“… (Merkel) sees the pillars of the world order teetering everywhere.”
“…Germany pays 1% (slowly) of GDP towards NATO, while we pay 4% of a MUCH larger GDP. Does anybody believe that makes sense? We protect Europe (which is good) at great financial loss, and then get unfairly clobbered on Trade. Change is coming!”
During the final weeks of the 2016 presidential election campaign, I wrote a widely circulated blog post on how a President Trump would accelerate the disintegration of the post-war neoliberal world order.
The fiasco at the annual G7 summit of the major Western nations was a key moment when a horrified European political and security establishment woke up to this strategic reality. The imposition of tariffs against China by the Americans is just one sign that President Trump is deadly serious about ending the liberal globalised economic order using the leverage of American military, economic and monetary (dollar) power. Anybody who followed the Trump campaign closely, listened to his speeches or reads his tweets should not be surprised by these developments.
I intend to provide a short macro news update on a number of geopolitical fronts bubbling around the world.
The election of a populist, Eurosceptic and anti-immigrant government, formed by the hard-right strongman Matteo Salvini and the alt-left leader Luigi Di Maio, has already triggered a major crisis within the EU. The refusal to let a ship carrying 600 illegal migrants from Africa to disembark at Italian ports has led to a major crisis. In the end the new left-wing Spanish government agreed to let the migrants in.
Public polls show that 80% of Italians support the hard-line position of the new government, showing that the vast majority of Italians have had enough of the mass migration of migrants from the MENA region over the last two years.
The French President Macron condemned the actions of the Italian government, yet, his security forces have prevented African migrants from crossing the French border. Nearly three quarters of the French public, according to a recent poll, think that the nation could not cope with another wave of third world migration. Popular hostility will prevent President Macron from opening up French ports to further migrant boats, when the Italian Interior Minister Salvini stops the next boats heading to Italy. If Macron does go against French public opinion, the political backlash will be fierce.
Angela Merkel is currently facing a major crisis in Germany over refugees, with her sister party the CSU demanding that refugees who have already registered in an EU country be rejected at the border. Whatever happens in the next week or so, and it is more likely then not that a compromise will be cobbled together, Merkel’s influence as a player is waning within the EU. Merkel understands that the world order is facing severe stresses but lacks the strategic vision to adapt to the changing times.
In my 2017 post Gotterdammerung, I wrote how the ideology of political liberalism was being replaced by a new populist consensus which rejected the permanent flow of migrants from the impoverished Third World. The recent Italian and Slovakian elections, where hard-line anti-refugee leaders came to power, just adds to the growing tally of populist governments across Europe. 2018 is increasingly looking like the year that the tide turned, finally, against the pro-migration consensus within the EU.
In my 2016 post on the impact of a Trump presidency, I discussed how Trump may move to dissolve the NATO security alliance and how Europe would be pressured to start paying for its own defence. The disastrous G7 summit has shattered any remaining illusions among the European political class that business as usual would continue under a Trump presidency.
A rather entertaining Spectator article last week noted how Whitehall was in a state of panic about how Trump will perform at the next NATO summit. According to the Spectator, “…privately, ministers are in a panic and running out of options.” Without major commitments from European nations, in particular Germany, in the next few weeks to reach the minimum 2% spending on defence, a major clash is looming.
Based on Trump’s own tweets, his aggressive speech to his fellow NATO leaders last year and his long record of hostility to European “free-loaders”, I expect the NATO summit, due on 11th and 12th July, to be explosive. President Trump is likely to impose a final ultimatum on the Europeans, demanding within a certain timeframe that all NATO members comply with the 2% GDP spending on defence, otherwise America will withdraw from NATO or to that effect.
The recent votes within the UK Parliament on the Brexit bill hasn’t fundamentally changed my final forecast that Britain will end up with a semi-soft Brexit by the end of 2020. This will disappoint hard-line Brexiteers who favoured a hard/clean Brexit that allowed the UK a free hand to negotiate trade deals with the rest of the world. Hard-core Remainers, will be upset that Britain has still left the EU.
I suspect that the majority of the British electorate, who will be tired of the entire saga by the end of 2020, will be reasonably content with a semi-soft deal that brings back control over borders, provides greater freedom on regulations and laws for services but provides a frictionless trade for goods within the custom union or it’s equivalent.
It is likely that the final deal, will also involve association agreements on security, defence and other areas of mutual interest. 80% of NATO military spending, post-Brexit will be by member-states outside of the EU, making the UK a major force in military and intelligence matters. Should President Trump threaten to withdraw the American security umbrella to Europe, panic will break out and will strengthen those voices within the EU27 that want an amicable divorce with Great Britain.
It is looking increasingly likely that Trump, will either this year or in 2019, impose 25% tariffs on foreign cars imported into America. This will primarily be aimed at the mighty German car industry and it is already causing fear and panic within Germany. The two biggest markets for German automobile companies are the US and UK, both of which are at risk due to potential tariffs and Brexit.
With German car industry facing a growing scandal over cheating diesel emissions, the risks of a meltdown of the car industry by the end of this decade is a serious danger. If Trump’s tariffs look inevitable, the domestic pressure to get a frictionless Brexit deal with the UK will become stronger.
The bigger picture is that the cycle of trade tariffs and counter-tariffs has begun between the major trading blocs (America, EU and China) and it will slowly unravel the process of globalisation over the past thirty years. Of course, a major trigger could accelerate this de-globalisation trend, one of which I will discuss next.
The World Health Organisation (WHO) has recently warned that a new strain of bird flu is the most likely candidate for a global pandemic that could potentially kill millions of people. The WHO “…has dubbed “disease X” – a newly emerging pathogen that could prove as destructive as the 1918 Spanish flu which killed between 50 and 100m people a century ago.” I haven’t covered this area much in FI, but the risks of a major pandemic occurring is considerably higher then the average citizen realises. John Greer has written in his books on the decline and fall of industrial civilisation that public healthcare systems will crumble as resources decline, public services are cut and states go bankrupt in the decades to come.
In this environment of a collapsing industrial healthcare system, the chances of a pandemic succeeding in going viral and killing millions is increasingly likely in the decades ahead. It is impossible to make a precise prediction on a pandemic, but the chances of a major global pandemic ravaging the world in the next decade is a reasonable one and it would shatter the just-in-time globalised economy. The film Contagion brilliantly shows how a modern industrial society effectively locks down in the event of a major pandemic.
The limits to growth business-as-usual model, which I reviewed in my 2016 post “winter is coming”, forecasted a global drop in population around the year 2030. As we are broadly tracking that model, the reader must take into consideration that by the early 2030’s, an imploding industrial world face the nightmare of pandemics, resource shortages and massive migration waves from a dying Middle East.
I am still writing my blog post on the disruptive potential of technology within the context of the Limits to Growth megatrend (climate change, resource, water, food and energy scarcity) and will aim to get that published next month.
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