ready now? Not to sidetrack, this is not an exclusive IT issues; this is global age expansion and entrepreneurial mobilization issues. Deeper studies and debates are essential.
The world is changing fast is no longer just a cliché, now growing into a warning
National Transformation: Futurism of ‘creating local grassroots economy’ demands two distinct national mobilizations. Firstly, creating skilled citizenry capable to swing with global-age demands and secondly, creating massive digitization of midsize economy to enable global-speed-performance to match trading with 100-200 nations. Mostly not new funding dependent but execution starved. Nations with such mastery will thrive and lead; generational transformation at magical speed with full deployments of platform economy is a prerequisite. Sounds rocket science, it is, but very doable and easy.
Rules of National Mobilization of Entrepreneurialism: To deploy such blueprints, launch a nationwide business-uplifting lifelong learning agenda for the entire export promotion bodies, Chambers, trade associations and also the entire small-medium-exporters base. Review this process meticulously every 100 days. Under right situation, the export promotion of the nation can easily quadruple within a year. It is necessary to keep asking what is blocking this and who is stopping this?
How do you mobilize public and private sector leadership after a lost decade on global-age expansion? With some 100 elections in 2019 alone and million promises on podiums the realities are hidden in creating real grassroots prosperity, now pending Presidential Elections of 2020 USA the mother of all elections will provide massive debates amongst calls of Impeachments, while December 12th Election of UK amongst calls of Brexit and European Union with loud and restless citizenry, a new world is unfolding. The public is informed, and slowly realizing what’s working and what’s not… deep silence at the public sector is not good, a growing sign of lack of skills. Urgent debates needed as 2020 starts with some dramatic shifts of markets, ideas and visions. We are now in the age of national mobilization of entrepreneurialism and platform economies.
China’s Descending Rise
China is in a sustained economic slowdown. This is causing malignant unease among the political and economic leadership of the communist party in Beijing that governs China. Investing in China will be different, because:
“The country’s first sustained economic slowdown in a generation. China’s economic conditions have steadily worsened since the 2008 financial crisis. The country’s growth rate has fallen by half and is likely to plunge further in the years ahead, as debt, foreign protectionism, resource depletion, and rapid aging take their toll.”
Chinese social structures are under duress over their aging society. Formerly in the 1990s-early 2000s: “China had the greatest demographic dividend in history, with eight working-age adults for every citizen aged 65 or older.”
Once societies age, marital numbers decrease, and overall productivity plunges. China’s explosion of older citizens versus working-age will bring unique circumstances for global consumers. Factual evidence of slower productivity is evident throughout China, and will have to be considered for any financial or economic decision for decades ahead. The Chinese economic miracle bursting is largely due to aging demographics.
No one in western or eastern economic analysis circles or think tanks realistically saw this coming former President’s Deng Xiaoping opening of China. This was termed, “Socialism with Chinese characteristics (and/or) ‘socialist market economy,’” still ongoing. This slowdown will have deep ramifications for the global investment community, liberal order in place for over seventy-five years, and Chinese financial wealth that now spans the globe.
When countries age, and use reproductive rights to control populations, they become more assertive abroad, and repressive to its citizenry; this describes China’s social, political and economic philosophies that govern over a billion people. Since its one-child policy was enacted, Chinese economic productivity will plummet, “because it will lose 200 million workers and young consumers and gain 300 million seniors in the course of three decades.”
Suppressive economies have difficulty innovating, producing enough goods domestically, and integrating into world economic mechanisms that intends to distribute wealth globally. But this isn’t the first time these warnings have been made publicly.
Former Premier, Wen Jiabao gave a prescient declaration in March 2007 during the long march of economic progress when Mr. Jiabao had misgivings about China’s growth model by stating, “(Chinese growth had become) ‘unsteady, unbalanced, uncoordinated and unsustainable.” Recent numbers indicated China’s official GDP “has dropped from 15 percent to six percent – the slowest rate in 30 years.”
Expansionary Chinese growth hasn’t experience this level of downturn since the end of the Mao into post-Mao era. What this does for the Belt and Road Initiative that is paving the way for investments into Central Asia up to the Arctic Circle is uncertain? Deep investment difficulties could witness China stopping the flow of billions of infrastructure projects into countries and continents such as Africa desperate for growth.
Public figures from the Chinese government generally have the economy growing at six percent, but many analysts and economists peg the number(s) at “roughly half the official figure.” China’s GDP has consisted of bad debt that typical financial institutions and western governments will transfer from the state to public sector and ultimately costs passed onto consumers. For China’s wealth to increase when so much domestic wealth is spent on infrastructure projects to increase GDP these official numbers need context.
China has bridges, and cities full of empty office and apartment buildings, unused malls, and idle airports that do not increase economic productivity, and if that isn’t the case then infrastructure increasing economic measurements will decrease. Unproductive growth factors officially known are: “20 percent of homes are vacant, and ‘excess capacity’ in major industries tops 30 percent.” According to official Chinese estimates the government misallocated $6 trillion on “ineffective investment between 2009-14.” Debt now exceeds 300 percent of GDP.
What’s discovered is the amount of China’s GDP growth “has resulted from government’s pumping capital into the economy.” Private investments have trouble overtaking government stimulus spending, and Foreign Affairs ascertains “China’s economy may not be growing at all.”
Chinese economic growth – post-Mao – saw the country’s self-sufficiency in agriculture, energy, and water almost complete by the mid-2000s. Through economic malfeasance, population control, and resource decimation, “water has become scarce, and the country is importing more food and energy than any other nation.” Environmental degradation is destroying the basic necessities for every day survival.
This is where the world community and financial resources of east and west can meet needs, and grow interconnected, global economies. Energy is one of the biggest areas that China will engulf global energy supplies
The U.S. Energy Information Administration believes China will continue being the largest natural gas user in non-OECD Asia, and by 2050:
“Expects that China will consumer nearly three times as much natural gas as it did in 2018. China’s projected increase in natural gas consumption is greater than the combined growth of natural gas consumption in all other non-OECD Asian countries.”
Opportunities for liquid natural gas (LNG) facilities to be built globally, and in China to spur domestic and international economic activity are unlimited. As China goes, so goes Asia, and the world is now in the “Asian Century.” Investors, geopolitical strategists, and anyone concerned with global security should never believe it is wise to let China continue to falter economically and societally. Setting up investment mechanisms and diplomatic vehicles that benefit China, and the world community is a prudent choice.
When military choices defeat sound fiscal and monetary polices, the past 150 years have brought “nearly a dozen great powers experienced rapid economic growth followed by long slowdowns.” Normal, civilized behavior was pushed aside. What’s needed for Chinese economic growth is the free flow of information, managed wealth, consumer goods, and research/innovation.
Decades ahead, and current economic realities point to China being a great power that is under pressure, but still needs capital. A weak, unsecure China who isn’t satisfied with its place in the Asian hemisphere or global economic system isn’t good for continued prosperity. It would be smarter to engage and invest within China in the areas of energy, water, agriculture, and electricity where opportunities still abound.
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