Slowing growth in China. Global recession. the end of history. Keynesianism. petrodollars. helicopter money. financial debt crisis. overproduction. unbalanced global economy. paradigm shift. plan B
Saturday, February 2, 2019
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Just What Is the End of History and How Do We Get There?
Author's note: The cool thing about online journalism, or blogging, is the hyperlink that allows the narrative to flow while taking readers to sites that cover the subject at hand in more depth. And while some links are just citations, others are, more or less, essential as they supplement the story. And we can start with this: Democracy In America. That said:
The end of history is a political and philosophical concept that supposes that a particular political, economic, or social system may develop that would constitute the end-point of humanity's sociocultural evolution and the final form of human government. The question is: are we there; is liberal capitalist democracy the end point?
In 1989, Francis Fukuyama brought that question to the fore with his essay: The End of History? Based on changes occurring within the Soviet Union and communist China he proclaimed: What we may witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such: that is, the end point of mankind's' ideological evolution and the universalization of Western liberal democracy as the final form of human government.
Well, it turns out that history is more fickle than predictable. The aftermath of the Great Recession has certainly challenged the capitalist paradigm as the recovery ushered in an age of secular stagnation — an age that witnessed the rise of Putin's autocratic rule in Russia along with socialist China's rise to a global economic powerhouse. These events not only challenged Fukuyama's paradigm, but led to renewed tensions, the return of the Cold War — Russia's forays in the Ukraine, China's fortifying the South China Sea and a renewed arms race. What this all adds up to, is that the end of history is still up in the air; that is, history has returned full circle to the ideological battle between capitalists and Marxists — returned, because Marxists see the Great Recession as the defining moment in history. And as they see it: Marx was right!
Admittedly, capitalism isn't looking good, as Keynes, the so-called master, had to be called back into the game to fix things, to pull the global economy out of the recession. And while Keynesianism has an implied profundity, fixing things is simply about priming the pump, pumping more demand into the marketplace in an effort to bring supply and demand back into equilibrium. Thus, industrial nations stepped inand initiated fiscal policies to boost demand while key central banks pulled out all the stops: lowering interest rates to rock bottom and instituting unconventional monetary policies—quantitative easing and negative interest rates. At the same time those nations began to build up huge debt to GDP ratios as unemployment soared and revenues plummeted. In the U.S., beginning in 2008, its budget deficits began to explode, eventually increasing its national debt by nine trillion dollars (doubling its debt) while the world as whole added 57 trillion dollars to its debt burden — think of it as the cost of keeping our heads above water; think of it as being on life-support.
So, was Marx right? Economically, that remains to be seen. But Marx, the revolutionist, he's dead. Today, even if revolution was in the air, if workerswere to overthrow the system, they'd have to contend with modern armies: tanks, machines guns and Apache helicopters. But that aside, the fact is, we live in a MAD world where anarchy is in the air. In such an environment, if the global economy were to collapse, there would be no revolution; only chaos and martial law. Here, the nuclear powers go into their respective versions of DEFCON I: don't mess with us while we try to clean up this mess. So hunkered down in their nuclear fortresses, what's likely to rise from the wreckage is a quasi-Orwellian world where power for the sake power rules: the eternal rule of Big Brother. So, even if Marx is right economically, what is there to cheer about; a darkening cloud of uncertainty and angst hangs over the global economy in a MAD world. So, let's cut to the source of that uncertainty and angst.
Capitalism and Marxism are ideologies that rose out of the industrial revolution (the most significant event in human history), and as they emerged, they brought forth an age of idiocy. These are matter over mind theories. For them, it is the material base, the marketplace that determines history. And here, both have put their faith and our fate in the hands of that marketplace god; different prophets to be sure, but with the same belief: history is preordained.
For Marxists, it's simply this: the Industrial Revolution, as it winds its way through history, constantly advances technology and so constantly replaces workers with machines. Inevitability this process reaches a crisis stage wherein unemployment reaches a critical mass, and pissed-off workers rise up and overthrow the existing order, put in place a dictatorship of the proletariat who take hold of the productive reins and once the process is complete, they turn to communism: from each according to ability, to each according to need— the end of history.
With capitalism it's all too simple: the marketplace in and of itself self-corrects; keeps everything in balance — end of story, end of history.
Yet, with the arrival of Keynes, and the continuing uncertainty that prevails, the story continues. And as we wait to see how things play out, we're just bystanders to history. As such, history is demanding a paradigm shift whereby we man up and take charge; where there is a will there is a way. And therein lies the problem. That ideological idiocy has trickled-down and in so doing has pretty much screwed up the thought-process across the board. That's not to say people are not functional in the marketplace. We can still tie our shoes, put a man on the moon and hold magic in the palm of our hand, but we have lost our objectivity, we have lost the will to think... the ability to think in the abstract.
That's fine for Marxists, but in the free world — a world wobbling on its economic axis — the absence of reason is filled with rising angst and uncertainty that has morphed into fear and loathing; fertile ground for the ever-ready demagogue. We're seeing it with the Brexit and within the current presidential race. So, the task at hand is to better inform the public, starting by understanding the crux of the problem—where the battle lines between capitalists and Marxists are drawn—overproduction.
Here, Marxists stake everything on the belief that there is no solution other than armed revolution and the overthrow of the existing order. In contrast, capitalists say don't worry your pretty little heads about it, recessions and depressions aren't so bad, they're just part of the business cycle: the marketplace, in and of itself, self-corrects — forget Keynesianism — during times of recession or depression, interest rates drop along with the price of commodities; the key commodity here being workers' wages. So when these factors reach a wow point (like now), businesses get back to business, and in the long term, supply and demand are brought back into balance.
Well, as Keynes tells us, in the long term we're all dead; so let's deal it with now, there's just too much pain and suffering; both for businesses and workers. So, that self-correcting thing goes out the window and left or right, or in the historical sense right to left, as at the onset of the Great Depression, first Hoover primed the pump followed by Roosevelt; and with the Great Recession, Bush followed by (shovel-ready jobs) Obama. So, they all do that Keynesian thing whereby, theoretically, things should get back to normal; overproduction comes back into play and we're left with a huge amount of debt — an age of idiocy. That's not to say that Keynesianism has brought back global production to that stage, but that in theory, it would; history, as we'll see, is still fickle.
The thing is, capitalism/Keynesianism and Marxism are just that: theories. And as such they exist because people believe in them. But given that we live in a MAD world wobbling on its economic axis where mass ignorance prevails, these are failed historical theories. And when the theoretical fails, the only thing left in the ideological toolbox is practical reason: self-determination. And if you believe in that, then anything is possible.
That is the end of history ideal; a mindset whereby we are the masters of our fate; which in of itself calls for a practical response: a plan B. However, while the former is the ideal mindset and plan B is the way forward, technically, they are just the means to the end. History comes to an end when the industrial revolution has come to an end; when production is fully automated and all the wrangle and squabble ends and a form of government arises where everyone gets a piece of the pie. They may not get all they want, but they'll have what they need.
So, it's all about getting there; hence, plan B. However, the problem remains: that trickle-down effect has pretty much been brain-stemmed. For too many, being stupid is pretty much like breathing. Here, the fault lies not in the stars, but in ideologues and politicians who are either reactionary or stagnant. The global wrangle and squabble continues while we continue our march to the abyss. This is just a broad brush perspective, but in general, it is more accurate than less.
So, while plan B is the way forward, it still relies on the will of the people. Understanding the nature of the crisis is important, but further enlightenment is necessary to strengthen that will — by necessity that means taking a hard look at ourselves and history; beginning by taking a Pogo moment.
Politically, on the right, the Republican Party's core mission is to maximize the welfare of corporations. Towards this end they not only peddle a false consciousness, they have brought into play a propaganda machine that has taken distractions to a whole new level: it's blacks, Mexicans, Muslims, gays, white godless liberal socialists commies, environmentalists, hippies, and so on who are responsible for our Nation's decline. Here, they prey on the susceptible, the prejudiced, the disgruntled, and the fearful.
And while capitalists, the paymasters who reward those who do their bidding, bottom line, they don't really care — all of the above are consumers—it's just a means to an end. What they care about is your vote. What they care about is maintaining power, what they care about is accumulating wealth; it is the first law of capitalism. And so far, it's all good— it's the golden age of capitalists; an age where those with the gold rule
So, while they have created a whole industry towards this end, rewarding conservative high priest economists, politicians, think tanks and those who partake in a mass media blitz — all cogs and wheels within a propaganda machine that constantly cranks out a distortion of facts to suit their narrative, their agenda — they reward those workers who support them with lower wages. And by the way, don't forget that government is the problem and they are the solution... never mind that underClinton, the left turned to the right, and embraced neoliberalism that is in play up to this day; there is no move to socialism, there is no economic divide between the parties.
There is, however — somewhat masked by the prevailing angst and uncertainty — an emerging divide within the Republican Party. That propaganda machine that produced a flock of parrots; they were radicalized to a point where a demagogue could step in front of that base, identify with, and so seize control of the party even while campaigning against the marketplace god. The irony here: priceless.
Trump is not only a thorn in their side, not only because Jeb Bush, with the compassionate conservative look, didn't stand a chance, it's that Trump dissed their god, dissed trade agreements, and so in general dissed capitalism, and thus has single-handedly destroyed the Republican Party. So, free market theory is out and only Trump can make America great again.
Then, there are those damn liberals with their live and let live agenda; you know, where the golden rule rules wherein those who follow that rule, are so noted in the book of life. A leftist party standing shoulder to shoulder with our liberal founding fathers; a liberalism that was again affirmed by President Lincoln and every time you pledge allegiance to the flag: one nation under God, indivisible, with liberty and justice for all.
There's all that, except for the fact that the Democratic Party, since Clinton, has ruled from center right; embracing neoliberalism. So, given the angst and uncertainty that prevails, neoliberalism is out, trade agreements are out, and promoting the general welfare is back in play. But in reality, there's no enlightenment; it's just the return of the shepherd tending to the needs of the flock. Paymasters and parrots, shepherds and sheep and an enthralled and so distracted and befuddled watchdog: democracy in America. So, how did we get here, what led us to this moment?
Looking back, it starts with a series of events. One could argue that the key moment was the advent of electricity (not that long ago, folks), taking the Industrial Revolution to a whole new level and the world with it. But, in a practical sense, it began with imperialism, followed by World War I, the defeat of Germany, the Great Depression, the political radicalization of Germany (the rise of Hitler), World War II, the destruction of a large portion of global production and the planning of post-war reconstruction at Bretton Woods.
Here, there was an agreement that would, post-World War II, keep trade in balance while mending the global economy. And given that post-war, Germany and Japan were within the sphere of influence of socialist China and the Soviet Union, the U.S. took them under its umbrella and aided them in rebuilding their economies. Yet, while Bretton Woods set the rules, it was the rise of neo-Keynesians that dominated the political and economic scene: the general reconstruction boom that followed the war. A boom that created huge global demand and so rising prosperity: it was the golden age of capitalism— an era of emerging coexistence within liberal democracies. An age that came to an end as Germany, Japan and others (Asian tigers and cubs) came on line, and set the world back on a path to overproduction; setting off tensions not only within, but a chain of events that changed the political and economic landscape; a step back in history.
So, following the chain of evidence, as they penetrated U.S. markets its trade surpluses began to decline and an outflow of dollars began to pile up in Europe leaving it with three options. One, use those dollars to buy their own currencies maintaining a fixed exchange rate; or exchange them for U.S. goods; or take them to the U.S. gold window. Considering that they were competing with the U.S., they opted to redeem their dollars in gold. In response, Nixon closed the window, took the U.S. off the gold standard (sorry, there's just not enough gold) that in effect ended the Bretton Woods agreement leading to a floating exchange rate; currency markets were given free rein and a glut of dollars led to its devaluation. And that's not a bad thing; it now takes fewer dollars to buy American goods giving domestic producers an economic edge in global markets. On the other hand, it takes more domestic dollars to buy foreign goods. So, why is that a problem? It's because the price of our oil imports would rise; and that's a bad thing as it costs more to fill up your gas tank, leads to inflationacross the board that in turn drives up the costs of exports. The net result is loss of demand and so recession.
In response Nixon cut a deal with Saudi Arabia: arms and protection in exchange for denominating the sale of their oil in dollars. That led to the rise of the petrodollar. And with it, the U.S., faced with rising global competition, was now sheltered from currency markets. And so sheltered, could continue to run constant and rising trade deficits. That, in a bizarre way, took the edge off of overproduction. Europe and others could continue to produce and export goods to the U.S. who in exchange would export dollars necessary for the purchase of oil. But taking the edge off of overproduction meant that U.S. producers had lost their edge and their mojo; the demand for petrodollars strengthen the dollar making their exports more expensive, and that, along with the loss of market share, led to a corresponding loss of profits. That drop in profits led to a resurrection of unfettered free market ideology; the resurrection of the marketplace god. So, Keynesianism was out and free market ideology was back in play (from the New Deal, back to the old deal); this time around with the moniker: neo-liberalism— new in that it was buttressed by supply-side theory; aka trickle-downeconomics. But, the thing is, for the self-correcting mechanism to work, workers' wages would have to fall. And while workers may have been willing to take it in the shorts for the greater good, they had mortgages, car payments, kids to feed and bills to pay; they couldn't be counted on.
Thus, re-establishing the ideology, the paymasters went to work; it's a global marketplace after all, and the goal was set: knock down those barriers to global trade. And who better to carry the ball, than Ronald Reagan, a likable actor andpitchman: Progress is our most important product. Here, he progressed from a Democrat to a Republican, to Governor of California to President of the United States.
So the ideology was in place and Reagan was the man, he set the stage for NAFTA and Go Figure Clinton kept the neoliberal ball in play by signing NAFTA into law and then proceeded to grant socialist China most favored nation status paving its way into the World Trade Association. And with that, the door to the Promised Land was opened.
And while China's corporate tax rate was a relative factor, it wasn't much of factor. Multinationals (the highest stage of capitalism, self-interested stateless entities) now had access to the world's largest pool of cheap labor and the world's largest potential market. That, coupled with a lax regulatory environment, led to a race to the bottom. They immediately weighed anchor and set sail for China. And as they did, they left in their wake rising unemployment in their respective countries creating a widening global disconnect between supply and demand which should have led to a global depression, financial collapse and global anarchy as the affected nations demanded less from China who in turn would demand less from the world who in turn would demand less from China. In chasing the almighty buck, by nestling in China, multinationals tipped the scales, unbalanced the global economy and killed the marketplace god. There is no way market forces were going to correct that imbalance... except in the long term.
On the other hand, socialist China, by opening its door, by capturing the mode of production, the supply-side (by the way, thank you very much), they changed the dynamics of Marxism: overproduction was out and deflation was in... not enough demand. But more to the point, it's not so much that global revolution is out, it's that you can't rise up and seize what's not there; China pretty much has it all: Socialism with Chinese characteristics.
Yet, capitalism was momentarily saved as events conspired to prop up the global economy; prop up a zombie capitalist ideology. First there was the dot.com boom that created a lot of wealth, a lot jobs, a lot of capital gains, and so a lot of capital gains taxes that created budget surpluses as far as the eye could see (Clinton's gift to Bush). But it was all irrational exuberance: the bubble popped, surpluses vanished, and the economy fell into recession.
So, the thinking at the time was: "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." Greenspan obliged by pushing interest rates down and Bush pushed the home ownership society and a housing boom/prop was born. But it would be short-lived.
As housing prices began to soar, Greenspan, in 2004, began raising rates. At the same time, despite lax lending policies, rising prices were pricing workers out of the housing market and, as a consequence, housing starts peaked at the end of 2005. At the same time the price of oil was skyrocketing and in 2008, reached an all-time high of $145 a barrel. Rising oil prices, rising interest rates, falling housing starts, a rising uptick in housing foreclosures (beginning in 2005), and the bottoming of the unemployment rate in March, 2007, all were signals that the housing bubble was ready to pop.
Yet the housing bubble wasn't limited to the U.S., it was a global housing bubble, and when it popped the world fell into The Great Recession and another prop emerged: the mother of all props. In response to the Great Recession, socialist China initiated their own stimulus plan: ratcheting up the building of new cities to a fevered pitch. Here, the metric that puts this into perspective is that China poured more concrete in three yearsthan the U.S. in the last hundred.
That gives some insight in the amount of commodities (along with goods and services) they demanded from global markets to build those cities. A construction boom that domestically put to work millions of migrant workers; powered up the service industry and so empowered an affluent middle class (who bought all the goodies the West had to offer; from German cars to Swiss watches) giving rise to the socialist Chinese dream. What it did for the world was to pull it out of the Great Recession.
That stimulus, was it a Keynesian thing or Marxist thing? What was the rush, why the fever? Given a looming global economic collapse they hastily build all those cities (having captured the mode production) so they could shift from socialism to communism—from each according to ability to each according to need—moving those in need up into a luxury high-rise apartment on the East side with all the amenities. Then there are their improved relations with Russia. That should give us pause. Think about it. The fall of the of Soviet Union in 1989 and subsequent rise of socialist China as it took the capitalist road... a mere coincidence, or an act of deception (after all, it did signal the end of history; what did we have to fear from socialist China?), a variation on a theme? Were Russia's forays in the Ukraine a way to distance itself from the West economically as it strengthened its ties with socialist China? This is just conjecture, but it is also extrapolating from the fact they are Marxists; master planners (whose only competitor are master propagandists).
Whatever, back on the West side, Keynes, was somewhat back in play; somewhat because the Eurozone and the European Union have problems of their own making. But a problem nonetheless for the global economy, being the second largest economy in the world, they can't throw much in the fiscal punch bowl. However, in testimony to the seriousness of the crisis, the IMF, despite its conservative past, not only jumped on the bandwagon, but constantly called on nations to do more — their message is clear, we're in serious trouble.
And then tragedy hit America: Barrack Obama was elected President, a black man in the White House; that was cause for a tea party and a gathering of Republican Party elites who formed a plan to counter everything Obama. So, the memo went out: No matter what, you can't make this guy look good; as a matter of fact, everything going south is his fault. So, putting their party first and America second, they voted en masse against the Recovery Act, turned to austerity and opposed further infrastructure projects. However, on the cusp of Obama's last year in office, they did pass one; go figure.
But despite their antics, it seemed like America, under Obama, while not doing great, was getting by (revenues were up and budget deficits were dramatically down). So the Fed took a baby step towards normalizing interest rates. However, with rising global angst and uncertainty, they have gone back to a wait and see game.
Yet, it's not hard to see what's going on: China's boom has turned to bust. The development of new mega cities has apparently run up against a population restraint and the construction boom that fueled a global commodity boom has come to a crawl. The last prop is gone, and as deflation continues to threaten, the feeling is that the Fed and other central banks have pretty much run out of ammo. But the thing is, they were firing blanks to begin with. China is the so-called factory to the world, and as such, they are pretty much meeting demand. Therefore, quantitative easing and negative interest rates, meant to spur investment, only produced a yawn.
And really, is America doing all that well? The petrodollar is not only still in play, but it has morphed into the petro/commodity dollar allowing the U.S. more latitude in running trade deficits. Deficits, that in turn became an engine of growth as imports are unloaded and distributed by trains and trucks to retail outlets that all together employs millions of consumers. And then there is all that imported demand.
It's a fact that as nations industrialized and urbanize, their populations stabilize and even decline. And that's a problem for those nations: as population growth slows, it impacts housing, infrastructure, consumption, and taxes that impact debt and social security. So, Europe imports more workers; North Africans, Muslims and America imports more Mexicans (illegal or otherwise), or whatever is on the global table. That there is shortage of white people is a problem for some people; but you have to weigh the alternative.
Take a look at Japan, it has an anti-immigration policy, and that in conjunction with a decline in population growth led to a decline in residential construction, associated infrastructure and consumption and a lost decade. Now take a look at its debt to GDP; it's closest rival is Greece. But, nonetheless Great Britain decided to leave the European Union. Do'h!
So, here we are: supported by the petrodollar, population growth and debt while running out of monetary bullets leaving us with one last shot, or in this case one last drop: helicopter money. And while throwing money into the wind will definitely increase demand, a lot would still find its way to China; the problem remains: an unbalanced global economy wobbling on its axis while angst and uncertainty and anger dominates the political season.
Trumpism has captured the hearts and minds of the Republican base and so captured the nomination despite the never-Trumpers. So, what does a good Republican do? Well, having lost their Party, those with integrity, leave the Party. Those without, however, do what usually do: they swapped principle for power. They did it under Bush, they did under Obama (putting their Party first), and now with Trump, they have gone all in. Past transgressions are forgiven and stragglers are flocking back; power for the sake of power. And already they're having regrets. Meanwhile on the left, Clinton is now the presumptive Democratic candidate.
Nonetheless, people are still feeling the Bern. But people (left or right) are also feeling the pain, the uncertainty and the wolf at the door. And yet, neither candidate is inspiring confidence, their negative ratings are going through the roof driven by the perception that Clinton is all about running the family business and Trump, well; he's the gift that keeps on giving. Yet the schoolyard wangle and squabble dominates the process as neither has a credibile answer to the angst and uncertainty. It is the multinational corporations who rule and there is no negotiating with them; they go where labor is the cheapest.
As such, the candidate that is surging in the polls is none of the above; nobody for president; the abyss still beckons and nobody has an answer... other then Big Brother.
There is that; but there is also that last option: helicopter money, aka money-financed stimulus policy. A policy that needs to be put in perspective: as it is banks manufacturemoney. So, understanding that, when someone goes to a bank and deposits their money (which could be a check, the currency of banks) it is so noted on the books as a liability. And when they lend that money, it's an asset and the books are balanced. So, money mostly exists as bookkeeping entries. And that was a problem. If too many depositors, for whatever reasons, needed some cash; banks recalled loans, depositors panicked and pulled out their savings, and an economic crisis followed. That problem was solved by passing the buck to the Federal Reserve System; the central bank that can juggle the books and so underwrite commercial banks and, if need be, the Federal government. So, the above is pretty much like manufactured money; it still keeps the wheels of commerce spinning, except there is no added debt.
The question is: are we reaching that point where we should seriously consider that option? The World Bank has downgraded its global growth forecast from 2.9 percent to 2.4 and China is exporting and importing less. The global economy continues to look grim as the last quarter hasn't been as bad since 2012. All this is happening while global debt continues to ratchet up. Ominous signs: the sky is showing some major cracks while democracy itself is cracking up. So, now seems like a good time. Enter plan B.
Right now the global economy is unbalanced, and so the first thing that comes to mind is how to use that money to rebalance the global economy; how to bring manufacturing jobs back home. Yet, even if we did figure that out, it would only lead back to global overproduction and all that goes with it. So the plan itself must put forward an end of history end point and endgame that gets us there; so, back to the end of history.
There, the end point, is that time in history where technology has advanced to a point where nations are universally self-sufficient: from lights out factories to energy to agricultural independence. And being independent, they can do whatever they want. And since money is no problem and nations are self-reliant, they can fund their governments, social security, healthcare, education and guarantee a minimum standard of living — thus supplying the demand to keep those factories running. Here, the historical evolution of the
industrial/military/entertainment complex has been pretty much reduced to an entertainment and service economy wherein you are free to pursue knowledge and health (back off the donuts and feel the burn), entertainment skills, work on your golf game, travel and explore the world; ideally to experience life to the fullest. Yes, people still have to earn their keep, and they are still somewhat limited to what they put in the pot; but really, if there is any problem here, it's one of keeping yourself entertained. Think of this as Part I.
Part II, is that along the way, as nations work their way to self-sufficiency, as they industrialize and urbanize, their populations eventually stabilize, which means the demand for resources will stabilize and be recycled. The question is: does this all mean the economic problem is solved as well as the political problem? If the answer is yes, then we have reached the end of history; no more wars and no more economic ideological conflict and thus a sustainable world. So, how do we get there?
We already know that money is no object. That's the means, but the way is no object either, the world just gets together, gathers the best minds at a newly convened Bretton Woods wherein they hammer out the details for a world in transition.
Essential to their task would likely be: across the board fixed-exchange rates; loans, interest rates, repayment schedules for developing and underdeveloped countries; balancing the rate of growth in sync with the production of resources, and coordinating the roles of the industrial nations as they export the means of production. And, since it is still a global economy, in the interim, it will be necessary to come to terms with trade deficits.
Meanwhile, industrial nations can agree to agree on some things like debt and energy; a grand bargain wherein they neutralize currency markets as they all use helicopter money in a practical and prudent manner.
For example: with the money-financed stimulus policy in place, the Fed directly deposits a monthly check (to cover ongoing expenses) into the Treasury's checking account and the Federal government takes that stimulus money and subsidizes Social Security and Medicare (the mandatory payments that make up the bulk of our budget) to the degree where deficits are eliminated and surpluses are created and worries about the solvency of those trust funds disappear. Those surpluses can then be used to eliminate taxes for the bottom tier of workers, fund needed infrastructure projects and even give a bump to Social Security benefits to those in need.
Moving on, we have to move beyond oil. As the global economy moves towards self-sufficiency, the demand for oil will rise. And as it does, it will have be countered with bio-fuels. Here, it would be hard to argue for anything else outside of algae fuel as the go-to biofuel. So cash in hand, governments/central banks subsidizes its production (think Greece, Italy, Spain and Portugal) to the point where it is competitive with oil. So, as we wean ourselves off oil to power our cars, trucks, trains and planes, it puts us on path to energy independence that down the road leads to a corresponding decrease in greenhouse gases, increased employment and global trade.
Next we turn our attention to the shift from the interdependence of nations to the creation of self-sufficient nations. Assuming the IMF and Bretton Woods II have worked out the details, it could go something like this: as the affected nations re-industrialize, it's just not about gearing up production for the home market, it's also about gearing up their capacity to export the mode of production to the developing and underdeveloped nations. And in some sense the industrial nations can subsidize the developing. How so?
Assuming that tariffs are out, since they only interfere in the transition, there is no way the affected nations (those that lost supply to China and elsewhere), particularly the United States, are going to reindustrialize, to reach self-sufficiency, without global wage parity. And the only way that can be achieved is through a progression of wage subsidies: in the production of oil, algae fuel, steel, copper, aluminum, and rare earth elements (necessary to rebuild our industrial base and infrastructure; a fundamental step towards self-sufficiency), and factory workers — a step by step progression of labor subsidies whose net effect is the lowering of prices domestically that in turn, lowers the cost of exports. And what works for the U.S., works for everyone. All in all, not a bad thing; prices remain down and consumption remains high, and everyone that wants a job has one. Here, if you want more, you upgrade your skills; there are industry gradations for subsidies, you'll get by, but to get more, you're going to have to go to school; vocational or otherwise.
However, getting there isn't done in one great leap; everything is done at an orderly pace. Not only as it relates to infrastructure and energy but to the transition itself that will take decades. But it all begins by taking that first step, by opening your minds and let the sunshine in.
Harmony and understanding
Sympathy and trust abounding
No more falsehoods or derisions
Golden living dreams of visions
Mystic crystal revelation
And the mind's true liberation
Nicely put. After all, we all breathe the same air, we're all faced with the same threats: from economic collapse to global warming and in a MAD world, the end of all history. So, what would be China's and Russia's reaction to plan B, would they get on board, and instead of confrontation, defending their hegemony, defend freedom; working in concert as we progress to the end of history? Well, in thinking about that, think about this: it all depends on what we do.
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