When talking about globalization, we often notice a seemingly neutral point of view, that is, although globalization will bring polarization, it can make the world economy grow, so as long as we pay attention to more equitable wealth Distribution, globalization will bring benefits to everyone. However, in my opinion, globalization will not only cause global polarization, but also cause a recession in the world economy. In this article, I will try to explain how globalization, with trade liberalization, investment liberalization, and capital flow liberalization as its core, has led to a shrinking of world market demand, leading to an overall recession in the world economy. This article further demonstrates that the next ten years will be the decade of the Great Depression of the world economy, which will be more severe than the Great Depression of the 1930s. Marked by the collapse of the US Nasdaq index in April 2000, the Great Depression has arrived. The perspective of this article is based on a new understanding of the relationship between competition and crisis.
1. Intense competition leads to economic crisis
In the dictionary of Western economics, there is no better word than competition. A perfectly competitive market is the most efficient market, which can achieve Pareto optimality and satisfy people's economic needs to the greatest extent. In this perspective, supply automatically generates demand, or supply and demand automatically balance, and the economy runs well like a sophisticated machine without causing an economic crisis.
However, in fact, competition is precisely the source of the crisis. The brewing, outbreak and resolution of every economic crisis in history have been caused by over-investment in leading industries and intensified competition. As a result, the cost of raw materials in leading industries has increased, product prices have fallen, profits have shrunk, and a large number of companies have gone bankrupt, leading to crises. With the large number of bankruptcies of companies, the emergence of new leading industries, or the development of new markets, the market will once again be in short supply and competition in the same industry will ease, and the economic crisis can be resolved. Feidi is good, Feidi is good
The core of competition is the competition for the same resources by individuals or companies pursuing maximization of personal interests. In the economics pioneered by Adam Smith, the pursuit of maximizing personal interests will automatically lead to maximizing social interests. However, in the competition for the same resources such as target markets, profits to be distributed, raw materials, etc., maximizing the interests of one party is minimizing the interests of the other party. In dramatic language, it is "life or death." Therefore, competition can also be seen as the routinization of war. We know that the most intense period of war is when both sides suffer the greatest casualties and weapons losses. Similarly, the most intense period of competition is when the profits of all parties shrink significantly and a large number of companies go bankrupt. Then the fittest will survive. After a large amount of resources have been wasted, the remaining resources will be allocated to the most competitive companies or individuals who are best at using competitive strategies. The industry will form a relative monopoly pattern. Due to the relative monopoly, the company's profit margin has increased, the production scale has further expanded, the number of employees has increased, and new competitors have been attracted to snatch monopoly profits. The industry will once again experience overproduction, competition will intensify again, and the industry will once again fall into crisis. In this way, every time the crisis ends, the degree of monopoly will increase and the scope of monopoly will expand. In fact, the result of more than two hundred years of economic competition is that the Fortune 500 companies have monopolized coal, oil, steel, automobiles, aircraft, ships, chemicals, machine tools, power generation equipment, semiconductors, computers, software, etc. Telecommunications, media and other major industries. In the past decade or so, there has been a wave of so-called large-scale mergers by powerful alliances in developed countries, with the US$350 billion AOL acquisition of Time Warner at its peak. 985e.com
It is worth noting that the crisis of one industry does not mean the overall economic crisis, and conversely, the overall economic crisis does not mean that any industry is in crisis. However, once the leading industries of economic growth, such as the textile industry in the early 19th century, railways in the mid-to-late 19th century, automobiles and chemicals in the early 20th century, semiconductors, computers, and telecommunications in the late 20th century, fell into crisis, It often means an overall economic crisis.
Those non-leading industries that fall into crisis in a certain local area, such as the hotel industry in New York or the catering industry in a certain district of Tokyo, may fall into crisis due to overinvestment and intensified competition even during economic prosperity. During times of economic crisis, some new industries may be quietly growing. For example, during the global economic crisis caused by the American railroad crisis in the 1870s, the oil industry enjoyed huge profits due to Rockefeller's completion of trustization.
From this we can easily conclude that easing competition leads to economic prosperity, while intensifying competition leads to economic crisis. Due to the existence and development of the financial industry, prosperity will be prolonged and crises will be exacerbated. During periods of easing competition, the financial industry issued large amounts of loans to support new competitors to enter lucrative industries, which led to the development of related equipment and raw material industries, increased employment, and boosted consumption, thereby expanding the market for lucrative downstream industries. Form a virtuous cycle. Subsequently, as demand growth fails to keep pace with investment expansion, the virtuous cycle ends at a certain point and a vicious cycle begins. Companies are engaging in price wars one after another, lowering costs and cutting wages, thus shrinking the market. In order to compete for the shrinking market, they have to further fight price wars, further reduce costs and cut wages, until a large number of companies go bankrupt and fall into a global economic crisis.
2. The easing of competition is the reason for the golden age after World War II
After the end of World War II until the early 1970s, the Western world had a so-called golden age. During this period, the average annual economic growth rate of developed countries as a whole was as high as 4.4, which was the average annual economic growth rate of 2.2 in the following two decades (from the early 1970s to the early 1990s). This has given rise to many optimistic ideas in the economics community, such as that labor-capital conflicts have been resolved, economic crises have been smoothed out or even disappeared, and the economy will achieve automatic and unlimited growth. This golden period has also attracted widespread attention in the Marxist economics community. In China, people believe that this is the product of the development of productive forces and the self-regulation of the capitalist system.
However, from the perspective of competition and crisis, this golden period is nothing more than a manifestation of the easing of economic competition among major Western countries. As we all know, after World War II, the United States had 50% of the world's production capacity and more than 70% of its gold reserves, and its competitive strength was far above that of European countries and Japan. In 1950, the labor productivity of the U.S. manufacturing industry was three times that of the United Kingdom, four times that of Germany, and more than three times that of Japan. The production of manufactured goods in the United States was six times that of West Germany and 30 times that of Japan. The productivity of American coal mines is 3-4 times higher than that of the United Kingdom and West Germany, and 7 times that of France. Therefore, at the end of the war, the policy of the United States was to use all the advantages of American rule to obtain the most favorable position for American capital, force countries to open their markets, accept cheap and high-quality American goods, and destroy Germany, Japan, the United Kingdom, France, and Italy. economy and seize the control and influence of these countries over the colonies, thereby realizing the United States’ dream of dominating the Western world. To achieve this goal, the United States provides aid to allies only for emergency relief, not to help allies rebuild their production systems; the aid is accompanied by an "agreement excluding all discriminatory treatment in international commerce", and in the currency and trade system plans, the United States does not allow Countries restrict trade in order to balance payments. Most importantly, in the name of preventing Germany and Japan from invading other countries again, the United States formulated a plan to dismantle the military industries of Germany and Japan, fundamentally eliminating the competitiveness of these two emerging industrial powers. If all this comes true, the United States will become the new world factory, and Europe and Japan will become the processing base for raw materials and primary products in the United States. Economic demand there will not be able to grow, and a prosperous period that has lasted for more than two decades will also end. It's impossible to appear.
In fact, this commercial ambition of the United States has not been realized. As U.S. goods were imported into various countries in large quantities, as the process of dismantling the military industries of Germany and Japan began, unemployed workers in Europe and Japan increased significantly, and the power of communist parties in various countries grew rapidly, the United States had to change its course. The U.S. ruling elite finally discovered that their number one enemy was the Soviet socialist camp, not Europe and Japan. Therefore, U.S. foreign economic policy underwent a 180-degree change, changing from eliminating competitors to supporting competitors.
There are three main measures. The first is the famous Marshall Plan; the second is to stop the dismantling of German and Japanese military industries; the third is to allow the devaluation of currencies such as the yen, pound, and mark. For example, the yen depreciates to 360 yen per US dollar, thereby reducing the U.S. The impact of goods on the markets of various countries has enabled countries to export to the United States. After that, due to the outbreak of the Korean War, Japan became the frontline supplier of arms to the United States and made a war fortune. Judging from the effects of these measures, it can be summed up in one word: the United States adopts a friendly attitude of unilateral free trade and allows trade protection by various countries. Since then, the production capacity of Europe and Japan has been rebuilt, and domestic demand has expanded, providing a larger market for American goods; the number of European and Japanese products exported to the United States has continued to grow, but it is still not enough to balance imports from the United States, and U.S. imports and exports have remained With a large surplus, the world economy has entered a virtuous cycle.
The reason why the United States can adopt the approach of supporting competitors is objectively because the competitiveness of American industry is much higher than that of Japan and European countries. However, due to high wage costs and low accumulation rates, the United States' advantages are gradually being lost. From 1955 to 1970, the total fixed assets of the U.S. manufacturing industry increased by 57%, that of major Western European countries by 116%, and that of Japan by about 500%. In 1960, the hourly labor cost of the U.S. manufacturing industry was approximately three times that of Western Europe and 10 times that of Japan. . Such a huge cost gap has caused the U.S. foreign trade surplus to continue to shrink and its gold reserves to continue to decline. By 1971, a trade deficit occurred for the first time. The share of the United States in the world's gross national product was 36.3 in 1955, 33.7 in 1960, 31.3 in 1965, 30.2 in 1970, and 24.5 in 1975. Marked by the collapse of the Bretton Woods system, the competitiveness of the United States has declined to the point where it is on par with Europe and Japan, and its decline is still developing further.
In other words, in order to cope with the needs of the Cold War, the United States made major strategic sacrifices and cultivated its own economic competitors. However, precisely during this period of easing competition that fostered rivals, the world economy experienced a great boom.
3. Intensified competition has caused a downward spiral in the world economy
The decoupling of the US dollar from gold will coincide with the devaluation of the US dollar. Since then, the ratio of the U.S. dollar to the Japanese yen has dropped from 1:360 to about 1:120, and the ratio to major currencies such as the British pound and the German mark has also continued to decline. On the one hand, the depreciation of the U.S. dollar reduces the purchasing power of U.S. dollar reserves in the hands of countries around the world and reduces the number of U.S. goods they can purchase. On the other hand, it enhances the export competitiveness of U.S. goods, weakens countries' protection of their own markets, and makes it more difficult to export to the United States. At the same time, U.S. companies are moving production bases overseas on a larger scale and faster, reducing the proportion of wages in costs, thereby alleviating the U.S.'s cost disadvantage against Europe and Japan. Third, the United States forces countries to open their markets to a greater extent, but at the same time, it uses Special Section 301 to strengthen the protection of its own markets and implements super protectionism.
These three measures are actually the fundamental reasons for the economic stagnation and expansion of various countries in the 1970s. Due to the adoption of a floating exchange rate system, the depreciation of the U.S. dollar triggered an exchange rate war. The Japanese yen, mark, and pound sterling competed to depreciate, causing uncontrollable inflation. At the same time, due to the ultra-protective U.S. trade, exports to the U.S. from various countries decreased, while imports With the increase, economic growth will naturally slow down; the situation of the United States has improved slightly, and the growth of trade deficit has only slowed down. Third, not only the United States, but also Japan and European countries are competing to transfer their production bases to third world countries, causing domestic and foreign demand to shrink, which is the most destructive. When the United States moves its automobile production lines to Mexico, the country loses a $30,000 job and Mexico gains a $3,000 job. The $27,000 becomes revenue for the car company, which will be used to lower car prices, increase senior employee salaries, and increase corporate profits. Since wages are the source of consumer demand and profits are the source of investment, worldwide demand has decreased, investment has increased, and competition has become more intense.
As far as Mexico is concerned, getting a job opportunity worth $3,000 seems to be a good thing. However, the technology and brand of General Motors in the United States plus Mexican wages can bankrupt the Mexican auto industry, causing demand in Mexico to shrink instead of growing.
Theoretically, if there is no new industrial revolution, as the competition among the three major economic regions of the United States, Japan, and Europe becomes increasingly fierce, stagflation will continue until a large number of companies in various countries go bankrupt and evolve into until the Great Depression of the world economy. However, there is a way to delay the onset of the Great Depression, and that is to eat more and consume at a deficit. copyright 985e.com
Since Reagan came to power, the United States has cut taxes on the one hand to improve the international competitiveness of enterprises, and on the other hand it has expanded armaments to enhance domestic demand. The fiscal deficit caused by this increase and decrease was compensated by the issuance of high-interest treasury bonds, which caused a large-scale increase in U.S. treasury debt during Reagan's term, forming the "deficit boom" of the 1980s. President Bush followed suit and continued to run a deficit budget. By 1994, the U.S. government debt reached 4.6 trillion U.S. dollars, and only paying interest on the national debt required 300 billion U.S. dollars each year. This is just debt in the narrow sense. If you include broad debt guaranteed by the federal government, the amount of debt is even more staggering. While government debt is mounting, the amount of corporate debt and personal credit consumption is also expanding. In 1980, the total debt of U.S. industrial and commercial enterprises was only US$1.4 trillion. By March 1991, it had reached US$3.5 trillion. During the same period, the country's total household debt rose from US$1.4 trillion to US$4.1 trillion. Since the 1990s, various debts in the United States have continued to rise. As of the first quarter of 2001, the total debt of the U.S. government, enterprises and residents has reached 31.6 trillion US dollars, which is three times the gross national product, of which government debt is 7.08 trillion, corporate debt is 15.18 trillion, and household debt is 7.23 trillion. Not only the United States, but also Japan and other European countries are heavily in debt. Japan's national debt has reached 130% of its gross national product, and the debts of companies and residents are also staggering, especially the liabilities of banks and other financial institutions, which have reached the point where Japan's financial system has completely collapsed. The government debt of European countries is smaller than that of the United States and Japan because the Maastricht Treaty stipulates that the total debt of each country shall not exceed 60%. The price is high unemployment and slow economic growth in Europe. But the debt of European companies and residents is not low. For example, during the telecommunications investment boom in the late 1990s, banks issued hundreds of billions of dollars in loans to telecommunications companies. According to the Financial Times, only 1% of these loans could be recovered.
While the debt of developed countries is staggering, the debt of developing countries also continues to rise. Since the Mexican financial crisis in 1982, large-scale financial and economic crises have broken out in developing countries many times. Countries such as Mexico, Brazil, East Asia, Russia, Turkey, and Argentina, which are regarded by Western countries as model students of economic liberalization, fell one after another in the financial crisis and were forced to accept the IMF's structural adjustment plan and sell their land, Minerals, telecommunications, railways and other sovereign assets with monopoly profits have tightened fiscal expenditures and cut welfare measures, causing people's living standards to drop significantly. As for the countries in sub-Saharan Africa, they have long been regarded as the fourth world. Apart from news of famine and war, there is nothing to arouse the interest of the outside world. In 1987, the total debt of the Third World rose to US$1 trillion, accounting for approximately 5% of the Gross National Product of the Third World. Almost all economic growth of various countries was sucked up by debt principal and interest. However, by 1996, instead of shrinking, this total debt had further increased to nearly US$2 trillion.
If the debts of countries, companies, and residents are astonishingly high in both developed and developing countries, then who are the creditors? Creditors are a small group of large financial groups that control monopolies and financial institutions. In other words, the development since the 1980s has been that this small group of large consortiums have issued loans to maintain weak world demand growth, thus delaying the Great Depression that might have erupted in the early 1980s, or at the latest in the early 1990s. to date.
In the early 1990s, the economic recession in the United States and the world was already very serious.
Beginning with the stock market crash in 1987, the U.S. economy began to decline, and officially entered recession in 1990. The number of corporate bankruptcies continued to expand, and the unemployment rate continued to rise. After several repetitions, a strong rebound occurred in the second quarter of 1993, and the so-called recession began. The new economic boom of the nineties. However, the international background of the United States' prosperity in the 1990s was very bleak. Europe was growing at a low rate, Japan was experiencing zero growth, there were economic crises in Central and South America, and Southeast Asia, and the gross national product of the former Soviet Union and Eastern Europe was significantly reduced. In this era of very close global economic interactions, how can the U.S. economy thrive? Has the international competitiveness of the United States been restored? This is not the case. The new economy of the United States was accompanied by huge deficits in the trade account and capital account. The trade deficit reached US$338.9 billion in 1999 and will reach US$450 billion in 2001. At the same time, huge amounts of money from Japan, Europe, China, Russia and other developing countries flowed into the United States. Japan's zero interest rate policy not only failed to stimulate domestic investment, but instead caused it to flow to the United States, which has high interest rates, to pursue high interest rates. The low growth of the European economy also caused European financial speculators to inject funds into the United States. China, whose economic aggregate is only one-tenth that of the United States, purchased US$80 billion in US Treasury bonds. After the collapse of the Russian economy, a large amount of money also poured into the United States. It is estimated that after the 1997 financial crisis alone, the amount of funds flowing into the United States from Southeast Asia reached as high as 800 billion U.S. dollars.
This forms a strange cycle. Countries earn money from Americans through exports, and then buy U.S. stocks and bonds, lending money to Americans to spend, and Americans spend money to support the economy of the United States and other countries. increase. Dollars continue to flow to the world, and the world sends dollars back to the U.S. bond and stock markets. In such a vicious cycle, the United States has more and more debts, its trade deficit is getting larger and larger, the overall demand of the world economy is getting more and more sluggish, and the stock market is getting higher and higher. The only possible outcome of this cycle is a world economic depression. Since the Great Depression was postponed twice in the early 1980s and early 1990s, all available fiscal and financial means have been exhausted, and its intensity will exceed that of the 1930s. Unlike the 1930s, there are no fiscal and financial means available this time.
4. Globalization paves the way for the accelerated intensification of international economic competition
The three major measures taken by the United States to deal with the relative decline of competitiveness and economic stagflation in the 1970s represent neoliberalism. The rise of China also means the arrival of the so-called era of globalization. In order to flexibly utilize the depreciation and appreciation of the U.S. dollar, capital flow liberalization is needed; in order to smoothly transfer production bases, cooperation from third world countries is needed, which requires investment liberalization; in order to strengthen the export of U.S. goods, there is trade liberalization. These are the three pillars of neoliberal globalization since the 1970s.
The liberalization of capital flows has enabled competition between countries to no longer be limited to technology and cost competition. The depreciation of a country's exchange rate means that the country's export competitiveness of all goods has increased, and the competing depreciation of currencies of various countries means that international competition is unprecedentedly fierce. Not only that, the liberalization of capital flows also causes the failure of a country's monetary levers to regulate the economy, seriously threatening the country's monetary sovereignty. The liberalization of capital flows has another serious consequence, which is shrinking world market demand. In 1966, the proportion of commodity import and export volume in the total foreign exchange transaction volume in the United States was more than 80%. After adopting the "floating exchange rate" system for nearly thirty years, this ratio dropped to 1-2. This means that a large amount of capital stays in the foreign exchange market, the capital invested in actual production declines, and investment demand shrinks.
Due to investment liberalization, transnational capital seeks the lowest costs and lowest taxes around the world, forcing countries to compete to offer tax concessions to transnational corporations, suppress labor movements, and reduce wages. Workers in developed countries are faced with the threat of factory closures and relocations, and are forced to accept employers' demands to lay off employees, lower wages, and increase workloads, while national industries in developing countries have gone bankrupt in large numbers under the attack of multinational corporations. The result is a shrinking of consumer demand in world markets.
Due to trade liberalization, small and medium-sized enterprises and agriculture in various countries compete with each other across borders. Prices continue to fall, wage costs continue to be compressed, and a large number of companies that lack international competitiveness have closed down, causing investment demand and consumer demand to further shrink. .
Therefore, neoliberal globalization is not only the product of the intensification of international competition in developed countries, but in turn has systematically intensified international competition, paved the way for unprecedented intensification of international competition, and pushed the world economy step by step. Towards the Great Depression.
But does this mean that globalization is a natural process? From the above analysis, it is not difficult to see that globalization is driven by multinational corporations of various countries, led by the United States, with the International Monetary Fund, the General Agreement on Tariffs and Trade/World Trade Organization and the World Bank as the organizers and implementers, and with neoliberalism as the organizational implementer. As a banner, it is a man-made process planned by elites in international politics, business, and academia. The so-called political consciousness in Washington is evidence of the existence of a political conspiracy.
People often confuse the relationship between market economy and neoliberalism, thinking that if a barrier-free market economy works within a country, a barrier-free market economy on an international scale should also work. However, the prerequisite for the success of a market economy within a country is that the political one-person-one-vote can restrict the economic one-money-one-vote, so that the country's regional gaps and the gap between rich and poor can be effectively adjusted, and there are sufficient financial funds to build roads, Bridges, ports, and airports can implement inherently coherent economic and civil and criminal laws, and can use Keynesian fiscal and monetary policies to regulate economic cycles. Without this premise, the market economy will lead to polarization, the prevalence of counterfeiting (bad money drives out good money), economic turmoil, and disorder, so that society cannot survive. In the absence of a world government elected by people around the world, and on the premise that multinational corporations are not subject to the constraints of democratic forces, the protection of each country's own economy is dismantled, the economic sovereignty of each country is abolished, and the economic logic of the weak and the strong is allowed to pass without obstacles. , can only lead to polarization and social unrest around the world. copyright 985e.com
5. Conclusion
The possible factor that may reduce the severity or shorten the duration of this crisis is a new round of industrial revolution. However, in the last two decades of the last century, the effects of the telecommunications, Internet, computer and software industry revolutions on economic growth had been released and turned into crisis factors in the bursting of the Internet bubble. Biological and medical technology seems to be the source of a new round of industrial revolution. However, due to the high degree of monopoly of this technology, it can neither spread rapidly to form an investment boom nor produce a chain reaction similar to the way railways drive the steel, locomotive, and coal industries. On the contrary, it will accelerate Wealth is concentrated in these biological and pharmaceutical companies, and it is difficult for them to become the locomotive of economic growth. Is it possible for new energy development to take on this important task? For such new energy development to be economically profitable, there must be a serious shortage of oil supply, and the latter often means exacerbating the economic crisis.
So, I see no economic or technological possibility of getting out of the Great Recession. Predicting the future is dangerous. Some academic friends warned me not to talk too much and to leave room for myself. Most economists around the world believe that the U.S. recession is just an ordinary cyclical recession that will recover sometime next year or the year after. Some economists believe that this recession in the U.S. economy is relatively serious, and it may take longer to get out of recession. Only a handful of economists believe that the U.S. economic recession may be like the Japanese economy in the 1990s, entering a long period of zero growth. As for those who foresaw a world economic depression that lasted longer than the 1930s, there were even fewer people. Are you that confident? Aren't you afraid of making mistakes and ruining your academic reputation? Feidi Paper Network
I am not a gambler. No matter doing work or studying, I will be prepared with both hands, plan for the worst and strive for the best result. Therefore, such confidence is based on competition and crisis theories that are different from the two major paradigms of economics, and most economists think within these two major paradigms. By reading the history of economic crises in Western countries over the past two hundred years, I can confidently say that my crisis theory can stand the test of history. If the world economy does not fall into the Great Depression in the next ten years, I will reflect on my own crisis theory