24 February, 2014

The economic "recovery": the magic bond carpet, and a new heirarchy of recovery

 Australian Treasurer Joe Hockey, front right, looks back to U.S. Federal Reserve Chair Janet Yellen centre, while delegates pose for an official photo at the Opera House in Sydney.

Check this photograph out. I snuck it off the CBC news website (thanks CBC.) Photo courtsey Rob Griffith of the AP--seems like Rob is a guy with a sharp eye and a sense of humor.

The photo caption says: Australian Treasurer Joe Hockey, front right, looks back to U.S. Federal Reserve Chair Janet Yellen centre, while delegates pose for an official photo at the Opera House in Sydney. (Rob Griffith/The Associated Press)

But I think the photo caption should say: "Hey, are those blokes behind me smirking?" thinks Australian Treasurer Joe Hockey, front right, as he looks back suspiciously at the two men at the back. 

Now lets get back from photo analysis to the content of said article, which says that:
"G20 vows to boost world economy by $2 trillion: U.S. treasury secretary says agreement 'turning the next page' on global recovery". 
Two trillion for the world economy? Doesn't that seem like a modest number, compared to the trillions the USA, Europe and China have been throwing in their economic forecasts for a while? And what is the "world economy" anyways--is there such a hegemonic thing, or does each nation (we could even break it down to each county in each state in each nation) have its own economic strengths and weaknesses, its own growths and slowdowns? 

For instance, despite Janet Yellen's serene countenance, she's looking at some seriously troubling financial crises that have hit American local economies. The most famous case, of course, is Detroit. Detroit went bankrupt.
And its going to require more than a few marketing stunts by luxury good makers looking to capitalize on the moment, in order to rescue its most vulnerable citizens. Seems President Obama is taking matters into his own hands. According  to this February 22 article from LA Times:
President Obama plans to announce on Tuesday the opening of two new manufacturing institutes in the Chicago and Detroit areas as part of a larger plan to use public-private partnerships to advance his agenda despite opposition from Republicans in Congress.
America's been flying high on Ben Bernacke's magic bond carpet for a while. It is only as time passes that they are starting to realize that magic carpets are not the best way to carry the economy. Coupled with the serious consequences of the revelations about America’s global and illegal surveillance on everyone, I’d say the two Bushes, plus the magic carpet (and the Monopoly money churned out with abandon), plus the intoxicating notion that America is above and beyond any global norms and laws, and can get away with anything, has just about done its economy in.

Cheers, guys.

Now lets go to the guy at the top right.  I imagine that’s the Chinese delegate. The Chinese, of course, have been eating humble pie for a while. In these economic analysis, they are always portrayed patronizingly as “about to be developed” nation. The more I think about it however, the more the “stuck in the middle income trap” nations may have something up their sleeves. First of all, if you are not that highly developed but in the moderate income bracket, the chances of weathering out the economic downturn may be higher because you have less further to fall.

I was in Burma when I asked the hotel owner if his rooms were all taken by Europeans. “Oh no, they don’t have money,” he said, a little scornfully. “They are haggling about every little thing. The people with the money are the Asians.”

“Which Asians?” I asked.

“Malaysians,” he said.  “And Chinese.”  Malaysians? Who knew. I would have imagined he’d have said the Japanese and the Koreans. But times they are a-changing.

And then there’s the strengths of the “developing” world.

Take India, which may still be a “developing” nation. Now being a developing nation may not be such a bad thing to be, in these horrid economic times. The further you are from the stock market and the illusory promises of bonds, the more likely you are to weather out this storm with greater resilience, is my thought.

India’s chugging along at its own pace—many of its one billion plus citizens have their own lands to grow food, so when the economy weakens, they don’t have to panic like Americans looking at “what used to be the only supermarket in town but now no more” empty shelves (a recent NPR story, if I’m not mistaken) but can simply go to their fields and pick some veggies to eat with their dal and roti. Unless Monsanto has managed to wipe off their seed stock, these guys should be able to weather out the overheated stock market collapse just fine. Plus of course despite their “poverty”, each Indian citizen has his or her own mini Fort Knox in the form of a little pile of gold jewelry, which helps to cushion when paper money loses its value.

The Indian farming class are smart and hold on to their gold themselves—they do not trustingly hand it over to a government to store at a Fort Knox that apparently hasn’t been audited since the 1950s, as the Americans (and the Germans?) have done. According to this article: 

Even more, the situation is the same with the supposed gold depository at Fort Knox. Nobody has seen the gold there for a very long time.
The last audit, and the last public visit, was in 1953, just after U.S. President Dwight Eisenhower took office. No outside experts were allowed during that audit, and the audit team tested only about 5% of gold there. So, there hasn’t been a comprehensive audit of Fort Knox in over 60 years.

To return back to China and India—a recent news article reported that China has offered 300 billion to India to get on the fast track. I imagine its the fast track to “developed” status. (Being "developed" is a goal that everybody has to subscribe to--its one of those things you just do, like brushing your teeth, says contemporary logic.) The “Dragon Boost” would put in 30% investment in India’s infrastructure, telecommunications, and sewage, amongst others.  

Now that’s quite a recovery plan. However, as a citizen of a concerned neighbourhood country, I would be happy to see India deal with this giant windfall cautiously. India’s already quite self-sufficient in transport—the great Indian railway, with its magnificent bare metal bunk beds, is one of the most hardy public transport infrastructure on the planet, and a joy to travel in. Take that and replace that with trains with lots of electronic sliding doors and AC, and push-button levers controlled by computers, and I think you are looking at a lot more security risks and a lot more miserable riders. Plus the SkyTrain of Bangkok, with its icy AC and its electronic sliding doors, is magnificent but it is about 4 times pricier than the local bus—basically, its not economically feasible for the ordinary middle class, but for the upper middle class only. More investment in glittering technology means more price hikes for the ordinary bloke.

Then there’s telecom. With all due respect to both India and China, I’d say that telecom is something that should strictly be left to the citizens of that country, and everybody else should get out of that sector, pronto. With the potential now to steal every ATM passcode in existence through the fiber optic flow of data, the greatest of security risks to any nation is going to come from telecom.  Not to mention all the torture to innocent citizens that can occur through radar attacks, sleep deprivation techniques, et cetera.

Thirdly, there’s sewage. Pardon my cynicism but I think the Chinese shouldn't really be picking up the Indians’ shit. Admittedly, the Indians have been bad at picking up their own shit. But until an attitude shift comes around to the notion of how to deal with one’s waste, having a friendly neighbourhood country come up and “Clean up” the cities with blue chemicals in closed water closet toilets is not going to make the problem of human waste go away.

Humans are trashing the planet in magnificent ways, and flushing 8 liters of clean water each time somebody takes a shit is probably one of the human race’s worst mistakes. Indigenous people had it right—they shit in the fields, it dried up, became fertilizer and went back to to the earth without destroying liters and liters of clean drinking water. See Cheryl Colopy’s “Dirty Sacred Rivers” for more on this—all the above paragraph is completely taken from  the “shit chapter” in her book, which I read with great avid attention.  

Bhusan Tuladhar, a thoughtful scientist from Nepal, gave a very interesting talk at the Art Council in Kathmandu on Thursday, looking at how we need to go back to indigenous methods of waste disposal in order to  deal with our trash sustainably. In the 1970s, people in Nepal were selling their waste at 50 paisa a bucket, he said—basically, human waste had a value, and until this happens, people are not going to be able to deal with the sewage problem adequately.

If the Chinese forgot about trying to be “developed, modern and Western” people and tried to figure out how methane gas generation and fertilizer could occur from Indian squat toilets, that sort of help might be useful. But ultimately of course Indians have to come to value their own shit. And clean it up themselves. There’s nothing as bad as a broken sewer in the middle of a crowded city—and its not a good idea to ring Beijing each time the sewer pipes break down.

The global “recovery”, in other words, may have to take a whole new form than the ones envisioned by world leaders. The Richie-Richs may have to scale back on their fabulous consumption. The overheated growth countries may have to think of new  ways to spend their billions (how about the cultural economy, China? A lot of artists, writers and filmmakers need funding.) And the developing countries have to realize that being on the “developing” rung of the ladder is not a bad place to be.

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