Monday, December 31, 2012

Crystal Ball Gazing, 2013 Edition, Part 2: International Trends

In Part 1 of this blogpost, I spent a little bit of time writing about why I believe the neo-liberal economic system, as formulated at Bretton-Woods in 1944, will continue to be the dominate paradigm through which world events play themselves out, at least for the next little while. In that blog, I hope that it was clear that I believe the neo-liberal paradigm is ultimately doomed, whether by the proactive actions of 99%, or because of reactive forces related to depleting resources and the inability of the system to continue to grow. I have always advocated that it makes more sense for humans as a species to make our own opportunities and plan for a better future, rather than to find ourselves in a reactive situation. However, with the global elites controlling public influence, public policy and wealth creation, it seems unlikely that we’ll escape the end of the neo-liberal paradigm on our own terms.

In 2013, there will be more people who understand that our economic system is flawed – more than flawed in fact. It’s a fossil-fueled locomotive headed over a cliff, taking us all along for the ride. A couple of more prolonged periods of negative growth (“recession”) will be enough to undo the system altogether, unless saner public policy can prevail. And since saner public policy involves a decoupling of our economic system from both the notions of unfettered growth and our dependence on non-renewable energy resources, it’s just not likely that sanity is going to prevail. Frankly, there’s too much money at stake to stop the insanity.


Thanks in part to the intransigence of American elected officials to reach a deal on the so-called “fiscal cliff”, there is a very real chance that the next global recession could be at hand in early 2013. Even with a deal by U.S. legislators, the signs of recession abound. Growth has slowed in Europe and Asia, and what modest gains have been made in the U.S. and Canada are jeopardized by political game-playing. Ultimately, confidence in the economy is a human-made commodity, meaning that if enough of us start to lose confidence in the economy, the economy is in trouble.

In 2013, I believe that we can expect to have lost confidence in the global economy yet again, and the economy will return to recession. While the recession of 2013 may not be as bad as the 2008-09 recession, it will be used as an excuse to implement austerity measures by governments around the globe. The idea of more “economic stimulus” will be a much harder sell in 2013, especially in the United States, thanks in large part to Tea Party Republicans who have never seen government spending that they like.

Having said that, though, I must confess that on the matter of stimulus spending, perhaps the Tea Party Republicans are onto something to which we should pay closer attention. If the economy is to be stimulated, we simply can’t do what we did in 2008-09: pour money into 20th Century industrial endeavours such as the auto industry, and into 20th Century public works, such as highway building. If we are going to incur additional debt (read: make our kids pay for the goods we buy today), at the very least we should be spending on our future, and not trying to prop up the past.

I, however, don’t have much confidence in governments around the world (and especially here in Canada) to invest in our future, especially when old brown economy jobs are at stake today, and when 20th Century thinking continues to prevail amongst baby-boomer decision-makers.


If there is to be any good news at all from the coming recession, it’s that commodity prices likely will fall as well, including oil. Now, that’s not good news for miners (and mining supply firms) here in Sudbury, at least not in the short term. With lower commodity prices, we can expect to see less investment, and projects which are now moving forward (like the Ring of Fire) will likely stall. Again, that’s all bad news for us here in Northern Ontario (and elsewhere, for sure), but there may be a silver lining, or at least an oily one.

Should recession hit, the price of oil will have no choice but to go down, as the market is already artificially high. Lower oil prices will assist in making this recession less severe, and less lengthy, than it might otherwise be, and it’s quite possible that we could be back in recovery mode by the end of the year. Of course, there may be a few wildcards which keep oil prices at their current levels, exacerbating recovery, which I’ll look at later.

Food Shortages

Some experts are predicting a global food shortage to occur in 2013, and I believe that the evidence suggests that those experts might be right. Globally, food prices have risen significantly over the past few years, and the price of grains was one of the factors which fuelled both the economic collapse of 2008-09, and the Arab Spring movement in the Middle East and North Africa. Food prices have been rising for a number of reasons, including extreme weather events related to climate change. One of the biggest factors, however, has to do with the rising price of oil. The fact is, that we consume oil in many ways, making it one of the most versatile (and therefore valuable) commodities on the market. We burn it for personal transportation, and for heating. We also eat it – or more correctly, we rely on petroleum-based fertilizers to provide us with the bumper crops we need to fuel our bellies (or the bellies of the animals which we in turn consume to fuel our bellies).

Our industrialized agricultural sector needs oil to make food. As oil prices rise, as they have done now for the past few years, the prices of grains and meat in turn rise, and the availability of food becomes more limited. We here in North America are relatively insulated from these fluctuations at the moment, as we have options to substitute (relatively) less expensive vegetable produce for more expensive meat products. Further, westerners already spend the lowest percentage of earned income on food products (somewhere between 5-12%); those in the developing world must devote a greater share of their economic resources towards food, between 30-45%, and in some places, more than 50%. With high oil costs, and potential price-spikes from climate-change enhanced extreme weather events, people spending a significant portion of their income on food will have much fewer opportunities to absorb higher prices.

Globally, we produce enough food for everyone to experience a healthy diet, so the notion of a “food shortage” isn’t really accurate. Even in those years where less food is actually being produced, the fact is that if we had made it a global priority to do so, no one on this planet would ever need to go hungry. But of course, solving world hunger has never been a big money-maker, so the idea just hasn’t caught on.

Of course, what’s interesting about that is that a global food shortage actually threatens the well-being of nations and citizens who continue to have enough to eat. One of the problems with food shortages has to do with the idea that they tend to foment civil unrest, armed conflicts, and mass migration. Should the global south begin to starve, it doesn’t take a genius to figure out what might happen to the more affluent global north. And let’s face it: that kind of scenario isn’t good for the economic growth, either!

Corporate Tax Cuts – No Longer a Prescription for Prosperity

And on a related note about “what’s not good for economic growth”, I think that 2013 might actually prove to be a watershed year in which the right-wing mantra of corporate tax cuts facilitating economic growth might finally be discarded by more mainstream conservatives. We now have decades worth of data at our disposal, and the verdict has been clearly in for some time now: lowering corporate taxes on their own does not lead to job creation or economic prosperity. It’s not an “all or nothing” game, but it’s been a good game for corporations, as they’ve increasingly been picking up less than their fair share of the tab.

Cutting taxes for job-creators may make sense in many cases, but across-the-board cuts have not brought the economic benefits which trickle-down economists and legislators have insisted we would accrue. In Canada, both Conservative and Liberal governments have bought into the notion that lowering corporate taxes will prove to be a boon for economic growth, and will assist with recovery. Only the Greens and the NDP have been making the case for targeted reductions, and returning corporate tax rates to more sustainable levels.

Already, over the last few years, there’s been a general acceptance that corporate welfare should be ended for profitable firms, particularly those involved with fossil fuel extraction. In 2008, our Conservative government made a pledge at the G-20 to end corporate subsidies to fossil fuel companies. In 2012, Canadian taxpayers subsidized fossil fuel industries to the tune of $1.4 billion dollars. Canada is in good company, however: globally, the International Energy Agency (IEA) estimates that we continue to subsidize the poor and impoverished fossil fuel industry to the tune of $520 billion of public money annually, an increase of 30% between the years 2010 and 2011. Interestingly, the IEA estimates that the global subsidy for renewable energy resources is at only $88 billion annually.

At least, though, when it comes to corporate welfare, there’s a general acceptance amongst decision-makers that we probably ought to stop doing so. In 2013, it’s going to be the same for corporate tax cuts.


Time magazine’s “Person of the Year” in 2011 was the Protester. They may be awarding their honour to the same person again at the end of 2013. Globally, protest movements aren’t going to recede, although in certain nations, they may be wound down (and here I’m thinking specifically of Egypt). In the last few years, we’ve seen anti-austerity protests in Europe, and pro-democracy protests in the Middle East, North Africa, Russia and Ukraine (and to a lesser extent, in Canada and the U.S. as well). Expect these protests to continue, and expect a more significant response from all governments. In Russia, pro-democracy protesters will increasingly be at risk of physical violence. In Canada and the United States, expect protesters to be increasingly labelled “terrorists” or other such terms which attempt to dehumanize and set protesters apart from “average citizens”. The divide-and-conquer strategy is a good one, as public opinion has generally not shifted in favour of protesters yet.

Of course, protests can have profound effects, as we witnessed in Egypt and Tunisia in 2011, and also in Quebec in 2012. We cannot forget the almost complete success of the Quebec secondary students demonstrations to create the change they sought: a change in government, as the Jean Charest’s Liberal government gave way to Pauline Marois’ Parti-Quebecois.

Part 3

In Part 3 of this post, I’ll make some predictions which are locally and provincially (Ontario) focussed.

(opinions expressed in this blog post are my own and should not be considered to be in keeping with those of the Green Party of Canada)

No comments: