Comment: Mercantilism is Dangerous, But Globalism is Dead- ZeroHedge Edit
US Mercantilism Ain’t The Problem
Contents:
The Stag and the Lion
Intro
Mercantilism is Dangerous
What Should Come After Unipolar Global Capitalism?
Things Can Get Worse Before They Get Better
Globalism’s diminished returns
The Rotting Corpse of Unipolar Globalism
Mercantile Stop-Gap
It Can Get Much Worse
Comment: US Mercantilism Ain’t The Problem
Aesop's Fable 102 - The Stag and the Lion
A stag, oppressed by thirst, came to a spring to drink. After having a drink, he saw himself in the water.
He much admired his fine antlers, their grandeur and extent. But he was discontented with his legs, which he thought looked thin and feeble.
He remained there deep in reverie when suddenly a lion sprang out at him and chased him. The stag fled rapidly and ran a great distance, for the stag’s advantage is his legs, whereas a lion’s is his heart. As long as they were in open ground, the stag easily outdistanced the lion.
But they entered a wooded area and the stag’s antlers became entangled in the branches, bringing him to a halt so that he was caught by the lion.
As he was on the point of death, the stag said:
‘How unfortunate I am! My feet, which I had denigrated, could have saved me, whereas my antlers, on which I prided myself,
have caused my death!
To which the Lion replied:
"We often make much of the ornamental and despise the useful" as he began eating the stag.
Intro:
Michael Every’s Daily entitled A Great Variety Of Moron Symptoms Appear is very good we think. We suggest reading it. He points out many ways things can (are?) go wrong from here. The pushback (if you want to call it that) comes from believing US Mercantilism (or any Mercantilism) to be the problem. Mercantilism is a symptom of Globalism's current shortcomings. Ultimately, Mercantilism is the best way forward given present circumstances.
First, we should get the truth out of the way about Mercantilism. It ain't pretty
Mercantilism is Dangerous
True Mercantile thought is sum-zero thought. It believes all value is created at the point of goods-exchange, as opposed to at the production or inspiration point. It is fascinated with the bottom-line and the present tense.
It makes no room for future growth. It is cash-and-carry personified. It does not believe a bigger pie can be created. It holds that our loss is their gain. It is also the earliest form of Capitalism. It is at its core, trading.
Mercantile thought, more than almost any other economic thought is shaped by environment, not by ideals. It was a response to environmental pressures when Feudalism broke down then. It is a response to globalism breaking down now. As risky as it is, Mercantilism's rise is a good sign that at least the world wants to trade with each other, even if a sum-zero mindset is now the new zeitgeist.
What Should Come After Unipolar Global Capitalism?
If Michael is using Marx as his guide, Socialism is “better” than Global Capitalism. We don’t think he believes that in the extreme sense. So, absent the new improved Global Capitalism we all want, Mercantilism is the best thing for everyone until trust is earned again.
Michael warns of the risks of Mercantilism. He’s not wrong. Here is our biased response:
Mercantilism is what keeps us from killing each other until the new “good” thing happens. Globalism is dead and there ain’t nothing better on the horizon just yet. Until then, hoping for a resurgence of globalism in a self-interested world is unlikely to happen for a generation. Self-sufficiency is king until it returns.
Regarding Micheal’s title: “A great variety of moron symptoms appear”. He is, we believe, referring to the stupidity inherent in thinking this new US Mercantilist model will work without a hitch in a global world. He is again right in a big way. Mercantilism is a fallback position that must hold now or we are in a lot of trouble.
Mercantilism rising isn't a bad thing necessarily auguring for a worse thing just yet. No, it is a constructive thing given the calamitous and accelerated collapse of Global trust these past two years. Mercantilism is the spindly ugly legs that keep the stag alive.
But Mercantilism *is* the replacement for Globalism as determined by environmental forces converging on people who wish to not kill each other just yet. Decentralized Capitalism, aka Monetary Multipolarity is the front runner for the future if we make it that far.
[Edit- Production scale and Unipolar centralization are dead, Multipolar demand networks and decentralized multipolarity are key now- VBL]
Things Can Get Worse Before They Get Better
"Everybody has a plan until they get punched in the face."
-Mike Tyson on Marxist dialectical materialism
Nobody said Globalism’s replacement had to be better or even *new*.
That, we contend, is the ultimate conceit of post-enlightenment humanity: Specifically that we are *always* progressing and improving teleologically.
That is what got us into this mess in the first place.
That is why the BRICS are doing what they are doing.
That is why Gold is resurging as money again. Some things cannot be improved upon.1
Thinking Globalism will return or that something better is coming tomorrow is ideal but premature.We want to believe that. We truly do. We believe the arrow of humanity is pointing upward. But that arrow does not point in a straight line. Thus, to ignore the cyclicality of things is to ignore history itself.
Globalism, an artifice of complexity, does not solve all problems. It exacerbates some while solving many. Neither is Globalism immune to the laws of diminishing returns.
Globalism’s diminished returns
Tainter's Collapse of Complex Societies is a seminal work on this diminished return problem the world is undergoing:
“In the evolution of a society, continued investment in complexity as a problem-solving strategy yields a declining marginal return.”
[Edit- Unironically, a major contribution to this declining marginal return is energy expended maintaining and growing complex bureaucracies.- VBL]
Humanity we hope, truly has a teleological drift upward just as the enlightenment project taught us. Nevertheless, it also *always* regresses to the mean within that drift. Therefore, Globalism --economic complexity personified-- must retreat once in a while. Just as all markets return to their moving averages, all societies return to their mean. Sometimes they even go below them.
Tainter’s Collapse….
Put differently: Globalism represents the world at its most complex to date. When a Global economy recedes because of lost trust as it is now, it also shrinks physical manifestations of Global Complexity (e.g. supply chains) as a function of lost trust along with it.
When economic complexity shrinks, the world reorganizes into simpler, more regional economic relationships to survive. Business stays local. Trust extends only to those you can see from your window literally or at least ideologically.2
The Rotting Corpse of Unipolar Globalism
Ultimately, Complexity Collapse ends when complex societies decompose into their smallest self-sustaining functioning version that society accepts without killing each other. Whether that smallest functioning version be a region (East/West now), nation-state (e.g post Austro-Hungarian empire), smaller ethnic enclaves (e.g. Yugoslavia breakup) or tiny tribes (e.g. Hutu/Tutsi) remains to be seen. But, balance must be restored before progress can resume. Paraphrasing Tainter:
Societal Complexity: Tribal >> Ethnostate >> Nation-State >> Regional Block >> International >> Global
Right now we have collapsed into Regional but still (barely) International functionality. Nation-state would be next if it continued. Frankly, it could continue if supply chains are not rebuilt along regional lines properly. That would be very bad.
What do you think happens in the East if the BRICS do not work out? We need the BRICS tradeblock to make it now. if it does not, then that whole region could go up in flames. Globalism is not a choice for them anymore. Mercantilism *must* work.
Mercantile Stop-Gap
"History shows again and again how nature points out the folly of men".- BOC
Mercantilism is providing a Stop-Gap against that right now. Without mercantilism-- and the only truly trustworthy monetary arbiter Gold-- complexity will collapse faster and further into warring nations, warlords, and tribal conflict.
In fact, Mercantilism saved Europe from itself once upon a time. Read: How Mercantilism Brought Europe’s Fragmented Economy Together for more on that.
Mercantilism is not the problem. It is a constructive (but wildly imperfect) fallback in an environment where complexity is shrinking. It is a sign that we still want to work things out. It’s the logical straw to grasp at given the world’s deteriorating situation. But it’s not the last straw. And it is not the shortest straw. It is the best straw right now.
The bottom line is: We hope Mercantilism works until something better comes along. Because Globalism is dead and there ain’t nothing better on the horizon just yet. If Michael’s fears are realized, it can get much worse.
It Can Get Much Worse
Here’s the kicker. If we do not find some comfort in Mercantilism until something better does come along and if economic complexity continues to collapse, Feudalism is next, as Marx understood.
Marx said: Early Societies » Feudalism » (Mercantilism) » Capitalism
Right now that timeline is moving in reverse.
Right now it simply looks like a healthy retracement (given the import of what happened in Ukraine and the ME) even though it feels horrible for the WEST. But it might not feel so bad in the EAST yet. Nevertheless, it can turn ugly quickly and must be worked at constantly. Ultimately, World War 1 was a byproduct of failed Mercantile practices.
See you on the other side of this mess.
Hi Vince, this mercantilist system that looks to take over from the global system could easily take us to war, based on the ideas that are outlined in the graphic. I realise most articles we read are US centric, but it pays to look at it from the other angle as well, and from that view, I'm not sure the rules are going to be very workable. I found it useful to pick a few countries and products, and to see how they would fare in a mercantilist world viewed from thier vantage point, rather than the US's and based on what it says on that graphic.
For example, European luxury goods exports. According to the chart in the article, the US would raise taxes on Vuitton goods, Ferraris and french wines, to take just a few examples. So far so good, because the sector of Americans who enjoy these products are more or less impermeable to higher prices. The question is that if colonies are not allowed to trade with non colonies of the US, what happens to France and Italy when they want to sell these products to Asia? If we take the view that Europe is a colony of the US, based on its dependence on US energy, its restrictions concerning trade with China (Huawei 5G), the tribute it pays - and will be paying - to the US military industrial complex without retaining any control of its own military strategy,; if we also account for the US's extraterritorial control over European business to the extent of the fines levied on banks like the BNP for trading without regard to sanctions, do we assume that European businesses will accept the restrictions for the benefit of American mercantilism? What is in it for Europe except for the staging of war (again for the third time)? I cant see the European public allowing it without any serious resistance. That might not be a world war, but with 450M people in Europe, it is still a big civil war.
Next I looked at China. In a mercantilist word, they would seek the competitive advantage as they have done in the last 25 years, except this time round they are not selling plastic toys; they are selling heavy machinery, power stations, communication and photovoltaic equipment, EV cars and soon to be, aeroplanes. If we are working on the basis of a free market, Airbus, Boeing, Westinghouse, Siemens, Thales, Catepillar, etc...and a number of Japanese companies, are going to be facing stiff competition, perhaps competition they can't match for price/quality and speed of execution. We have already seen Mr. Trump at work on how to compete with the Chinese industrial onslaught, but what we don't know is what will happen if the US campaigns to force China's trading partners to impose tariffs on Chinese machinery. based on monetary reserves they have stored in the US Fed. Inside the BRICS are some ex-western colonies so I dont see how such a pressure campaign could result in a war-free trading system. When forced to take sides, the ex-colonies within the BRICS are likely to go with the solution that enriches them the most while also providing them with autonomy of governance. That implies they will lose their reserves before they are able to create the alternative non-dollar trading system. And if they are also storing gold in london or the US, forget it....it'll be gone.
What about Latin America? Is it a colony of the US?, yes probably; it is begrudgingly a colony, although it contains elements of resistance within it. Would they be forced to stop selling raw materials to China? What happens to China's investments in Latin American countries, and to what lengths will the Chinese go to protect them? There may not be a peaceful solution to mercantilism in this region.
On the other hand, the Global south does not contain western controlled colonies, except in a few small pockets. On the question of raw materials, excluding the US which has an abundance of most of the needed raw materials, they are to be found in abundance in Latin America, Canada, Africa ad indonesia to name the major ones, whilst a narrower range of commodities in the energy sub-sector can be found in the GCC/West Asian region, plus Russia and the Stans. I wont delve into Africa, because although it is potentially a battleground for the great powers, it is already very much controlled by China. The UK has the Commonwealth of course, but it hasn't got the resources to leverage any power on this geographical location. The Brits just dont have the money to compete.
As for Canada, they are not going to get the opportunity to sell any of their commodities to other than the five-eyes countries and Europe, so this one is straight forward enough, and i suggest the Stans are still in the orbit of Russia through their regional tariff-free trading system. Kazakhstan for instance has pledged the next five years of uranium production exclusively to Russia.
Shipping could be affected by the suggestion that US cargoes must use US ships. If the Jones Act is extended across all oceans for American ships, it would privilege a handful of US companies, but they are not sufficient in size and number to handle all of US trade. I dont see how limiting US trade to US ships could work but international tonnage worldwide is unlikely to take this set of rules without working around it. Depending on how the US enforces the rules, it is hardly going to be without the risk of degrading relationships, so, I find the chart dictates too many conditions that are just not going to work without a fight. Forcing the golden billion to stick to the mandates of the US for the greater good of the Western system, is like predicting war in no time at all.