Financial Collapse🧨 Globalization - The Most Ancient And Ever-Failing Utopia - financialanalysis

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Wednesday, January 15, 2020

Financial Collapse🧨 Globalization - The Most Ancient And Ever-Failing Utopia

Today, many regard the America First doctrine as being treacherous to America’s allies. Actually, the opposite is true. This is why...
Globalization—A New Term for an Ancient Idea
We still remember the eloquent speaker coming to our school in what was at that time communist Bulgaria. He would argue that internationalism—a concept that seeks to unify all nations—was inevitable. In the mid-1980s, it became clear that the only inevitable outcome of internationalism was failure.
Around the same time, however, Theodore Levitt, writing in the Harvard Business Review, brought another term into use—”globalization.” To us Eastern Europeans, its resemblance to internationalism was, and still is, very alarming.
[Note: Despite some differences in definition, the terms imperialism, internationalism, and globalism share one similarity—they all seek to ultimately create a homogeneous humanity by eliminating territorial fragmentation and lifting national boundaries.]
Today, proponents of globalization argue that it’s a new and unstoppable trend. However, history tells us that the drive toward a homogeneous humanity is perhaps the most ancient, universal, and subconscious utopia that people have sought to achieve.
So far, every attempt to realize this utopia has failed miserably. We need to recall, for example, the Babylonian Empire of Nebuchadnezzar II, Greece under Alexander of Macedon, the Islamic Caliphates, Napoleon’s France, or the USSR.
Today, nation-states still dominate the world stage. Why? Why does the initial success of globalization always end with a return to a fragmented world?
Fragmented Humanity—A Judeo-Christian Concept
The concept of a fragmented humanity is deeply rooted in the Western worldview. The Biblical story of the Tower of Babel—present in both Judaism and Christianity, but not in Islam, Buddhism, and Hinduism—describes how God splits up a monolithic humanity into different linguistic groups and spreads them across the world.
Indeed, with the emergence of language and geographical separation, humanity acquired the essential instruments of group construction, leading to the later rise of nations. The fundamental point here is that—in contrast to other major value systems—Judaism and Christianity view a fragmented humanity as part of a Divine plan.
Benefits of Fragmentation
The main advantage of a fragmented world is that it offers a competitive environment for economic, social, and juridical systems—a driving force of human progress. When there is rivalry, especially within a common domain that allows for the exchange of goods, knowledge, and skills, the results can be stunning (e.g., Ancient Greece, Renaissance Italy, and pre-Bismarckian Germany).
The fundamental rejection of a homogeneous humanity is probably one of the reasons why Jews and Christians have produced the most competitive and prosperous period of human civilization. As German sociologist Max Weber wrote in “General Economic History”: “This competitive struggle [among the European nation states] created the largest opportunities for modern western capitalism.”
Another benefit of fragmentation is that it limits inequality. A certain level of inequality promotes economic growth; yet, excessive disparities may lead to social unrest and revolutions. Price’s Law, which predicts the distribution of wealth in society, states that the square root of a population owns 50 percent of the total output it produces. In other words, inequality is a direct function of the size of the population: The more populous a community, the greater the interpersonal disparities within it.
Fragmentation of the world may also prevent conflicts by creating a more stable global political environment. A good example is the impact of territorial unification and fragmentation in European politics.
German historian Ludwig Dehio, in “Gleichgewicht oder Hegemonie,” saw the five hegemonic power-building events in the last five centuries in Europe—Spain of Philip II, France of Louis XIV, Napoleon’s Empire, Germany of Wilhelm II, and the Third Reich of Adolf Hitler—as a direct result of the political instability prompted by the removal of borders and unification.
The more profound point here is that, in the long term, fragmentation along national borders can actually promote economic progress and political stability, whereas globalization ends up hampering socioeconomic development, increasing inequality, and ultimately provoking large-scale conflicts.
America First - Snatching Victory from the Jaws of Globalization
Currently, it appears that global elites are using the resources of the United States and the European Union to pursue globalization by promoting liberal-left values.
The America First doctrine is a definite sign that President Donald Trump has rejected globalism and embraced economic nationalism. This policy not only strengthens the United States but also sends an explicit message to its allies: “The globalist agenda is dead. Start caring about your own countries!”
Now America’s allies—confronted with this new reality—are forced to accept that their own countries and citizens will have to come first—an encounter that will make them more self-reliant, less globalist, and ultimately stronger.
Proof of the success of this policy is the recent unprecedented increase in military spending of almost all European NATO member states.
Conclusion
Recent political events—the 2016 Brexit vote, the last U.S. presidential election, the 2019 re-election of the Law and Justice Party in Poland, and Boris Johnson’s landslide election victory in the UK—reveal that this latest attempt at globalization is losing ground.
If history has taught us anything about globalization, it’s that once on the retreat, it can’t be retrieved—a development that’s tragic for the “progressive” political commissars, but beneficial to ordinary people.
World Stocks Pause At Record High To Asses US-China Trade Deal.US equity futures dipped and world stocks eased off record highs on Wednesday with US and German bond yields slipping as euphoria over the US-China trade deal set to be announced today fizzled after Steven Mnuchin said tariffs on billions of dollars of Chinese goods coming into the U.S. are likely to stay in place until after the U.S. presidential election, and any move to reduce them will hinge on Beijing’s compliance with the phase-one accord, people familiar said.Today's main event will be the phase one trade deal signing. As DB's Jim Reid writes, the closely guarded text still remains a bit of a mystery and as such the devil will be in the detail. All will be revealed later though with a reminder that the signing is expected to take place at the White House at 11.30am EST. It’s said to be an 86 page document but for those of us used to 550 plus page Brexit agreements that were eventually voted down this is a walk in the park. Joking aside the main headline yesterday came after Europe went home as Bloomberg reported (after others had hinted earlier) that existing tariffs on billions of Chinese goods will remain until after the US election to allow the administration to review Chinese compliance before removing them. However, Treasury Secretary Steven Mnuchin said later that China won’t win US tariff relief until the two countries reach a Phase 2 accord and added that there was no link between the timeline for tariff reductions and the November election. So the US will maintain 25% tariffs on $250 billion of Chinese imports and 7.5% on a further $120 billion for now. This news wasn’t a big surprise really but markets lost traction and dipped into the red after the headlines offsetting the small positive momentum post the dovish US CPI and the bumper start to US bank earnings. Elsewhere, the top trade officials of the US, the EU and Japan struck a deal yesterday in Washington to expand the kinds of industrial subsidies prohibited by the WTO.

“Despite the landmark signing of the U.S.-Sino trade deal today, markets are unenthused,” said Rand Merchant Bank economist Nema Ramkhelawan-Bhana. "Phase One, though positive, is merely the start of a long process to undo the damage already inflicted on the global trade order."

Share prices pulled back from recent highs on Wednesday after Wall Street closed weaker on Tuesday, with the Stoxx 600 index dipping in the red, with gains for health-care shares countered by drops in carmakers and insurers, triggered by Mnuchin’s comments that U.S. tariffs on Chinese goods would stay until the completion of a second phase of a U.S.-China trade agreement. Their eventual removal hinged on Beijing’s compliance with the Phase 1 accord, Bloomberg reported, citing sources.

Earlier in the session, MSCI’s index of Asian shares ex-Japan retreating from 19-month peaks and Japan’s benchmark Nikkei likewise falling 0.5%, off a four-week high, hours before the U.S. and China are due to sign their phase-one trade deal. The region’s benchmark MSCI Asia Pacific Index snapped a four-day winning streak. Philippine and Indonesia shares were among the biggest decliners, while Australia’s S&P/ASX 200 Index and the New Zealand Exchange 50 Gross Index hit new highs. Bourses in China, South Korea and Hong Kong lost between 0.5%-0.7% on the day. India’s Sensex also declined. Technology was the worst-performing sector. Heavyweights such as Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. both retreated after recent rally.

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