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From “Information” Society to “Self-Sufficient’ Society

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We have not seen the World War III yet but after this pandemic, it is not difficult to make reliable projections about what would happen after that. Despite the huge amount of experiences of the world civilizations we simply went back to the social rules of the hunting and gathering societies. We literally became hoarders. Now we need to find a way to reach our “civilization” level just 3 months ago. We need to fast-forward a couple of thousands of years and get back to the end of 2019 in a couple of months.

Societies all around the world have structured ways of regulating and managing social life which are called social institutions, like the education system, health care system, economic system, etc. All of these social institutions are a result of previous experiences and future projections. They are not fixed and they constantly change based on new realities. COVID-19 is now our current reality. Our definition of “normal” will change indefinitely. Nothing will get back to “normal” as we used to know it. Just like the politicians, we all know that if the current stage of “curfew” continues for couple of months the whole social and economic system will eventually collapse. That is the reason why we see the urge to re-open businesses despite the high probability of tsunami-like waves of spread. Now we are trying to find a way to keep the “people” and the “economy” alive at the same time, but unfortunately “keeping the economy alive” looks like winning the war. A new study suggests that relaxing business closures and stay-at-home rules could cost 13,000 lives in Texas and 12,000 lives in Georgia by September 1. But it will also preserve $3.4 billion in statewide income in Texas, and $1.7 billion in Georgia. New York’s tougher restrictions will save 5,000 lives, but cost $2.4 billion in lost income.

The economy has been the driving force of our modern capitalist system. We defined ourselves by our wealth. We looked for easy ways to increase our wealth and climb the social class ladder as quickly as possible. We have been so obsessed with the idea of making a huge amount of money without breaking a sweat. We always fell for the get-rich-quick schemes like our modern inventions of stock markets, lottery, and other “financial” investment tools. Lots of people got really rich with these tools at the expense of the others who lost a lot. You can also think about these schemes at societal level as the exploitation and the colonization of other societies, which are the manifestations of imperialism.

We created this ideal of living in a bigger house and riding an expensive car which resulted in the habit of spending more and more. Even though we strive for this huge amount of products, we assigned the production duty to the “cheap” third world countries like China and Mexico. Instead of producing real/tangible products we focused on the “service” sector, because this is what the economic rules have been telling us; maximize your profits with minimum investment. They mass produced and we mass consumed. The idea of spending constantly as a “consumer” and even buying unnecessary things because they were “cheap” drove us into this “ideal consumer” who forgot to save for hard times.

When you combine the driving economic force of get-rich-quick capitalist system with the “ideal” consumer personality you would produce individuals who would not invest in the industrial production sector. We have forgotten that the production sector, not the service sector would create real, tangible goods. Without those goods our economic system thus our society would become extremely fragile especially when things do not go as planned; see COVID-19!!! It is now clear that the current means of production will not take us to a better stage. Too much reliance and dependence on other countries to provide essential parts of the supply chain brought us to this point.

To get a clear picture of what our economic backbone looks like, let’s look at the Fortune’s list of 10 largest businesses in the US in 2019. There are no “real” production businesses on this list. You can also understand why we are paying a ridiculous amount of monies for health coverages. We just see lists of business moguls with an unprecedented amount of wealth. We are the richest country in the “free” world with one of the worst wealth distribution system. On one hand you can see the extreme accumulation of wealth and on the other hand there are literally millions of people struggling to pay their bills and mortgages amid pandemic. You can’t simply explain the failure of these millions of people from a Weberian Protestant Ethics perspective. This mass misery is not a sign of predestination, this is exactly a system failure.

RankCompany NameSectorIndustry
1WalmartRetailingGeneral Merchandisers
2Exxon MobilEnergyPetroleum Refining
3AppleTechnologyComputers, Office Equipment
4Berkshire HathawayFinancialsInsurance: Property and Casualty (Stock)
5Amazon.comRetailingInternet Services and Retailing
6UnitedHealth GroupHealth CareHealth Care: Insurance and Managed Care
7McKessonHealth CareWholesalers: Health Care
8CVS HealthHealth CareHealth Care: Pharmacy and Other Services
9AT&TTelecommunicationsTelecommunications
10AmerisourceBergenHealth CareWholesalers: Health Care

Source: https://fortune.com/fortune500/, 05.07.2020

Even China, which can be called as the “world’s production capital”, has the same non-productive entities at the top of their wealthiest list. They are even worse than the U.S. Five of their top 10 entities, which are among the top 50 in Fortune’s Global 500 list, are just state-owned financial institutions. I believe this also explains how China easily buys “assets” all around the world. There isn’t even a single “technology” company in this list. I can’t categorize China as a “free” society and obviously their wealth distribution system is worse than ours – if there is any.

RankCompany NameSectorIndustry
1Sinopec GroupEnergyPetroleum Refining
2China National PetroleumEnergyPetroleum Refining
3State GridEnergyUtilities
4China State Construction EngineeringEngineering & ConstructionEngineering, Construction
5Industrial & Commercial Bank of ChinaBanksBanks: Commercial and Savings
6Ping An InsuranceFinancialsInsurance: Life, Health (stock)
7China Construction BankBanksBanks: Commercial and Savings
8Agricultural Bank of ChinaFinancialsBanks: Commercial and Savings
9SAIC MotorMotor Vehicles & PartsMotor Vehicles & Parts
10Bank of ChinaFinancialsBanks: Commercial and Savings

Source: https://fortune.com/global500/, 05.07.2020

It has generally been accepted that the new information society is based on services rather than industrial production. At the very early times of modern internet which started to link global commercial networks and enterprises during the 1990s, Castells predicted a future society that he labeled as network society or information age. In his very influential trilogy of books, he speculated that by the development of information technology and rising dependency on networks, the time of traditional industrial society was fading away and a new type of economy was emerging. In this new type of economy, which he labeled as “informational economy”, he argued the competitiveness of individuals, companies, and even nations will be dependent on technology, networks, and information rather than the level and power of tangible productivity and manufacturing economy.  

I see the information sector as our newest get-quick-rich scheme where there is no real/tangible industrial production. Even as the richest country in the world with the most advanced technologies,we will not be able to survive under these economic conditions for very long.Supposedly “producing” this many things and still suffering from lack of vital goods?!?!?! There is something fundamentally wrong in this equation and it is the lack of producing real/tangible products.

Societies have institutions to meet their needs and governments are the most organized entities that are responsible for every other institution in the society, hence it is the government’s responsibility to regulate the new social order in the post-information society. If we are not a self-sufficient society, then we are not economically independent. The coming society should eventually be a self-sufficient society which would be a hybrid of production (industrial) and information societies with different regulations and taxation systems. We now understand that, in terms of economic rules, one size does not fit all and the governments now need to focus on more equity instead of equality.

The government should work on a new tax reform which will enable different taxing regimes for different sectors. An industrial production company should not be subject to the same tax regime with a service-based company. The information society will collapse if the COVID-19 threat continues for another year. Italy, which is one of the G7 member states, is now on the brink of financial collapse.Italy’s credit rating downgraded to just one step above “junk” by Fitch. This is not a joke and even the most powerful nations are being hit so hard by the ongoing pandemic. Finally, think about all of the financial institutions that are “keeping” your life savings, like the retirement plans and the insurances. It would be a devastating collapse if things do not get back to “normal” soon.

Ismail Dincer Gunes, Ph.D. Faculty Member at Sul Ross State University in USA Dr. Gunes is an expert in Criminal Justice with over 14 years of experience at the Turkish National Police Force from 1996 to 2010. He got his Master’s degree in Criminal Justice in 2001 and his Ph.D. in Sociology in 2008 both at University of North Texas. He got his Associate Professorship in Sociology in 2011. Dr. Gunes has numerous publications and presentations in Sociology, Criminal Justice, and other related fields. Currently he is serving as an Assistant Professor at the Department of Homeland Security & Criminal Justice and Training Coordinator of H. Joaquin Jackson Law Enforcement Academy both at Sul Ross State University.

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Economy

Finding Fulcrum to Move the World Economics

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Domenico Fetti / Wikimedia Commons

Where hidden is the fulcrum to bring about new global-age thinking and escape current mysterious economic models that primarily support super elitism, super-richness, super tax-free heavens and super crypto nirvanas; global populace only drifts today as disconnected wanderers at the bottom carrying flags of ‘hate-media’ only creating tribal herds slowly pushed towards populism. Suppose, if we accept the current indices already labeled as success as the best of show of hands, the game is already lost where winners already left the table. Finding a new fulcrum to move the world economies on a better trajectory where human productivity measured for grassroots prosperity is a critically important but a deeply silent global challenge. Here are some bold suggestions

ONE- Global Measurement: World connectivity is invisible, grossly misunderstood, miscalculated and underestimated of its hidden powers; spreading silently like an invisible net, a “new math” becomes the possible fulcrum for the new business world economy; behold the ocean of emerging global talents from new economies, mobilizing new levels of productivity, performance and forcing global shifts of economic powers. Observe the future of borderless skills, boundary less commerce and trans-global public opinion, triangulation of such will simply crush old thinking.

Archimedes yelled, “…give me a lever long enough and a fulcrum on which to place it, and I shall move the world…”

After all, half of the world during the last decade, missed the entrepreneurial mindset, understoodonly as underdog players of the economy, the founders, job-creators and risk-taker entrepreneurs of small medium businesses of the world, pushed aside while kneeling to big business staged as institutionalized ritual. Although big businesses are always very big, nevertheless, small businesses and now globally accepted, as many times larger. Study deeply, why suddenly now the small medium business economy, during the last budgetary cycles across the world, has now become the lone solution to save dwindling economies. Big business as usual will take care of itself, but national economies already on brink left alone now need small business bases and hard-core raw entrepreneurialism as post-pandemic recovery agendas.

TWO – Ground Realities:  National leadership is now economic leadership, understanding, creating and managing, super-hyper-digital-platform-economies a new political art and mobilization of small midsize business a new science: The prerequisites to understand the “new math” is the study of “population-rich-nations and knowledge rich nations” on Google and figure out how and why can a national economy apply such new math. 

Today a USD $1000 investment in technology buys digital solutions, which were million dollars, a decade ago.Today,a $1000 investment buys on global-age upskilling on export expansion that were million dollars a decade ago.  Today, a $1000 investment on virtual-events buys what took a year and cost a million dollars a decade ago. Today, any micro-small-medium-enterprise capable of remote working models can save 80% of office and bureaucratic costs and suddenly operate like a mini-multi-national with little or no additional costs.

Apply this math to population rich nations and their current creation of some 500 million new entrepreneurial businesses across Asia will bring chills across the world to the thousands of government departments, chambers of commerce and trade associations as they compare their own progress. Now relate this to the economic positioning of ‘knowledge rich nations’ and explore how they not only crushed their own SME bases, destroyed the middle class but also their expensive business education system only produced armies of resumes promoting job-seekers but not the mighty job-creators. Study why entrepreneurialism is neither academic-born nor academic centric, it is after all most successful legendary founders that created earth shattering organizations were only dropouts.  Now shaking all these ingredients well in the economic test tube wait and let all this ferment to see what really happens.

Now picking up any nation, selecting any region and any high potential vertical market; searching any meaningful economic development agenda and status of special skills required to serve such challenges, paint new challenges. Interconnect the dots on skills, limits on national/global exposure and required expertise on vertical sectors, digitization and global-age market reach. Measuring the time and cost to bring them at par, measuring the opportunity loss over decades for any neglect. Combining all to squeeze out a positive transformative dialogue and assemble all vested parties under one umbrella.

Not to be confused with academic courses on fixing Paper-Mache economies and broken paper work trails, chambers primarily focused on conflict resolutions, compliance regulations, and trade groups on policy matters.  Mobilization of small medium business economy is a tactical battlefield of advancements of an enterprise, as meritocracy is the nightmarish challenges for over 100 plus nations where majority high potential sectors are at standstill on such affairs. Surprisingly, such advancements are mostly not new funding hungry but mobilization starved. Economic leadership teams of today, unless skilled on intertwining super-hyper-digital-platform-economic agendas with local midsize businesses and creating innovative excellence to stand up to global competitiveness becomes only a burden to growth.

The magnifying glass of mind will find the fulcrum: High potential vertical sectors and special regions are primarily wide-open lands full of resources and full of talented peoples; mobilization of such combinations offering extraordinary power play, now catapulted due to technologies. However, to enter such arenas calls for regimented exploring of the limits of digitization, as Digital-Divides are Mental Divides, only deeper understanding and skills on how to boost entrepreneurialism and attract hidden talents of local citizenry will add power. Of course, knowing in advance, what has already failed so many times before will only avoid using a rubber hose as a lever, again.  

The new world economic order: There is no such thing as big and small as it is only strong and weak, there is no such thing as rich and poor it is only smart and stupid. There is no such thing as past and future is only what is in front now and what is there to act but if and or when. How do you translate this in a post pandemic recovery mode? Observe how strong, smart moving now are advancing and leaving weak, stupid dreaming of if and when in the dust behind.

The conclusion: At the risk of never getting a Nobel Prize on Economics, here is this stark claim; any economy not driven solely based on measuring “real value creation” but primarily based on “real value manipulation” is nothing but a public fraud. This mathematically proven, possibly a new Fulcrum to move the world economy, in need of truth

The rest is easy  

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Economy

Evergrande Crisis and the Global Economy

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China’s crackdown on the tech giants was not much of a surprise. Sure, the communist regime allowed the colossus entities like Alibaba Group to innovate and prosper for years. Yet, the government control over the markets was never concealed. In fact, China’s active intervention in the forex market to deliberately devalue Yuan was frequently contested around the world. Ironically, now the world awaits government intervention as a global liquidity crisis seems impending. The Evergrande Group, China’s largest property developer, is on the brink of collapse. Mounding debt, unfinished properties, and subsequent public pressure eventually pushed the group to openly admit its financial turmoil last week. Subsequently, Evergrande’s shares plunged as much as 19% to more than 11-year lows. While many anticipate a thorough financial restructuring in the forthcoming months, the global debt markets face a broader financial contagion – as long as China deliberates on its plan of action.

The financial trouble of the conglomerate became apparent when President Xi Jinping stressed upon controlled corporate debt levels in his ongoing drive to reign China’s corporate behemoths. It is estimated that the Evergrande Group currently owes $305 billion in outstanding debt; payments on its offshore bonds due this week. With new channels of debt ceased throughout the Mainland, repayment seems doubtful despite reassurances from the company officials. The broader cause of worry, however, is the impact of a default; which seems highly likely under current circumstances.

The residential property market and the real estate market control roughly 20% and 30% of China’s nominal GDP respectively. A default could destabilize the already slowing Chinese economy. Yet that’s half the truth. In reality, the failure of a ‘too big to fail’ company could bleed into other sectors as well. And while China could let the company fail to set a precedent, the spillover could devastate the financial stability hard-earned after a strenuous battle against the pandemic. Recent data shows that with the outbreak of the delta variant, the demand pressure in China has significantly cooled down while the energy prices are through the roof. Coupled with the regulatory crackdown rapidly pervading uncertainty, a debt crisis could further push the economy into a recession: a detrimental end to China’s aspirations to attract global investors.

The real question, therefore, is not about China’s willingness to bail out the company. Too much is at stake. The primal question is regarding the modus operandi which could be adopted by China to upend instability.

Naturally, the influence of China’s woes parallels its effect on the global economy. A possible liquidity crisis and the opaque measures of the government combined are already affecting the global markets: particularly the United States. The Dow Jones Industrial Average (DJIA) posted a dismal end to Monday’s trading session: declining by more than 600 points. The 10-year Treasury yields slipped down 6.4 basis points to 1.297% as investors sought safety amid uncertainty. The concern is regarding China’s route to solve the issue and the timeline it would adopt. While the markets across Europe and Asia are optimistic about a partial settlement of debt payments, a take over from state-owned enterprises could further drive uncertainty; majorly regarding the pay schedule of western bondholders amid political hostility.

Economists believe that, while a financial crisis doesn’t seem like a plausible threat, a delayed response or a clumsy reaction could permeate volatility in the capital markets globally. Furthermore, a default or a takeover would almost certainly pull down China’s economy. While the US has already turned stringent over Chinese IPOs recently, a debt default could puncture the economic viability of a wide array of Chinese companies around the world. And thus, while the global banking system is not at an immediate threat of a Lehman catastrophe, Evergrande’s bankruptcy would, nonetheless, erode both the domestic and the global housing market. Moreover, it would further dent Chinese imports (and seriously damage regional exchequers), and would ultimately put a damper on global economic recovery from the pandemic.

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Economy Contradicts Democracy: Russian Markets Boom Amid Political Sabotage

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The political game plan laid by the Russian premier Vladimir Putin has proven effective for the past two decades. Apart from the systemic opposition, the core critics of the Kremlin are absent from the ballot. And while a competitive pretense is skilfully maintained, frontrunners like Alexei Navalny have either been incarcerated, exiled, or pushed against the metaphorical wall. All in all, United Russia is ahead in the parliamentary polls and almost certain to gain a veto-proof majority in State Duma – the Russian parliament. Surprisingly, however, the Russian economy seems unperturbed by the active political manipulation of the Kremlin. On the contrary, the Russian markets have already established their dominance in the developing world as Putin is all set to hold his reign indefinitely.

The Russian economy is forecasted to grow by 3.9% in 2021. The pandemic seems like a pained tale of history as the markets have strongly rebounded from the slump of 2020. The rising commodity prices – despite worrisome – have edged the productivity of the Russian raw material giants. The gains in ruble have gradually inched higher since January, while the current account surplus has grown by 3.9%. Clearly, the manufacturing mechanism of Moscow has turned more robust. Primarily because the industrial sector has felt little to no jitters of both domestic and international defiance. The aftermath of the arrest of Alexei Navalny wrapped up dramatically while the international community couldn’t muster any resistance beyond a handful of sanctions. The Putin regime managed to harness criticism and allegations while deftly sketching a blueprint to extend its dominance.

The ideal ‘No Uncertainty’ situation has worked wonders for the Russian Bourse and the bond market. The benchmark MOEX index (Moscow Exchange) has rallied by 23% in 2021 – the strongest performance in the emerging markets. Moreover, the fixed income premiums have dropped to record lows; Russian treasury bonds offering the best price-to-earning ratio in the emerging markets. The main reason behind such a bustling market response could be narrowed down to one factor: growing investor confidence.

According to Bloomberg’s data, the Russian Foreign Exchange reserves are at their record high of $621 billion. And while the government bonds’ returns hover at a mere 1.48%, the foreign ownership of treasury bonds has inflated above 20% for the second time this year. The investors are confident that a significant political shuffle is not on cards as Putin maintains a tight hold over Kremlin. Furthermore, investors do not perceive the United States as an active deterrent to Russia – at least in the near term. The notion was further exacerbated when the Biden administration unilaterally dropped sanctions from the Nord Stream 2 pipeline project. And while Europe and the US remain sympathetic with the Kremlin critics, large economies like Germany have clarified their economic position by striking lucrative deals amid political pressure. It is apparent that while Europe is conflicted after Brexit, even the US faces much more pressing issues in the guise of China and Afghanistan. Thus, no active international defiance has all but bolstered the Kremlin in its drive to gain foreign investments.

Another factor at work is the overly hawkish Russian Central Bank (RCB). To tame inflation – currency raging at an annual rate of 6.7% – the RCB hiked its policy rate to 6.75% from the all-time low of 4.25%. The RCB has raised its policy rate by a cumulative 250 basis points in four consecutive hikes since January which has all but attracted the investors to jump on the bandwagon. However, inflation is proving to be sturdy in the face of intermittent rate hikes. And while Russian productivity is enjoying a smooth run, failure of monetary policy tools could just as easily backfire.

While political dissent or international sanctions remain futile, inflation is the prime enemy which could detract the Russian economy. For years Russia has faced a sharp decline in living standards, and despite commendable fiscal management of the Kremlin, such a steep rise in prices is an omen of a financial crisis. Moreover, the unemployment rates have dropped to record low levels. However, the labor shortage is emerging as another facet that could plausibly ignite the wage-price spiral. Further exacerbating the threat of inflation are the $9.6 billion pre-election giveaways orchestrated by President Putin to garner more support for his United Russia party. Such a tremendous demand pressure could presumably neutralize the aggressive tightening of the monetary policy by the RCB. Thus, while President Putin sure is on a definitive path of immortality on the throne of the Kremlin, surging inflation could mark a return of uncertainty, chip away investors’ confidence: eventually putting a brake on the economic streak.

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