This Will Be the Most Important Story of the Year: China Is Now Exporting New Deals to Rich Countries Impoverished by Austerity

   2019-04-09 23:04

GettyImages-537405049.jpg

You probably have not heard the biggest story this year. It is this: China basically exported a New Deal package to Italy, a major European country that has yet to recover from the Wall Street crash of 2008 and the European debt crisis of 2010. Italy owes a ton of money to banks whose interests are pushed and imposed by Troika (the European Commission, the European Central Bank, and the International Monetary Fund—or, in my language, the Berlin Consensus). In essence, these policies demand that a state commitments to a grueling debt repayment schedule that displaces the kind of fiscal policies that would help pull its economy out of a mess. These policies, which in the US are known as New Deal economic programs, and in economics (or heterodox economics) as Keynesianism—a government directs cash to the conventional economy because, simply, the market will not—have been blocked by a Troika austerity agenda that demands, no matter what, it be directed to debt payments.

Sponsored



Join us at SEAF, April 26-28, for three days of sensuous art and performance!

What to do? The Italian economy is stuck. Troika will not budge. The left (a Sanders) and populists (a Trump) are equally ineffective at this conjuncture. Then, in walks China, a surplus country. What does it offer? What Italy needs right now: a New Deal-like investment.

From Reuters:

Italy signed a preliminary accord with China on Saturday that makes it the first country of the Group of Seven industrialized nations to join the Chinese Belt and Road infrastructure project.

Around 30 parallel deals were signed on the sidelines of the visit to Rome by Chinese President Xi Jinping, including 10 with Italian companies and others with ministries and public bodies.

Italian Deputy Prime Minister Luigi Di Maio said the deals were worth an initial 2.5 billion euros ($2.8 billion) but had a potential value of 20 billion.

Pause and think about this for a moment. This deal’s implications are world-historical on so many levels.

I will begin with this: Basically, the US and Europe are oriented to their banks, which, in turn, are oriented to an elite class—shareholders and bond traders—that’s indifferent to the conventional economy and, at every opportunity, presses all governments, as well as corporations, to be fully committed to maximizing the value of their financial assets.

This has resulted in austerity—cuts in public services and investment. Enter China, an economic global power that is offering money, “panda bonds,” that a struggling rich country can direct at economically viable and long-term projects. China is exporting a New Deal to a country that desperately needs it, but Troika will not provide. This is something worth thinking about in light of the US’s mainstream attack of the Green New Deal. Our society can easily transfer billions to corporations caught in the ether-like ideology that the distribution of capital to shareholders and executives is efficient. But the idea of the meaty Green New Deal is considered a pipe dream, a fantasy, an ether. No matter what the opponents of the project have to say, however, it will have to happen with or without them. There’s just no way around it. And then you have China learning, exactly, how to export what the US will certainly need, but will likely fail to politically produce: a new New Deal. (Much of this point was made by Barrons writer Matthew C. Klein in the article “Italy Embraces China, and Europe’s Elites Have Only Themselves to Blame.”)

But here is another point, which is at once historical and drawn from personal experience. Africa in the late-1980s turns out have been the future of Europe on two accounts. One, it was forced to adopt a suite of economic policies that, at the beginning of this decade, were imposed on a number of European countries, most notably Greece. These policies, which formed what’s known as the Washington Consensus (World Bank, US Treasury, IMF), are called Economic Structural Adjustment Programs (ESAP). They required that poor African states slash government services/spending, abandon development projects like import substitution or industrial politics, and fully open capital flows. These policies did not work. As the Cambridge economist Ha-Joon Chang has pointed in several books, they actually retarded economic growth. ESAP nevertheless was, and still is, the economic law of several African countries, including the one I was born in, Zimbabwe.

Zimbabwe also, in the late 1980s, was the recipient of Chinese investments in big conventional-economy projects. Indeed, I saw with my own eyes, China construct, though with many of its own workers, a world-class national sports stadium in Harare. And so, on one hand, you had Western austerity, in the form of ESAP, and the other Eastern Keynesianism (or New Dealism) in the form Chinese infrastructure investments. What no one in low-income Zimbabwe—and other Third World countries (now known as the Global South)—knew at the time was that this condition or situation was the future of high-income Europe. Africa in the late-1980s and early-1990s would prove to be the laboratory of what would emerge in, at first, the PIGS in the 21st century. Zimbabwe then is Greece today. Zimbabwe then is also Italy today. And what all of this adds up to is a macro-level transition of what Giovanni Arrighi calls in his book Adam Smith in Beijing “global political economy,” from North America to China.

I want to close this post with a passage by the founder of economics, which is always and only a discourse about capitalism, Adam Smith, that guides Arrighi’s thinking in Adam Smith in Beijing. Please read it carefully and think about it in the light of these recent and important developments:

Their consequences have already been great; but, in the short period of between two and three centuries which has elapsed since these discoveries were made, it is impossible that the whole extent of their consequences can have been seen. What benefits, or what misfortunes to mankind may hereafter result from these events, no human wisdom can foresee. By uniting, in some measure, the most distant parts of the world, by enabling them to relieve one another’s wants, to increase one another’s enjoyments, and to encourage one another’s industry, their general tendency- would seem to be beneficial. To the natives, however, both of the East and West Indies, all the commercial benefits which can have resulted from these events have been sunk and lost in the dreadful misfortunes which they have occasioned…

At the particular time when these discoveries were made, the superiority of force happened to be so great on the side of the Europeans, that they were enabled to commit with impunity every sort of injustice in those remote countries. Hereafter, perhaps, the natives of those countries may grow stronger, or those of Europe may grow weaker, and the inhabitants of all the different quarters of the world may arrive at that equality of courage and force which, by inspiring mutual fear, can alone overawe the injustice of independent nations into some sort of respect for the rights of one another.


Original Source