Thorbjørn Waagstein, Economist, PhD, since 1999 working as international Development Consultant in Latin America, Africa and Asia.
The economic crisis caused by the new corona virus has in the advanced economies been paid for in the same way as the 2007-2009 Great Financial Crisis: pumping money into the financial sector and increasing public expenditure. Result: more public debt to be paid back in the future, basically by common people. This cannot continue eternally. The next crisis has to be financed otherwise, shifting the burden to those who sit on the cash.
The recent drop in oil prices is generally referred to as a ‘Saudi-Russian price war’. This is a wrong description. Two things are happening. Firstly, as renewables are becoming cheaper and cheaper, oil is becoming increasingly irrelevant, and all countries with large oil deposits are scrambling to get as much as possible out of the ground before it is too late. Secondly, the OPEC+ oil cartel has failed, as outsiders – often called ‘free riders’ – have increased production so much that the cartel is no longer worth while. These two factors are the death knell for OPEC+ and high price oil – the good times for the oil industry will never come back. The fall in demand because of COVID-19 is not the cause, it is only the trigger.
The European and US handling of the new corona virus (COVID-19) epidemic has been dominated by the story that this epidemic is unstoppable. We can perhaps slow the course, but finally the same amount of people will be infected, it was said. This might also be the best, as then an important part of the population would then be immunised and we would thus avoid a later flaring up of the epidemic. It was even said that efforts to stop the epidemic would be unscientific, a result of politicians eager to be seen ‘doing something’. That would be the turf of the populists. This is absolute and complete nonsense.
The management of the Venezuelan economy has been surprisingly incompetent and disastrous, despite sitting on the world's biggest oil reserves. Sanctions and embargo against Venezuela have accelerated the decline, with inflation bordering on hyperinflation, a collapsing economy and mass migration. There is much to dislike in the Venezuelan Government and its policy, and by the way in the opposition, too. But sanctions and embargo is the wrong policy, causing further suffering for the Venezuelan people. Recognizing a self-proclaimed president and supporting a bogus uprising is converting it into a farce. It is old US policy to treat its foes like this. But what the EU is doing, supporting this, is very difficult to understand. Now the Europeans can no longer just blame the Venezuelan Government. They have decided to take on shared responsibility for the suffering of the Venezuelan people.
When Mauricio Macri won the Argentine Presidential elections in 2015, there was excitement in Washington, the European Union and, above all, among the Latin American right. They would finally get rid of the incompetent and populist government in Argentina. 'The technocrats to the rescue', wrote 'The Economist', and stated that Macri 'is choosing well-regarded technocrats to occupy the main economic positions'. Unfortunately, after making a heroic attempt to rescue the country, Macri lost the presidential elections in October 2019 and the same bad populist guys (and women) are returning. Or this is what the international mainstream media want us to believe. They are not only wrong, it is a flagrant distortion of the facts.
The ongoing US trade war against China will have deep longer term repercussions, independently of whether a trade deal is reached to end it. Had it only been a question of erratic actions by a lunatic president, the effects could have been limited. But Trump is not alone. The general mood in the US establishment is that China should be contained, or even rolled back. So the key-word is now ‘disentangling’ of the US economy from China.
The ongoing trade war that the US has unleashed against China will change the history of the 21st century, independently of whether an agreement is eventually reached between the parties or not. It signals the decision of the US to prevent China from growing into an economic superpower, using whatever means it has at hand. But this is an extremely dangerous and futile policy. China has more than four times the population of the US. As it develops, its economy will inevitably surpass the US. There is nothing the US can do to prevent that, so they will have to find out how best to live with it. Unfortunately, this is not how an important part of the US establishment sees it.
It has been common to say that the main strength of the US political system is its checks and balances. The three branches of Government are balancing each other out, and the free press and civil society in its many forms contribute with more checks on the system. Sometimes this is still true. But in many cases the result is dead-lock and a non-functional system. Most worrying is that in the fundamental case of war and peace, it simply does not work. This puts the whole world in danger.