What Ended Global West Dominance
So what has washed / is washing away the soil under the Global West dominated Globalization 1.0 model? It’s not just one single facet, but rather quite a some. The multiple walls/borders that have bounced and still are bouncing the Global West dominated Globalization 1.0 model back are:
- Geographical Distances: Globalization is mainly about being able to cope easily with distances. The last decades delivered many ‘easy tools’ to do that. The sea container changed global manufactured product flows/reach for every. The television delivered information real time over the global. Air passenger traffic exploded, both business and leisure related. The end of the Cold War boosted international contacts. The internet connected every person to the whole world. By all this globalization could thrive as never before. Coping with distances was never so easy. But as always and everywhere: something’s strongest point is also the weakest point, as the it gets all the focus, other facets are been driven out of focus. We started to see anything as ‘a product’ that could be ‘put in a container’ and ‘shipped to everywhere’. But we forgot that distance had, has and will have some severe downsides: less control, more exposure and therefore more risks. Globalization hit its borders when distance related risks (less control by more exposure) came to the surface. Read Robert Kaplan’s book ‘the revenge of geography’ to re-discover the concepts/problems of both distance and mountains.
- Ideological Blindness: The nations in the lead positions of the last decades (the winners of the Cold War) where glad that they won the Cold War. The peace dividend could be cashed in (military spending declined for 8% to 2% GDP) which thrived their economies/prosperity significant. The failure of communism made them glad, it made them drunk. Fukuyama’s ‘the end of history’ book is the best example of this euphoric/ideological blindness. They thought that because the other model failed, their model was faultless and therefore superior. It could just ‘be exported’. The original was ok, so put it on the copier machine and press the endless copying button. But the original was not that perfect and both the original and copies started to fail.
- System Errors: The model of capitalism (and certain its globalized version) had unfortunately also some systemic errors/risks of its own. These came to surface in 2008. Suddenly everyone (from right to left: everybody) acknowledged the systemic risks and agreed upon (something that was inconceivable before 2008). Not acknowledging them was simply not possible. The financial system was near collapse and there where several days that those in charge didn’t know if the system would be still standing the next day. The system errors where not only in the area of distance, they where also in the core: the governing of the systems had failed and by that the systems had derailed.
- Blind Arrogance: A lot of these systemic errors where by absence of that much competition. Absence of external competition is never good for staying good in the art of competition, both for businesses and nations. Internal competition also was not that hard: the market was growing rapidly: the people where busy with consuming and could not care less for any systemic or governance or moral issue. Being drunk is being numbed to a large extend. Being drunk also having some inflated self valuating effects.
- Credit Limits: All this euphoria was further fired up more credit. Credit that delivered to enjoy the blessings of tomorrow today and paying for it tomorrow would be easy (as tomorrow the sun would shine ever more clear). Credit driven ‘growth’ started to replace real productivity based economic growth. Producing became a dirty word. Importing was the new wave. Importing based on credit growth. Globalization was so much driven by credit growth in all its facets. But credit has two nasty facets: a) it costs interest and b) it has to be repaid. When the Global West reached PeakCredit, it reached PeakProsperity and PeakGlobalization the same time. When credit growth no longer paid for the credit, real performance became important again. And that was neglected for a long time, so it was not in a that much good shape. Defaults started to appear. And after PeakCredit comes the Credit Crunch, and aside with that the Prosperity Crunch and the Globalization Crunch.
- Financial Ratings: The more credit wave was quite fired up good ratings for debt portfolios. Good ratings delivered debt both less compensating equity demands plus good collateral characteristics. Ratings replaced the own risk assessments everywhere and certainly in the field of globalization (where own assessments was difficult due the distance and absent of sector or local knowledge). But the (totally ignored/forgotten) risk facet of / attached to distance (and distance is the core spec of globalization) suddenly came to surface again due to not expected defaults on loans with high quality ratings. Due to these defaults and the attached collapse of trust in ratings the globalization of finance than started to retract itself. Globalization was instant a risk again, as the used remote quality indicators proved to be useless and where ‘just an opinion’ (to quote all the CEOs of the three major global rating agencies in the Senate hearings in the aftermath of this drama). The retraction was abrupt and massive the same time and still is ongoing: the finance world is very much de-globalized and will move further in that direction and stay that way as the function of ratings agencies in remote risk assessments/grading has gone down the drain.
- Financial Passports: The more credit wave also was thrived by ‘bank passports’: central banks trusted the assessment and documentation of other central banks to issue bank licences. This ‘passport’ model in issuing bank licences (which had lead to an explosion of foreign banks in most nations of the world) came abrupt to an end as some of this ‘passport based licensed’ banks come into problems due the fact that their ‘passport’ was not based on actual health, but more on special relations with their homeland central bank. The number of licences for new banks based on this ‘passport model’ dropped to almost zero in most nations and the former by it generated credit growth dropped also to almost zero.
- Surfaced Losses: As credit growth start stalling, the by growth covered severe real performance problems came to surface. Kicking the can down the road was suddenly no longer possible. For sometime finding a new funding partner did the job (‘there’s always a bigger fool’), but of course that lasted not long. This was not only caused to the distance attached facets of globalization (risks times exposure), but popped up everywhere and instant simultaneously in the global interconnected system. In the equity market, in the bond market, in businesses, in corporations. Everywhere. All these losses came instant into the financial systems: as debts could no longer be rolled over debtors could not perform on their loans. Some banks where infected more than others and the interbanking system started to work very stiff: as interbanking money traffic is based on mutual accounts, some banks started to develop huge deficits on their accounts by other banks. Of course the corresponding banks where infected by this too.
- Banks Bailouts: Instead of isolation of the problems, in their efforts to contain the problems, the governments (who all thought that not their banks where in problems, but that they where infected by bad account settling behaviour of banks of other nations: they just could not believe that in their own backyard a pile of junk had been grown) started to bail out the banks. Loading the problems of those malfunctioning banks on their own balance sheets. For the banks it was a game on life of dead called ‘privatizing profits, socializing debts’. Bailing out banks is not a problem. It becomes a problem if the bailout is not done in the ‘taking the entity in receivership’ way (http://en.wikipedia.org/wiki/Receivership), as bailing out without receivership is rewarding malfunctioning management. Receivership is not nationalization (which would lead spreading the infection/problem). Receivership is about isolating the problem and then addressing it. Bailing out without receivership mutes the purification by the market principle of capitalism and by that infects the concept of healthy capitalism by malperformance at its core. Giving incentives to malfunction undermines efforts for good performance.
- Political Corporatism: The bailouts given to the banks without taking them into receivership tell a story. The name of that story is corporatism: governments serving special interests at the cost of public interests. A situation where special interests (with close toes with the government) determining governmental policies and budget spending instead of public interests. A system of government not for/by the people, but for/by special interests. It is no rocket science that such a model is not that much effective and therefore that such a model is not that much sustainable. One of the driving forces for corporatism is that politicians vote on bills openly. This seems right, but make them very vulnerable for lobbying. When politician vote openly, the quality of their vote is compromised to large extend. Closed voting boxes protects democracies against corporatism.
- Governmental Debts: As economies are different in size, not the amount of debt is important, but the Debt/GDP ratio is. There’s quite a spread between the 11% of GDP governmental debt of Russia and the 230% of GDP governmental debt of Japan. The governmental debt to GDP ratio says a lot of a nation’s future perspectives. Loading the excess debts of the banks on the balance sheets of the governments was a not that smart move. It made a sector problem, a nation problem.
- Governmental Spending: Governments like to spend. As taxation is not that popular by their electorate, they like creating debt very much: pulling some of the fruits of tomorrow into the present by credit. But what if tomorrow is not more better, but less better than today.
- Governmental Funding: As governmental debt to GDP ratios rises. Governmental funding enters dire straits. When this occurs they will do anything to drive the interest rate of their central bank to close to zero percent and delivering Financial QE to banks so that they can buy their debt and make an easy profit on it. Real economic performance starts to become less important as things become more and more surrealistic by this all.
- Defaulting Governments: Nations with too much debt can’t only survive in a near zero interest environment, any rise of the interest rate will drive them into default. The governments that already had cooked their books to some extend or even severely could not bury this new (and quite not that small) debt burden of bailing out the banks. They started to warn for coming missing interest and amortization payments. When they did that their funding potential instantly dropped to zero, which of course made their payment capacity problems even bigger (as ‘rolling over’ debt is the core characteristic of governmental funding). Bad performing the governmental debt what hurt globalization severely. Once again a too high rating issue (junk labelling as AAA) caused both the initial problem (structural too high debt) as the suddenly new banks bailout originated extra governmental debt load problem.
- Governments Bailouts: When some governments warned that they could not perform on their existing loans as access to the new and roll-over credit markets were closed for them, governments started to bailout each other, spreading the problems even further. If this was done in a bilateral way it would help the weak one as the their was a mutual interest that could empower both parties. But mostly it’s done in a multilateral agreements not focused on progress/performance, but mainly on austerity/costs: the government with too much deficits got even bigger deficits. It killed the economy of the nation with the too high deficits, by that it killed a piece of globalization too.
- Private Debts: Not only the governments of the Global West are buried under debt. Their households too. The people just followed their leaders in the ‘debt is good’ wave. In many nations the official governmental policy is to discourage saving and the promote spending. Quite a concept. Tells a lot of wisdom of the leadership and the health of the economy. The ‘growth’ and ‘outperformance’ of the Global West is very much driven by debt. The growth is gone and so is the outperformance soon to (although it has some historical longer trail that makes it last longer).
- Governance Vacuum: Where the governments with their minds and actions while this all these facets were growing into problems? They were widely absent when these problems start to grow and came to service. They where drunk by credit too. Enjoying the credit game as much as everybody else. But things are more worse. Governments have a revolving door (http://en.wikipedia.org/wiki/Revolving_door_%28politics%29) with the biggest industries. This polluted both these governments as those corporations (both reduced their performance by this playing with each other). Governments became part of / players in the game. Unneeded to say that this didn’t improve the concept of governance and governing. Capitalism moved into the crony capitalism direction. Bending regulation became interesting (also in pushing the smaller companies out of the market). Not performance was longer the main driver: sleeping with politicians eating out of both the market and the government became the success driver. Unneeded to say that this didn’t improve the comparative skills of the corporations. Both the business world as the government world loses when this all happens. And it happened. Destroying real performance.
- Wrong Detours: History shows that sometime huge detours burned a lot of time/resources for nations/economies. Several of these detours of today can be recognized. Financial capitalism is by far the biggest detour the Global West took. Extended laid out here above. But there’s more: Power projection the second biggest one. Power projection is the result of power drunkenness, leading to self-overestimating, leading to others-underestimating, leading to no self-restriction. Power comes with responsibility. Power projection is when power drunkenness anaesthetize responsibility. Power projection is when tail winds results in achieving even more tail winds (while destroying the long term perspective of sustainable tail winds based on economic performance). The third wrong detour that is developing since 9/11 is that one of governmental control. The Global West will not return on those three mega detours by voluntary change, they only will change those three things when reality kicks them out of both. Taking the wrong detours have a price (not only in wasting time/fuel): the result is also changes that are not that easy to correct: ‘an economy ends up in other places’. Financial capitalism not only delivers a debt burden system with continuous lowering wages that destroys itself: it also delivers a situation where the benefits of productive capitalism are scarce. Power projects not only delivers an economy where too much resources and consumed by the empire activities: it also delivers a situation that harms the important ‘brand’ imago and needed good relations for markets (supply and demand). And for excess of governmental internal spying: ask the people out of the old DDR what allocating too much resources to this, did to their economy. The problem is that governments these three mentioned huge detours not recognized as causes, but they start to address the consequences (making the situation even more bad).
- Labour Taxation: As governments searched for ways to get revenues to cover their expenses (public services and public goods) they of course have gone for the low hanging fruit first (outsourcing against no costs the administration and collection and mainly stealth: the taxpayers don't have to do his/her own tax payments) and started to labour taxation. It worked well for all parties until globalization really took off in the 80ties and beyond. Labour taxation made labour in the developed nations extra expensive, not only the labour was more expensive, it was taxed heavily too. Labour taxation now is working in an anti-development way in the developed nations. Labour taxation is like driving with the hand breaks on. The story that wages are too high is not true: labour taxation is too high. Governments should tax businesses, not labour.
- Labour Legislation: The governments of the Global West outsourced (by means of legislation) parts of the national social security functions towards the businesses. This looked smart (less costs for the government and yet by businesses mandatory delivered social security), but it was not. It loaded/burdened businesses with things they can't handle, not administrative, not financial. It made the business world much less dynamic. It was penny wise, pound foolish. The story that wages are too high is not true: labour legislation is too wide/deep. Labour legislation should guarantee/enforce safe working environments. It should not make businesses afraid to hire someone (due the business risks hiring people delivers to the business operation/security). Business need to do business. Governments need to deliver social security. Mixing those two total different functions is asking for malfunction of both. Businesses should be able to hire/fire on short notice. Governments should offer good unemployment income arrangements. Businesses should not have to pay workers as they are ill. Governments should offer good sickness income arrangements.
- Declining Wages: The growth of wages stagnated when Financial Capitalism replaced Productive Capitalism. Financial Capitalism delivered a fix for this: consumer credit. But as any credit, consumer credit has a peak moment when it can't grow further. That happened in 2007/2008. Credit growth is a fake 'solution'. Declining wages is the proof that Financial Capitalism bears and cherishes the seeds for its own destruction. Financial Capitalism delivers widening the wealth gap and by that it destroys the soil it needs to grow on: massive demand collapses sooner (without credit) or later (with burning first some decades credit expansion). Financial Capitalism has no long horizon, nor any sustainable future, not due to other influences, but pure by it's own design. Financial Capitalism is the elite going mad and destroying the future of their own children. When wages don't grow that much and consumer debt, car loans, mortgages still grow to heights never seen before, you know that that spread sometime will derail the system. Wages are the motor of any economy. Declining the wages is declining the economy. This is what the Global West has done: too easy adopting Reaganomics, without assessing the consequence first. Today credit growth can't deliver any artificial growth anymore to the Global West. The debts need to be repaid while the economies are in dire straits. Double unfortunate.
- Taxation Imbalances: The taxation of international corporations went to almost zero (1 or 2% profit), while the taxation of local business stayed at the old levels. In the USA ecommerce ruined the sales tax revenues too (on ecommerce no sales tax). The whole taxation system moved significant in the direction of favouring large corporations at the expenses of SMB companies.
- Governmental Budgets: While governmental debt rose significant due to bailouts (changing private debt problems overnight into public debt problems), the taxation of corporations went south (became almost zero) and stagnation of the economies delivered less overall tax revenues: the governmental revenue flow declined. Add to this increased spending on the security complex (replacing almost at large the old 10% military spending that had declined since 1989: no 'peace dividend' anymore due to this.
- Governmental Spending: Special interests started to loot the governments. To name three big ones: the financial sector (after 2007), the security sector (after 9/11) and the military sector (after 9/11 gradually rising, in the USA not gradually, but sharply). Half of the US federal debt is caused by these three big special interests. Their political connections are just too good: the best money can buy.
- Special Interests: Stiglitz in a syndicated article that is published widely (for example on http://www.vanityfair.com/business/2015/01/china-worlds-largest-economy): "The United States then made two critical mistakes. First, it inferred that its triumph meant a triumph for everything it stood for. But in much of the Third World, concerns about poverty and the economic rights that had long been advocated by the left remained paramount. The second mistake was to use the short period of its unilateral dominance, between the fall of the Berlin Wall and the fall of Lehman Brothers, to pursue its own narrow economic interests or, more accurately, the economic interests of its multi-nationals, including its big banks rather than to create a new, stable world order. The trade regime the U.S. pushed through in 1994, creating the World Trade Organization, was so unbalanced that, five years later, when another trade agreement was in the offing, the prospect led to riots in Seattle. Talking about free and fair trade, while insisting (for instance) on subsidies for its rich farmers, has cast the U.S. as hypocritical and self-serving."
- Rigged Statistics: Governments have the same desire as businesses: getting good ratings from persons, businesses and rating agencies. Nice statistic output makes the sun shine. By this governmental statistics don't have that much credibility anymore: they have moved from good/independent indicators towards biased politicized data. Visit for more objective data for example Shadow Stats (http://www.shadowstats.com) to get a more non-political flavoured view of actual data. The best example are the labour participation stats: people who work for one hour are not considered to be unemployed: this sweetened the data severely.
- Rigged Markets: The fact that Reaganomics was not a that dogmatic free market ideology, but more a wealth concentrating mechanism can not be more clear shown by the measures the Reagan Administration took after October 19, 1987 ("Black Monday"): he installed the http://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets and since than markets are artificial. Add to this the huge impact/volume of http://en.wikipedia.org/wiki/Open_market_operation. Combine this with the near unlimited liquidity operating the global reserve currency delivers and you know that markets should be written as 'markets' and that insiders can skim every upwards and downwards movement in the 'market'.
- Economic Performance: The foundation of every performance is economic. Even of derived things as monetary and military performance: as these two grow basically also on economic performance. When performance to a large extend is based on debt growth and the debt growth is no longer possible (as all debt growth reaches an end somewhere/sometime), economic performance get a severe hit. The Global West is in a zero percent growth situation. The EU has added the gray economy estimates to their GDP to create some artificial growth. Both the USA and the UK deliver growth figures by lower household income figures. Growth has left the Global West.
- Economic Perspectives: The economic perspectives of the Global West are not that bright. Debts need to be serviced (interests and amortization). Unrealistic excess debt needs to be restructured (damaging pension funds and banks severely). Financial capitalism destroyed the manufacturing base. Power projection destroyed governmental balances (25% of the current US debt is post 9/11 actions/wars related), global trust and good global relations (both for sales of products as for purchase of resources). Excess control mechanisms eat out production (security people don’t produce other things). The effects of the detours governments/economies took are not that easy to overcome.
- Management Limits: The structure of many of the western global corporations is still a national model applied to a global setting. That deliver huge management and control gaps. Gaps that could easily be exploited by those who can’t resists chances for fraud. Not that much corporations are real global corporations. They are organizations and not organisms. Micro managing top down limits severely. Smart global corporations turn themselves from organizations into organisms. A too long story for here. But the top down structure of most corporations is the biggest brake on their real globalization. The top down imperial model has it’s limits and therefore has its reach i.e. doesn’t perform that good.
- Cultural Limits: The best example to illustrate this facet is McDonalds: McDonalds is no global fast food corporation: it’s a global hamburger corporation. They just can’t imaging that large parts of the world has a different sense of taste than eating soft semi wet buns with a slice of crunched meat. McDonalds never will become a global fast food corporation, they always will stay a global hamburger corporation. They have build their own prison. There’s a limit to hamburger acceptance in the world, the hamburger has not everywhere the same ‘approval rating’. There’s a lot of better fast food out there, both traditional and of new competitors. Even the facts that they were the first and are the avatars of fast food, doesn’t dissolve the cultural limits they hit for them. The fact that they have the best roll-out model of any global brand doesn’t help them too. They have just build their own cultural limit/prison.
- Foreign Policies: The divide and conquer strategy has a certain life time. Sleeping around with anybody delivers bad relations with everybody at the end of the day. This is no rocket science. There a limit in the number of alliances a super power can maintain. At a certain point all alliances start to behave itchy (as the super power also sleeps with their opponents). Sleeping around back fires hard at a certain point. The US relation with both the Turks and the Armenians (https://en.wikipedia.org/wiki/Armenian_Genocide) is a perfect example of this. As long the super power is the only super power (as in: has hegemony) it can get away with anything. But the moment the world becomes multi-polar the vassals don't take anything for granted anymore. This is where alliances meet their end-of-stretch-point. Sociology supports this thesis: every new member of a group doubles the interconnected complexity of the group. Only those who are ideologic blinded by their own 'light' see this. Even relative smart companies like Stratfor are suffering from this: ideology makes blind. To quote a famous writer (Anais Nin): 'we don't see the world as it is, we see the world as we are".
- Trade Blocks: Trade Blocks don’t stimulate globalization, they more repress it. Limiting it by political overhead. Trade blocks are repressing the benefits of economic/global diversity. Pushers of trade blocks are often those who have made an agenda to conquer the markets of those who they negotiate with. This is something the EU doesn't understand on TTIP for example. The concepts of trade blocks is also very much on repressing sovereignty and democracy in favour of corporate initiated/dominated settlement courts. Bilaterals are a very good sovereign alternative for the trade blocks movement: delivering the same upsides, but without the downsides attached to trade blocks.
- Power Blocks: The existence of power blocks could deliver peace/stability. At least that's how they are sold. The reality is that power blocks often are dominated by one or two dominant parties (US and UK) and the rest is submissive / recessive / client. Empires have submissive clients by alliances. Sovereigns has independent partners. The narcisistic/selfabsorbed view of empires finds worldwide less and less openness for it. Being part of a power block comes with a price, a price that only can be settled by a blank cheque model (you never know what will be demanded tomorrow by the block leadership).
- Empire Costs: Empires have the tendency to grow. Endless. Their DNA is mainly about extension. Self-restriction is not very common in the leadership of empires. Empires are 'high maintenance'. This leads to tipping point where the costs of maintaining the empire overgrow the benefits of operating an empire. this is why empires always collapse and in a modern connected world this will happen a) sudden and b) overnight. Empires have been never good for the common homeland people (they always pay the price of the empire, while the overhead is profiting of it).
- Internet De'usa'ificantion: The Internet (better said: the TCP/IP protocol) was the US competition on the ITU (International Telecommunication Union) X-25 protocol. Like always the US was more cleaver than the ITU and delivered the universities of the world a TCP/IP connection line for free or at reduced price. The rest is history. TCP/IP won of X-25. Some global players (the Europeans, but also some Americans like IBM) where blind for the consequences of this 'milk and honey' based type of digital empire building and did stay on the X-25 platform too long than was good for them. As consequence of this 'milk and honey' based TCP/IP diplomacy the new digital world was an American world, where US businesses had the upper hand for decades. Not only in TCP/IP, but also in DNS (Domain Name System): the part of the internet we all know. The most simple example of this upper hand is that the EU 'got' it's own toplevel domain .eu not earlier than May 2005 (date of entry of .eu in the global root servers). The USA dominated .com world was by than already the defacto digital world. The .eu toplevel is also a show case / text book example of the impotency of the EU leadership and it's submission towards the USA: they even couldn't get this done by hard demand somewhere in the early 90ties (when the internet started to emerge/explode).
- Internet De'west'ification. The latin character set of the Global West was for a long time the only character set operational in the DNS root servers of the Internet. Applications for IDN ccTLDs were possible as late as November 2009 and the first became operational as late as May 2010. By this the internet become multicultural, not instant, but slowly/gradually.
- Swift Alternatives: Power is most powerful i.e. still on the rise when it's not projected. Power needs wise self-restriction otherwise power creates contra powers. The move of the USA to disconnect Iran of Swift (the international payment 'switch'/'router' platform) did have some severe external consequences. Nations outside the Global West start to understand that they we're dependable on the 'grace' of the USA aka the Global West for their financial connection with the world and they don't liked that too much / at all. The Global Rest (Global East and Global South) decided to create a non-political version of Swift (but as always: talking about something is one thing, realizing something is from another level). The organization will be difficult (too many parties with too many interests), but it will come for sure and it will rip the Global West of a major geopolitical hub/tool.
- Severe Dehubbing: Aside from this Global Rest alternative for Swift: the dehubbing trend (the explosion of governmental and monetary bilaterals) also connects nations with each other without the need of such a global financial switch/router. And like in biology and also in IT: non-central systems aka diversity makes systems more robust/redundant. This dehubbing started in aviation and is changing many other realms too. The internet is dehubbing at fast pace by direct peering/connection (avoiding the global internet exchange hubs). Dehubbing is not only driven by emerging self-awareness, but also by performance/redundancy/stability demand. All dehubbed systems are more stable/redundant. The Global West is losing its global hubs positions in all realms.
- Internet Governance: The internet is still very much a DoD (US Department of Defense) and DoC (US Department of Commerce) issue, not directly anymore, but this they hold some veto style privileges. The resistance against this outside the US has grown significantly. The fear that the US could erase national toplevel domains of nations they like to see some 'regime change' happen. They could for example (not directly but by lobbying) aim for an overnight stop on the resolving of the .ir toplevel domain for Iran (which is as simple as typing the ; character for the .ir line in the config file of the DNS root servers -http://www.internic.net/domain/named.root- of the internet). Therefore most nations in the Global Rest (Global East and Global South) prefer that the ITU will take over the internet governance. Something the internet professional community is not that found on (as they are blind for the current politicization potential of the internet and only see the future politicization potential of the internet). But for sure the internet will become in the future a less US government effected/influenced structure. One way or the other.
- BRICS Bank Replacing of WB/IMF: The World Bank and the International Monetary Fund are not only located in Washington, they are designed by Washington too (as both were/are a part of the Washington proposal at Bretton Woods, that won over the other proposals presented at Bretton Woods) and therefore serve the US interests directly or indirectly. The IMF dogma is called Washington Consensus and is mainly about austerity and privatization (severe discounted: for pennies on the dollar) to 'solve' problems: 100% undiluted Chicago Economics. It went decades without any serious competition, but these time are over. The Washington Consensus faces severe competition of the Beijing Consensus which is mainly about state driven investments to solve problems. The Beijing Consensus is 180 degrees opposite to the Washington Consensus. It's not that strange that nations prefer the Beijing Consensus. And as always: monopolists are forced to change their behaviour when competition comes into play. The IMF tries to change, , certainly when US geopolitics is play too (Greece is the perfect example for this), but that's not that easy: the interests of Washington and Northern Europe are not in-sync/in-line with each other. The IMF is reaching the ends of its (political determined) possibilities. China is competing with Washington, not by doing the same with the use power, but by doing the opposite without the use of power. The Global Rest will maybe not be able to align to form a new IMF, they certainly will not succeed in reforming the IMF, but dehubbing and diversification will replace the need for both. The AIIB will help emerging nations in dire straits with kickstarting their economies by investments. That's the beauty of being yet underdeveloped: growth is possible: something the Global West can't use to solve its problems: they are peak growth and in decline and burdened by debt driven artificial growth that replaced real growth for more that three decades.
- Moral Leadership: The moral leadership of the Global West collapsed when the USA/UK started to torture people and abandoned the legal system rights to suspects and started to monitor their own population. All the reasons why worldwide people liked the Global West sunk deeply. Bush/Blair have done the Global West more damage than everybody else ever could do.
- Moral Arrogance: After 1989, the Global West went drunk in their own ideology. Their perception was not that the Cold War was ended by mutual efforts, but that they won the Cold War. This victory drunkenness made the Global West believe that their ideology was a) superior and b) flawless. Two misconceptions that came to surface in 2007/2008.
- Currency Dominance: Having the global reserve currency delivers huge advantages to a nation. Advantages strangely enough are not seen by most of the media of the Global West. When the dollar dominance came under pressure when Nixon unilaterally shut down Bretton Woods' dollar to gold convertibility, Kissinger delivered the USD an extra global reserve currency life cycle by creating the petro dollar system together with Saudi Arabia. But the Global Rest is actively trying to avoid this 'imperial taxation' by currency diversification. See CIRI (China India Russia Iran) Avoids Dollar or http://www.planck.org/publications/BQE-Bilateral-Currency-Swaps. The days of currency dominance are over. The USA will give it yet on other shot when they will try to get to merge the dollar and the euro at their terms. See for that http://www.planck.org/publications/Global-West-Common-Currency-Union.
- Currency Wars: Having the global reserve currency is a beyond imagination advantage. Not only debt can be created excessively. Other currencies can be attacked by this exceptional monetary advantage too. New wars are not fought will traditional weapons: they are fought with monetary ones: going short on a currency can destroy a nation and by that its government within one month without any shot fired. If done by planners that have already a replacement government lined up, the changes that that lined up new government will be in place is huge (as for the rest the collapse of the old system came as a surprise).
- Air Defense: Before Russia started to deliver S300 and S400 systems to the Global Rest the nations of the Global Rest where very vulnerable for the Air Power of the Global West. Russia's S300- and S-400 deliveries declined the air supremacy of the Global West significantly. The real reason why Syria never is bombed before ISIS is called S-300. The new already in developing S-500 system will end air supremacy for any nation for ever.
- Total Surveillance: The economy of East Germany (DDR) was not that vibrant. Too many FTEs were working for the control state model. The Global West is moving in this self repressing/burdening direction at fast pace. Another facet of total surveillance is that innovation is based on freedom to express. Innovation is not a mainstream event: this is why it's called innovation. Innovation is about finding new roads, new directions, new theories, etc. Total surveillance represses innovation severely: as innovation is somewhat rebellious by nature.
- Economic Sanctions: If there one this that’s very effective in hurting the interests of the Global West that would economic sanctions. Sanctions isolate the Global West and collides the Global Rest. Sanctions are the sign of not knowing what is happening out there, of a self-centred global vision that is blind for anything that's happening and booming allround the globe. The Global Rest has a) near double digit economic growth (closing the external wealth gap: by market driven jobs) and b) productive instead of financial capitalism (so the are closing the internal wealth gap: by market driven jobs). Economic santions are backfiring severely on the economies of the Global West. Economic sanctions hurt the economies of the Global West, not those of the Global Rest. Economic sanctions restructures the economies of the Global Rest away from the Global West and make them more interconnected/intraconnected. The only effect of economic sanctions is that the Global West is pushed out of the global center even more fast.
- Imperial Projections: The other huge facet is power. Power is only useful in self-restrain, without self restrain power is backfiring big time. Smart imperial projection could deliver a lot of both thrust and trust. Unwise imperial projections destroys any reach what others have build. Places not bases should is the slogan of smart empiring. Just more bases is the slogan of bolt empiring. It's time to recognize that US/UK foreign policies are hijacked by both economic imperialists (special interests of the energy and financial sector operators) as by political imperialists. And as always (a basic law in physics): action generates reaction. See for more details on this http://www.planck.org/publications/Global-East-Driven-Globalization-2-0. It describes the role of Brzezinski (sleeping around with anybody with as result both damaged relations and choas all over the place) and describes that Brzezinski's influence declined significantly after PNAC (founded in 1997 by William Kristol and Robert Kagan, interesting to know is that Kagan is the husband of today's important geopolitical actor Victoria Nuland) took over the direction/lead regarding US foreign policy somewhere around the millennium. PNAC ended the still somewhat smart empiring of Brzezinski into bold power projection empering (something Brzezinski always tried to prevent: he sweetened it always to some degree). Much of PNAC's legacy was still directly derivated from Brzezinski's work, they took his objectives but change the operation mode. Zbigniew Brzezinski was and still is the most influential geopolitical advisor within the USA (who while getting old, still is actively competing with the former PNAC people on 'the tone of voice' of empering). His long time of influence makes his influence much bigger and wider than the back than very influential (but only while in office) geopolitical actor Henry Kissinger (although much of Brzezinski's work is based on the imperial ideology of Kissinger: Brzezinski is a typical 'student overgrows teacher' example). Anything PNAC touches gets broken. Anything. The concept of nation building is a severe ideological blindness and the result is contrary.
- Global Governance: The existing global governance systems are made at the end of WWII and reflects the powers at that time. As the world has changed, these structures haven’t. Of course the former main power will throw some peanuts to the emerging powers, but that will not stand for long. The existing powers will not give up their privileges. Never. So the existing global governance structures are heading towards obsolete powerless pictures of the past. They will not be replaced with new global structures: the Global Rest doesn’t trust the Global West that much anymore. Climate change will not deliver a new global structure too (the science first needs to be depoliticized to get credibility again). A global currency reset will not happen, China and Russia will not join this due US meddling in Hong Kong and Ukraine, so it will only happen in the Global West, so that will not deliver a new global structure too. Global Governance also will enter a more diverse/distributed stage 2.0 model.
- Power Shifts: Power is based on economy performance. If economic performance declines, power decline will follow sooner or later. Power has some historical trail (actual power projection reflects the near past, not the present nor the near future), but the length of this historic trail is limited. But basically power grows on economic performance. Of course there are other facets (the best example to illustrate this is the ownership of nuclear weapons).
- Embedded Press: The number of public relation officers have outnumbered the number of journalists. They are better paid and face less risks. Investigative journalism died when media corporations merged into huge conglomerates and these very huge conglomerates are depending on the government for the licenses. Investigative journalism died when media corporations merged into huge conglomerates and these huge conglomerates became depending on even big corporations for their advertising revenues.
- Governmental Moral: Governments are more and more under influence of special interests and serve these interests more than the public interest. All the preaching the Global West is pushing intensively towards the Global Rest is something they themselves abandoned long time ago (to be more precisely: since the 70ties when voting by politicians became public/transparent: pilling loads of special interest pressure on them). The governments of the Global West are not serving the public interests the way they used to be.
- Patents Overstretch: Patents are gone play the lead/main role in the last phase of Globalization 1.0. But they will push the envelope too far. TTP, TTIP and TISA are pure patent driven agreements. Giving US patents the upper hand in where implemented. TTP, TTIP and TISA will be realized, regardless opposition. But the patent realm is near the end of its life cycle, as it blocks innovation instead of stimulating it. A very good example of this is dna/food patents: the old system of breeders' rights made it possible to build innovation on innovation, but the dna/food patent model doesn't allow that. So innovation stops due the fact that every development becomes just a dead-ended street. Patents don't serve their original purpose anymore. The emerging nations will weaken/abolish patents more and more. TTP, TTIP and TISA have provisions for this (seizing containers in harbours without warrants at the cost of the sender). So the patent system will lead to stagnation for those nations jailed into it.
- Imperial Overstretch: Imperial overstretch has three facets. Finance, management and complexity. The finance part is simple: an empire (like the US) can only maintain near 1000 foreign bases when it operates the global reserve currency. Operating the global reserve currency is having an unlimited credit card on the real output of the world and also having a money creation machine that dilutes by inflation the real output of the world. An empire can operate those military operations as long it has the tool of having the global reserve currency. When these expenses must be paid out of domestic/homeland productivity it's game over. The decline of the dollar as global reserve currency by the rise of importance of competing currencies (euro, renminbi/yuan, etc) and by the rise of bilateral currency swaps (two nations facilitating mutual trade by doing a currency swap with each other). The management part is also simple: too large structures can't be managed too well. Big often equals failure/waste in operation. Risks are not assessed/overseen and therefore not addressed etc. The complexity part is simple too: See for example Iraq: Iraq can't be managed well by outsiders due to the complexity of it. Regardless wild plans (like https://en.wikipedia.org/wiki/Ralph_Peters#Redrawing_borders_and_regime_change that would make parts of the empire more suitable for the emperors, these plans will fail, they're drawing board fantasies made with 0.0% realism, written out of empire blindness/ideology. Unfortunately the leadership of the empire don't see the decline of the empire (and therefore will be surprised by its fall).
- Reversed Brain Drain: Decades long the Global West have enjoyed a brain drain wave from out the Global East and Global South: highly educated people that where determined to live/work in and contribute to the Global West. These times are behind us for three reasons: a) the growth of the Global West is stagnating (real zero or negative growth figures, forget the polished governmental data: see the real stuff on sites like http://www.shadowstats.com): less demand and less perspectives, b) 9/11 has made the Global West for sure less open for immigrants (even for high knowledge professionals), c) 9/11 has made the Global West for sure much more xenophobic, d) 9/11 made the Global West less free (Patriot Act etc): the Global West has lost it's USP in this realm, but also the changes in the Global East and Global South are contributing significant to this: e) the Global East and Global South became more free for the individual person and its views/believes/ambitions, f) the Global East and Global South are economic booming (a near double digit growth figure of between 5 and 10%, year after year), g) the Global East and Global South have developed a middle class segment is society, h) own culture/food has a great appeal to people, i) family ties still are strong, and j) the weather is often more nice in the Global East and Global South. But more and more educated people of the Global West are moving also towards the Global East and Global South, just as the opportunities are better in an economic growth setting even for those with good perspectives in the Global West (let alone for those who have not that much perspectives due the economic crunch of the Global West).
- Reverse Hunger: Obesitas: Like hunger weakened the underdeveloped world till globalization solved it, obesitas is now weakening the developed world and globalization doesn't solve this one. Costs of health care are rising (while governmental funding is already in dire straits) and life time expectance is declining. So much for being developed. Obesitas is getting a real problem in the Global West and it lowers the productivity of the Global West like hunger did for centuries in the Global Rest.
- Cultural Differences: Globalization hit its borders in exporting the cultural narrative of the Global West. As the novelist Anais Nin once said ‘we don’t see the world as it is, but as we are’. Every perspective of the world is more derived perspective of ourselves than of the world at large. Add to this general assessment that
- Sociological Barriers: Globalization lead to strong changes in society/economy. Two huge changes: 1) Immigrant groups emerged voluminous. 2) Working class people lost their jobs. The societies of the Global West became less hospital towards immigrants.
- Linguistic Barriers: The English language was a huge part of the success of Globalization 1.0. It still is and will be a huge driver behind Globalization 1.0. But times are changing. The emerging nations grow together with their economic performance and currency reserves also self-esteem. English is no longer the default language of international relations. The attitude against English is changing rapidly towards something like ‘if you don’t bother to learn my language, why should I expect loyalty/continuity of you’. The more the self-esteem grows (and it does, exponential), the less business will be done in English). Like the dollar is getting avoided by bilateral currency swaps, English is getting avoided by bilateral linguistics.
- Psychological Barriers: The human mind needs some feeling of security to function. Security that is delivered by an oversight to some extend. The degree of this oversight demand difference per person. But ignoring this is not wise (as it’s a fact), nor is making it ridiculous (as it has nothing to do with backwardness, but with basic psychology). The human mind can adapt changes. Very good. But overfeed them (with force accompanied with calling everybody backward) and they start to resist. As the drivers of Globalization 1.0 where deep narcissistic they didn’t care too much on this facet: they profit of it big time and could not care less. But the losers of Globalization 1.0 got their voice when social media kicked in.
- Social Media: Globalization 1.0 narrowed the inequality gap in the emerging world, but Globalization 1.0 widened the inequality gap in the developed world. Prices rose, wages didn’t. Where in the 70ties one income could provide a household a good life without debts, now two incomes are needed to do so (and debt rose significantly: more and more is needed to service this debt). But as Globalization 1.0 was driven by those who aimed for personal benefits, so not the benefits, not the consequences did interest them: just the bottom line did. They were in charge and behind the steering wheel. Nobody could stop them if they want so. But social media has changed this playing field, making it equal. The losers of Globalization 1.0 are getting their voice too. This process is not even started. Today social media can and will make/break brands (depending on their behaviour).
On top of those huge and difficult changes the northern hemisphere (i.e. the Global West) will face and have to deal another huge facet: another Maunder Minimum (http://en.wikipedia.org/wiki/Maunder_Minimum) as the magnetic values of the sun are heading towards lower values. This New Maunder Minimum will deliver them a) less food production and b) more energy consumption. Not only the economic sun will shine in the Global East and Global South the next century, the real sun unfortunately will do too. Al Gore will become the symbol of non-scientific manufactured consensus. The word consensus is a-scientific in its nature: science is primarily about keeping asking questions: not about defining an one and only truth that must be defended: that’s politics and religion. Manufactured/politicized science is total blinded by one facet and therefore not comprehensive and thereby derailing. Comprehensive not political funded science will rise in influence again. Universities will decline in credibility. New scientists will rise together with new/better models that will have less white spaces than the current models. That what’s wrong with the financial world and the political world is also wrong with the science world.
See also International Currency Stability
See also Europe: Diagnosis and Prescription
See also Governmental Funding Turbulence
See also Labour Taxation
See also Money Creation
See also Energy Open Finance Platform
See also Global PV Solar Energy Finance Model
See also EQE/EBS Model Summary Diagram
See also BQE: Bilateral Currency Swaps
See also Gold Backing vs EQE/EBS Backing
See also Secular Stagnation as Denial Term
See also Financial QE vs Productive QE
See also Productive Capitalism Perspectives
See also Emerging Nations - Electricity PPP
See also Emerging Nations - Solar PPP
See also Easy Instant Solarizing Nations
See also Making The Euro More Offensive
See also Structural EU/EC Boat Refugees Solution
See also Global Solar Rollout - Description - Diagram
See also Regional Solar Rollout - Description - Diagram
See also Obama Administration Energy Strategy
See also China As Global Leading Solar Energy Nation
See also Open Finance Platform for Energy Investments
See also Iceland 3.0: Geothermal and Energy as Currency
See also Addressing Economic Decline of the Global West
See also IntraContinental: Continental Rail Schedules
See also Global West Enters Economic Adulthood
See also Global East Driven Globalization 2.0
See also Financial Capitalism vs Productive Capitalism
See also CIRI (China India Russia Iran) Avoids Dollar
See also Global West Gets A Common Currency
See also What Ended Global West Dominance
See also National Economic Development Organizations
See also Desert Investment Economics
See also Ending Global Poverty (By Sea Water Irrigation)
See also Global Deserts Exploration Model
See also WaterTech and MicroCredit Merge
See also Lupin As Soy Replacer
See also Global Seed Cartels Aren't Right
See also Global Food Model: Local to Global
See also Sun / Earth Interactions
See also Telco 3.0 : Telco out of the Cloud
See also National Business Clusters Abroad
See also Scientific Education/Research Funding
See also Iran: National Economic Plan
See also Immigrants and Trade
See also Emerging Nations - Minerals PPP
See also Emerging Nations - Deserts PPP
See also Emerging Nations - Energy PPP
See also National Solar Fund Model
See also Secular Islamic Finance
See also Open Energy Finance Platform
Gijs Graafland / Planck Foundation / Amsterdam / 2015
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